Holding

Workers engaged in a canteen operated by a contractor, where the principal employer has a statutory duty under Section 46 of the Factories Act to maintain the canteen, are deemed employees of the principal employer for the purpose of regularisation.

Summary

National Thermal Power Corporation Ltd. (NTPC), a public sector undertaking, was statutorily obligated under Section 46 of the Factories Act, 1948 to provide a canteen for its employees. The canteen was operated by contractors, employing about 54 workers. The workers filed a writ petition seeking regularisation as NTPC employees with attendant benefits. A Single Judge dismissed the petition, but a Division Bench of the Andhra Pradesh High Court reversed that decision, directing regularisation for those workers who were fit to continue. NTPC appealed, arguing that the contractors' employees could not be deemed its own employees. The Supreme Court held that where a principal employer has a statutory duty to maintain a canteen, the workers engaged by contractors are to be treated as employees of the principal employer for purposes of regularisation, and upheld the Division Bench’s order. Consequently, the appeal was dismissed.

Issues considered

Whether workers employed by a contractor to run a canteen, which the principal employer is statutorily required to maintain under Section 46 of the Factories Act, can be deemed employees of the principal employer for regularisation.
Whether the Division Bench erred in reversing the Single Judge’s dismissal of the workers’ claim for regularisation.
Whether the statutory obligation under Section 46 overrides the contractual relationship between the contractor and the canteen workers.

Legislation cited

Subjects

Factories ActSection 46canteenregularisationcontract labourstatutory obligationpublic sector undertakingemployee statusindustrial disputes

Judgment

A NATIONAL THERMAL POWER CORPORATION LTD.
v.
KARRI POTHURAJU AND ORS.

AUSJUST 13, 2003

B [S. RAJENDRA BABU AND DORAISWAMY RAJU, JJ.]

Industrial Laws:

Factories Act, 1948-Section 46-Regularisation of service-Statutory
·C obligation on employer to provide and maintain canteen for benefit of
employees of the unit-Canteen being run through contractor engaged from
time 'to time-Out of 2300 employees 54 working in canteen-Workers of
canteen claiming regularisation ofservice-Single judge rejecting the claim-
However, Division Bench of High Court allowing the claim to those who are
D fit to continue in employment-Justification of-Held: In view of the statutory
obligation on employer to maintain canteen the order of Division Bench of
High Court is justified

In view of the discharge of the statutory obligation under section 46 of
the Factories Act, 1948 appellant-corporation, a Public Sector Undertaking
E started a canteen for the benefit of the employees of their unit, through a
contractor. It was run through contractors engaged from time to time. At the
relevant time, out of2300 employees, about 54 persons were working in the
canteen in various capacities. Respondent-workers filed writ petition seeking
for a direction to the appellant to regularise their services with attendant
F benefits. Single Judge of the High Court dismissed the writ petition. However,
Division Bench allowed the appeal directing that the services of the workers
who are fit to continue in employment be regularised. Hence the present
appeal

Appellant contended that the Division Bench of High Court erred in
G reversing the decision of the Single Judge; and that the respondent-workers,
engaged by the contractor in the canteen cannot claim to be part of the
appellant's establishment and claim for regularisation of their services.

Dismissing the appeal, the Court

H 426
NATIONAL THERMALPOWERCORPN. LTD. 1·. KARRIPOTHURAJU [RAJENDRABABU,J.) 427

HELD: Appellant-corporation who had a statuary obligation under A
section 46 of the Factories Act, 1948 to run the canteen cannot contend that
workers engaged in the canteen even though by contractor cannot claim to
be part of appellant's establishment and claim for regularisation of their
services. Also the Division Bench of High Court gave liberty to the appellant
to consider the claims of the workers as to whether they satisfy the
requirements and whether they are otherwise unfit for confirmations.
B

... Therefore, the challenge to the decision of the Division Bench of High Court
cannot be countenanced, as either legitimate or valid one. (431-E, F]

Indian Petrochemicals Corporation Ltd. and Anr. v. Shramik Sena and
Ors. (1999) 6 SCC 439; Indian Overseas Bankv. 1.0.B. StajJCanteen Workers'
Union and Anr., [2000) 4 SCC 245; Steel Authority of India Ltd. and Ors. v.
c
National Union Water.front Workers & Others [2001] 7 SCC 1; VST Industries
Ltd. v. VST Industries Workers' Union and Anr., (2001) 1 SCC 298 and The
Saraspur Mills Co. Ltd v. Raman/al Chimanlal and Ors., (1974] 3 SCC 66,
referred to.
D
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5990 of 1997.

From the Judgment and Order dated 27 .11.96 of the Andhra Pradesh
'r
High Court in W.A. No. 385 of 1996.

V.R. Reddy, N.B. Shetye, Rajendra Dhawan, Ms.' Meera Mathur and E
A.T.M. Sampath for the Appellant.

Hardev Singh, L. Nageswara Rao, Ms. Madhu Moolchandani, R.
Santhanakrishnan, G. Ramakrishna Prasad, K.C. Sudarshan, Jayanth M.
Raj, P.P. Singh and S. Udaya Kumar Sagar and T.G. Narayanan Nair for the
Respondents.
F

The Judgment of the Court was delivered by
.. RAJENDRA BABU, J. The above appeal has been filed against the
order dated 27 .11.96 of a Division Bench of the Andhra Pradesh High Court
G
in Writ Appeal No.385 of 1996, whereunder the Division Bench, while setting
aside the order of the learned Single Judge in Writ Petition No.3793of1992,
allowed the claims in the writ petition to the· extent and subject to the
conditions specified in the order. The appellant, National Thermal Power
Corporation Ltd., Ramagundam Super Thermal Power Station, is a Public
Sector Undertaking of the Government of India. It started a canteen in the H
428 SUPREME COURT REPORTS [2003] SUPP. 2 S.C.R.

A year 1983 for the benefit of the employees of their unit, through a contractor
and from. that time onwards it was being run through contractors engaged
from time to time. The total.number of employees, at the relevant point of time,
were said. to be 2300 and about 54 persons were said to have been working
in the canteen in various capacities - cooks, servers, cleaners etc. It is not
B in controversy that the appellant is a factory governed by the provisions of
the Factories Act and.Section46 of the said Act, 1948 casts a mandatory duty
and obligation on the appellant to provide and maintain a canteen for the
benefit of all those serving in the unit. Concedingly, the appellant grants
substantial subsidy and at one point of time,. as found noticed in the order,
it was to the tune ofRs.l',95;000. The respondents, at least many of them, were
C said to be·working:fromthe year 1983, though engaged by contractors. The
Deputy Manager.-Administration·and his subordinates were said to supervise
the working ofthe·canteen inTespect of preparation, service and maintenance,
to ensure quality of service·as well as that it was carried on beneficially to
the workers. It is also claimed that the said' authority issued identity cards
D· also to the workers for entering the factory premises. Apparently, taking
ad·1antage of certain· decisions of courts, including.this Court, the respondent-
workers moved the High Court by means of the Writ Petition filed under
Article 226 of the Constitution oflndia·seeking for a dircctionto the appellant
to regularize their services with attendant benefits.

E Appellants disputed the. claim, contending. that the canteen was run as
a beneficial measure, to cater to the needs of workers in the unit,. that
contractors used to be engaged periodically - at times different contractors
for different period; depending upon· the. successful offer. made pursuant to
invitation of tenders, that they have: nothing to do with the total strength of
F workers engaged. by such contractors, that they are .neither workers relating
to the manufacturing activities of the appellant-Undertaking or they perfonn
any work incidental thereto or by any means could claim to be workers of the
appellant within the meaning of the Industrial Disputes Act, 1947. The control,
if at all, was said to be to ensure that there is no industrial unrest on account
of the manner of running. the canteen and proper food articles are made
G available.hygienically and at the rates stipulated without sacrificing the.quality
of the food stuffs, eatables and beverages and such supervision cannot make
them workers under the control of the appellant and that the relationship of
Master. and. Servant and discipJinary control over them was also with their
employer-contractor, at all times.

H
NATIONAL THERMAL POWER CORPN. LID. 1•. KARRI POTIIURAJU [RAJENDRA BABU, J.] 429

The learned Single Judge was not prepared to accept the claim of the A
workers and was of the view that the workers in the canteens run by Railways
and LIC stand on a different footing and there can be no comparison of the
workers in the canteen under consideration with those in the other institutions.
The writ petition, therefore, came to be dismissed and the workers were
constrained to file an appeal. The Division Bench, while allowing the appeal, B
made the same subject to the following directions:

"Learned counsel for the first respondent has, however, urged before
us that while affirming the judgment of the Bombay High Court as
above, the Supreme Court has given some directions and in the
instant case for the obvious reasons of the existence of the canteen C
in the hands of the contractors ever since the establishment of the
canteen, the Court should issue similar directions as issued by the
Supreme Court in the said case. While we do not have much information
as to the type of the employees the canteen is having and whether
there are any employees in the canteen who do not qualify within the
minimum and the maximum age limits prescribed under the policy of D
the first respondent or that they do not fit in the minimum medical
standards of minimum service period, it is not possible, therefore, to
specify, in the same terms as the Supreme Court has done, in the
instant case, but to observe generally that a person who has crossed
the age limit or a person who is below the age of employment can E
obviously be not regularized or treated as employee of first respondent
Similarly, a person who is not medically fit cannot claim employment
and if has so worked alright, but cannot by virtue of such employment
claim the benefits of the employees of the first respondent. It would
be advisable in such circumstances that the first respondent corrects
its mistakes and allows the cases of all the employees and treats all F
those who are not unfit to continue in the employment of first
respondent as its employees."

Hence, this _appeal.

The learned Senior Counsel appearing on behalf of the appellant placed · G
strong reliance upon the decisions reported in Indian Petrochemicals
Corporation Ltd and Anr. v. Shramik Sena and Ors., [1999] 6 SCC 439 and
other related decisions to contend that the Division Bench went wrong in
reversing the decision of the learned Single Judge and that the respondent-
workers, who are indisputedly the workers in the canteen engaged by the H
430 SUPREME COURT REPORTS (2003) SUPP. 2 S.C.R.

A contractor, cannot claim to be part of the appellants establishment and claim
for regularisation in the services of the appellant-Undertaking and consequently
the order under challenge is liable to be set aside. Per contra, learned Senior
Counsel appearing for the respondent-workers placed reliance upon the
decisions reported in Indian Overseas Bank v. I. 0. B. Staff Canteen Workers'
B Union and Anr., [2000] 4 SCC 245 as well as Steel Authority ofIndia Ltd. and
Ors. v. National Union Waterfront Workers and Ors., [2001] 7 SCC l and in
VST Industries Ltd. v. VST Industries Workers' Union and Anr., [2001] l SCC
298] to contend that the decision of the Division Bench does not require any
interference in this appeal. Reliance was also placed on an ~arlier decision of
this Court in The Saraspur Mills Co. Ltd v. Raman/a/ Chimanlal and Ors.,
C [1974] 3 SCC 66 for sustaining the decision of the High Court under-challenge.

We have carefully considered the submissions of the learned counsel
appearing on either side. In [1974] 3 SCC 66 (supra), this Court held that where
there is a statutory liability on the company concerned to run a canteen in
the factory, then even though the canteen was run by a Co-operative Society,
D the employees working in the canteen would be covered by the definition of
the word "employed" envisaged in Section 3(13) of the Bombay Industrial
Relations Act. In (2001) I SCC 298 (supra) dealing with the claim of workers
of a canteen run through a private contractor in pursuance of the obligation
of the industrial establishment under Section 46 of the Factories Act, 1948,
E this Court upheld the claim of workers for being treated as ~he workers of the
company itself. In [2001] 7 SCC l (supra), a Constitution Bench of this Court
considered the claims of contract labourers engaged by a contractor for
absorption in the establishment of the principal employer on issuance of the
abolition notification under the provisions of the Contract Labour (Regulation
and Abolition) Act, 1970 and the rules made thereunder. This Court, while
F adverting to the position of law in force, has observed as follows:

"106. We have gone through the decisions of this Court in VST . '
Industries case, G.B. Pant University case and M. Aslam case. All of
them relate to statutory liabi1ity to maintain the canteen by the principal
employer in the factory/establishment. That is why in those cases, as
G in Saraspur Mills case the contract labour working in the canteen were
treated as workers of the principal employer. These cases stand on a
different footing and it is not possible to deduce from them the broad
principle of law that on the contract labour system being abolished
under sub-section (1) of Section 10 of the CLRA Act the contract
labour working in the establishment of the principal employer have to
H
NATIONAL THERMAL POWER CORPN. LTD. 1•. KARRI POTHURAJU [RAJENDRA BABU, J.) 43 J

be absorbed as regular employees of the establishment. A
107. An analysis of the cases, discussed above, shows that they fall
in three classes: (i) 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 appropriate Government B
issued notification under Section 10(1) of the CLRA Act, no automatic
absorption of the contract labour working in the establishment was
ordered; (ii) where the contract was found to be a sham and nominal,
rather a camouflage, in which case the contract labour working in the
establishment of the principal employer were held, in fact and in C
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 of contract labour stood
prohibited; (iii) where in discharge of a statutory obligation of
maintaining a canteen in an establishment the principal employer D
availed the services of a contractor the courts have held that the
contract labour would indeed be the employees of the principal
employer."

Consequently, we consider it to be too late in the day for the appellant,
which had an obligation under the Factories Act, 1948 to run the canteen to E
contend to the contrary. So far as the case on hand is concerned, the Division
Bench has chosen to leave liberty to the appellant to consider the claims of

-'
I
the workers as to whether they satisfy the requirements and whether they are
otherwise unfit for confirmations. In the light of all these, we are unable to
countenance the challenge to the decision of the High Court, as either legitimate
or valid one. The appeal, therefore, fails and shall stand dismissed. No costs.

NJ. Appeals dismissed.
F

'I
=j

•