Holding

The High Court should not have directed reference to the Industrial Tribunal; the dispute must be pursued under the Industrial Disputes Act, 1947, and the Court must leave it to the appropriate government to consider a reference.

Summary

The Central Government issued a circular on 8 November 2000 refusing to prohibit contract labour in certain establishments of Rashtriya Chemicals & Fertilizers Ltd. The General Employees Association filed a writ petition under Article 226 seeking quashment of the circular, alleging that the contract labour system was a sham. The Bombay High Court directed the Central Government to refer the dispute to an Industrial Tribunal and granted interim relief to the workers. The Supreme Court held that the High Court erred in exercising writ jurisdiction because the matter required adjudication under the Industrial Disputes Act, 1947, and the Court should not have formulated the terms of reference or ordered a reference. Accordingly, the appeals were allowed and the High Court directions set aside, with the Association advised to approach the appropriate State Government for a reference under the ID Act. No order as to costs was made.

Issues considered

Whether a High Court can, under Article 226, direct the Central Government to refer a contract‑labour dispute to an Industrial Tribunal when the dispute falls within the ambit of the Industrial Disputes Act, 1947.
Whether the High Court may formulate the terms of reference and grant interim relief in a writ petition challenging a circular issued under the Contract Labour (Regulation and Abolition) Act, 1970.
Whether the appropriate remedy for the Association is a reference under the Industrial Disputes Act rather than a writ jurisdiction.

Legislation cited

Contract Labour (Regulation and Abolition) Act, 1970
Industrial Disputes Act, 1947s. Section 10(1)(d)
U.P. Industrial Disputes Act, 1947s. Section 4K

Subjects

Contract labourIndustrial TribunalWrit jurisdictionArticle 226Industrial Disputes ActReference to tribunalInterim reliefCentral Government circular

Judgment

). RASHTRIYA CHEM. & FERTILIZERS LID. AND ANR. A
v.
GENERAL EMPLOYEES ASSOCIATION AND ORS.

APRIL 23, 2007

[DR. ARinT PASAYAT AND R. V. RAVEENDRAN, JJ.] B

, Constitution of India, 1950--Article 226-Central Government circular
not prohibiting contractual labour in the establishment-Writ petition
challenging the circular-Petitioner conceding that the issue could not be
decided in writ petition-High Court directing Central Government to make
c
reference of the dispute to Industrial Court for adjudication-Held; Not
appropriate-High Court was to consider the petitioner's stand when
petitioner accepted that certain issues could not be decided in writ petition---
It should have left it to them to avail remedy under 1947 Act-Industrial
Disputes Act, 1947. D
Central Government issued circular refusing to abolish and prohibit
r contract labour in the Civil Works and Carpentry establishment of the
appellant. First Respondent-General Employees Association challenged the
Circular. Writ petitioner conceded that the said issue cannot be considered
by High Court in the writ jurisdiction under Article 226 of the Constitution E
and the appropriate forum was to go into such question. High Court issued
direction to the Central Government to make reference to the Industrial
Tribunal for adjudication whether the contract labour system was genuine,
or was a mere camouflage to deprive the contract employees of the benefits
.. ·~
available to permanent employees of appellant No. 1 and granted interim
protection to the workers. Hence the present appeal.
F

Allowing the appeals, the Court

HELD: 1.1. Once the respondent No. 1 approached the High Court on
the foundation that the Contract Labour (Regulation and Abolition) Act, 1970
G
applied, it pre supposes existence of a valid contract. What the writ petitioner-
'-:· respondent No.1 wanted was quashment of Notification for reconsideration.
In view of what has been stated in second SAIL case the High Court has to

- consider whether the stand taken in the writ petition was inconsistent. In the
instant case the writ petitioner itself accepted that certain issues could not
457 H
458 SUPREME COURT REPORTS [2007] 5 S.C.R.

A be decided in the writ petition. That being so, High Court giving directions in "
the nature done, do not appear to be appropriate. The High Court ought not to
have given the directions in the manner done and should have left the
respondent No.I-Association to avail remedy available in the I.D. Act
[Para 11) (465-F, G; 466-A)

B 1.2. It is open to respondent No.I to move the appropriate State
Government seeking reference of the purported dispute to the Tribunal The
State Government would consider whether any reference is called for.
(Para 12] (466-B, CJ ~

Steel Authority of India Ltd. v. National and Union Waterfront Workers
c and Ors., [2001] 7SCC l; Steel Authority of India Ltd. v. Union of India of
Ors., (Second SAIL Case) (2006) 3 CLR 659; Sankari Cement Alai Thozhilalar
Munnetra Sangam. Tamil Nadu v. Government of Tamil Nadu and Anr., [1983)
1 SCC 304; V. Veerarajc;n and Ors. v. Government a/Tamil and Ors., (1987]
1 SCC 479 and TELCO Convoy Drivers Mazdoor Sangh and Anr. v. State of
D Bihar and Ors., [1989] 3 SCC 271, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2122 of2007.

From the Judgment and Order dated 17.09.2003 of the High Court of
Judicature at Bombay in Writ Petition No. 7543 of2000.
E
WITH

C.A. No. 2123 of2007.

Jamshed P. Cama, M.S. Bodanwala, Gopal Jain, R.N. Karanjawala, Nandini
F Gore, Jayant Mohan and Manik Karanjawala for the Appellants. 1 •
The Judgment of the Court was delivered by

DR. ARIJIT PASAYAT, J. I. Lt:ave granted.

2. Challenge in these appeals is to the orders passed by a Division
G Bench of the Bombay High Court directing reference to the Industrial Tribunal
and granting interim protection to the workers in the Civil Appeal relating to
SLP(C) No. 594 of2004.

H
3. First Respondent-General Employees Association (in short the
'Association') had questioned legality of the Circular dated 8.11.2000 issued
-
RASllTRIYACHEM. & FERTILIZERS LTD. v. GENERAL EMPLOYEES ASSOCIATION (PASAYAT, I.] 459
~-;:.
by the Central Government conveying its decision refusing to abolish and A
prohibit contract labour in the Civil Works and Carpentry establishment of
Rashtriya Chemicals and Fertilizers Ltd.-Respondent No.I, in W.P. No.7543/
2000. It was alleged by the writ petitioner that respondent Nos. 5 to 8 in the
writ petition (who are non-official respondent Nos. 4 to 7 in this appeal) were
dummy and sham contractors. It was conceded by the writ petitioner that the
said issue cannot be considered by the High Court in the writ jurisdiction B
under Article 226 of the Constitution oflndia, 1950 (in short the 'Constitution')
" and the appropriate forum - Industrial Tribunal has to go into such question.
., The writ petitioner requested that order may be made referring the matter to
the Industrial Tribunal and meanwhile to afford interim protection. While
accepting this prayer, the High Court, however, issued the following directions: c
"(i) The appropriate Government, i.e., the Central Government is directed
to make a Reference of the following demands to the Industrial Court
for adjudication within two months from today;
(a) Whether the contracts between the Ist respondent Mis.
D

- r
Rashtriya Chemicals and Fertilizers Ltd. and respondent Nos. 5
to 10 are sham and bogus and are a comoufiage to deprive the
concerned contract employees of the benefits available to
permanent workmen of the I respondent?
(b) Whether. the employees listed at Exhibit A to the petition
should be declared as permanent workmen of the 1 respondent?
E

(c) What are the wages and consequential benefits to be paid to
the employees list at Exhibit 'A' to the petition?
(ii) The Industrial Tribunal upon receipt of such Reference shall proceed
• )-
with the matter expeditiously and dispose of the same as early as F
possible and in any case not later than 30.6.2004.

(iii) The interim order passed by this Court on 29.12.2000 shall continue
until receipt of the communication by the petitioner from the Industrial
Tribunal that the Reference has been received and for a period of two
months therefrom. The petitioners shall be at liberty to make application G
'<: before the concerned Industrial Tribunal for continuation of the interim
relief upon receipt of the communication that Reference has been
received and if such application is made by the petitioner, the same
shall be disposed of by the Industrial Tribunal within a period of four
weeks therefrom. Needless to say that if for any reason the Industrial
H
4GO SUPREME COURT REPORTS [2007] 5 S.C.R.

A Tribunal is not able to dispose of the application for interim relief that
may be made by the petitioner within a period of four weeks from such
application, the industrial Tribunal shall be free to pass an appropriate
order for continuation of the interim order until disposal of the
application for interim relief. In case interim order on the application
is adverse to the petitioners same shall not be given effect to for a
B period four weeks.

(iv) It is clarified that in case there is any change in the Contractor •
by respondent no. I the new Contractor shall engage the same workers
subject to the order of the Industrial Tribunal.

C (v) It is further clarified that the above interim order is confined only
to 39 employees who are presently working on the establishment of
respondent no.I through respondent nos. 5 to I 0.

(vi) All contentions of the parties are kept open to be agitated before
the Industrial Tribunal."
D
4. The connected Civil Appeal (relating to SLP(C) No.12961 of2003) is
in respect of workers in a canteen in the Thar factory of the Appellant No. I.
The first respondent-Union filed W.P. No.2940/1998 for a declaration that the
employees (whose names were shown in the Annexure to the writ petition)
-
were the regular employees of Appellant No. I and for consequential reliefs.
E A Division Bench of the High Court has given following directions while
disposing of the petition by judgment dated 23.1.2003:

(i) The appropriate Government that is the Government of Maharashtra
is directed to make a Reference of the following dispute/s to the
Industrial Tribunal for adjudication within two months from today. -f •
F
(a) Whether the contract between the Rashtriya Chemicals and
Fertilizers Ltd. and the contractor/s is a sham and bogus one and
is a camouflage to deprive the employees as per Annexure A of
the benefits available to permanent workers of Rashtriya
Chemicals and Fertilizers Ltd.?
G
(b) Whether the employees whose names are shown in Exhibit A
·•
annexed to this order are employees in the Canteen of Rashtriya
Chemicals and Fertilizers Ltd. and ifthe answer is in the affirmative,
whether such employees should be declared as permanent
workmen of Rashtriya Chemicals and Fertilizers Ltd.?
H
RASHTRIY ACHEM. & FERTILIZERS LID.'- GENERAL EMPLOYEES ASSOCIATION (PASAYAT, J.] 461
-· } (c) What are the wages and consequential benefits to be paid to A
the employees as per the list Annexure A?

(ii) The Industrial Tribunal upon receipt of the Reference shall proceed
with the matter expeditiously and dispose of the same as early as
possible and in no case later than 31.12.2003.
B
(iii) The interim order passed by this Court on 24.6.1998 shall continue
until receipt of the communication by the Petitioners from the Industrial
.. Tribunal that Reference has been received and for a period of two
"I months therefrom. The Petitioner shall be at liberty to make application
before the concerned Industrial Tribunal for continuation of the interim
relief upon receipt of the communication that Reference has been c
" received and we observe that if such application is made by the
Petitioner, the same shall be disposed of by the Industrial Tribunal
within a period of four weeks therefrom. We record the statement of
the learned Senior Counsel for Respondent Nos. 1 and 2 that no
objection shall be raised by the said respondents about the
maintainability of the application for interim relief by the petitioner.
D
Needless to say if for any reason, the Industrial Tribunal is not able
r to dispose of the application for interim relief that may be made by
the petitioner within a period of four weeks from such application, the
Industrial Tribunal shall be free to pass an appropriate order for
continuation of the interim order until disposal of the application for E
interim relief.

(iv) It is clarified that in case there is any change in the Contractor
by Respondent Nos. 1 and 2, the new Contractor shall engage the
same workers subject to the order of the Industrial Tribunal.
., ~
F
(v) All contentions of the parties are kept open to be agitated before
the Industrial Tribunal.

5. Learned counsel· for the appellants submitted that after the decision
of this Court in Steel Authority of India Ltd and Ors, v. National Union
Waterfront Workers and Ors., (2001] 7 SCC 1 the High Court ought not to G
have given directions in the manner done. The prayer in the writ petitions was
... not for determination of the question whether the contract labour system was
genuine, or was a mere camouflage to deprive the concerned contract employees
of the benefits available to permanent employees of appellant No. I. The High
Court in both the orders even formulated the terms of reference which is
impermissible. H
462 SUPREME COURT REPORTS (2007] 5 S.C.R.

A 6. There is no appearance on behalf of the first respondent -Association .._ ~-
in spite of service of notice.

7. In order to appreciate the stand taken by the appellant, it is necessary
to take note of the observations made by this Court in several cases. In the
Govind Sugar Mills Ltd and Anr. v. Hind Mazdoor Sabha and Ors., [1976]
B 1 SCC 60 while considering Section 4K of the U.P. Industrial Disputes Act,
1947( in short 'UP Act), in pari materia with Section 10(1) of Industrial
Disputes Act, 1947 (in short 'ID Act') it was observed inter alia as follows:

"In the special appeal the High Court has taken the view following the
decision of this Court in State of U P. v. Basti Sugar Mills Co. Ltd
c that when action was taken under Section 3(b) of the Act it was
t
obligatory for the State Government to make a reference under Section
4K for adjudication of the industrial dispute raised in relation to the
said action. The High Court on a consideration of the entire facts and
circumstances of the case allowed the writ petition and quashed the
D order of the State Government dated June 22, 1966 by grant of a writ
of certiorari. In this appeal since the special leave was granted on a
limited question we are not called upon to interfere with the said
portion of the order of the High Court. But it further directed the State
Government and the Labour Commissioner to refer the dispute for
adjudication in exercise of their power under Section 4K of the Act.
E It seems to have been so done on the view that it was obligatory for
the State Government to do so after the issuance of the notification
under Section 3(b) of the Act. In our opinion this was not correct.

In the ji;dgment of this Court delivered a few days ago, M Mahabir
Jute Mills Ltd Gorakhpore v. Snri Shibban Lal Saxena (judgment
F dated July 30, 1975), it has been held on a consideration of the
provisions of law contained in Section 4K of the Act that after quashing
the order of the. Government refusing to make a reference the High
Court could ask the Government to reconsider the matter but it could
not give premptory directions to make a reference. We may, however,
G take note of a sentence occurring in the judgment of this Court the
case of Bombay Union of Journalists (supra) at page 35 which reads
thus:

"if the appropriate Government refuse to make a reference for
irrelevant considerations, or on extraneous grounds, or acts ma/a
H fide, that, of course, would be another matter; in such a case a
RASHTRIYACHEM. k FERTILIZERS LTD.'· GENERAL EMPLOYEES ASSOCIATION [PASAYAT, J.] 463
-.....>- \
party would be entitled to move Court for a writ of mandamus." A

We think what was meant to be conveyed by the sentence aforesaid
was that the party would be entitled to move the High Court for
interfering with the order of the Government and not necessarily for
the issuance of a writ of mandamus to direct the Government to make
reference. The mandamus would be to reconsider the matter. It does B
not seem to be quite reasonable to take the view that after the refusal
• of the Government to make a reference is quashed a writ of mandamus
.., to make a reference must necessarily follow. The matter has still to be
left for the exercise of the power by the Government on relevant
considerations in the light of the judgment quashing the order of
refusal" c
8. It is now well settled that High Courts will not straightway direct the
appropriate government to refer the dispute. It is for the appropriate government
to apply its mind to relevant factors and satisfy itself as to the existence of
a dispute before deciding to refer the dispute. We may refer to the following
D
observations of this Court in Steel Authority of India Ltd. v. Union of India
1 & Ors., Second SAIL Case (2006) 3 CLR 659)):

"For the purpose of exercising jurisdiction under Section 10 of the
• 1970 Act, the appropriate government is required to apply its mind .
Its order may be an administrative one but the same would not be E
beyond the pale of judicial review. It must, therefore, apply its mind
before making a reference on the basis of the materials placed before
it by the workmen and/or management, as the case may be. While
doing so, it may be inappropriate for the same authority on the basis
..... ~ of the materials that a notification under Section 10( 1)( d) of the 1947
Act be issued, although it stands judicially determined that the F
workmen were employed by the contractor. The state exercises
administrative power both in relation to abolition of contract labour
in terms of section 10 of the 1970 Act as also in relation to making
a reference for industrial adjudication to labour court or a Tribunal
under Section l 0( 1)(d) of the 194 7 Act. While issuing a notification
G
under the 1970 Act, the State would have to proceed on the basis that
"-·
the principal employer had appointed contractors and such
appointments are valid in law, but while referring a dispute for industrial
adjudication, validity of appointment of the contractor would itself be
an issue as the state must prima facie satisfy itself that there exists
a dispute as to whether the workmen are in fact not employed by the H
464 SUPREME COURT REPORTS (2007] 5 S.C.R.

A contractor but by the management. We are, therefore, with respect,
unable to agree with the opinion of the High Court.

We would, however, hasten to add that this judgment shall not come
in the way of the appropriate government to apply its mind for the
purpose of issuance of a notification under Section 10 of the 1970
B Act."

9. The exception to the above is, when the Court finds that the
appropriate government refuses to make a reference of a dispute is unjustified.
Jn such circumstances, the court may direct the government to make a reference
C Sankari Cement Alai Thozhilalar Munnetra Sangam, Tamil Nadu v.
Government of Tamil Nadu and Anr., [1983] 1 SCC 304, V. Veerarajan and Ors.
v. Government of Tamil and Ors., [1987] 1 SCC 479 and TELCO Convoy
Drivers Mazdoor Sangh and Anr. v. State ofBihar & Ors., [1989] 3 SCC 271.

I 0. The Circular dated 8.11.2000 of the Central Government which was
D the subject matter of challenge in the first matter is extracted below:
"I am directed to invite your kind attention to the above cited
subject and to say that the matter relating to the prohibition of
employment of contract labour in the establishment of Rashtriya
Chemicals and Fertilizers Ltd., in their plants at Chem bur, Mumbai and
E Thal District Raigad, Maharashtra was discussed in the 44 Meeting
of the Central Advisory Contract Labour Boardheld on 6-7th April,
2000 under the Chairmanship ofShri T.S. Shankaran. The Board made
the following recommendations to the Government:
"The Board observed that the Committee has examined in detail
F the issue with respect to the factors set out in Section 10 of the
Act before coming too its conclusion. The Board, therefore,
decided to accept the recommendations of the Committee and
recommended to the Government accordingly"
2. In pursuance of the recommendations of the Board, the matter
G has been considered in detail by the Central Government and it has
been decided not to prohibit employment of contract labour in the I
following work/jobs in the establishment of Rashtriya Chemicals and
Fertilizers Ltd., in their plants at Chembur, Mumbai and Thal District
Raigad, Maharashtra for which the appropriate government, under the
Contract Labour (Regulation and Abolition) Act, 1970 is the Central
H
RASHTRIYACHEM. k FERffilZERS LTD.'· GENERAL EMPLOYEES ASSOCIATION [PASAYAT, J.]
465
-· ... \.
Government: A
(I) Cleaning of Roads, Stonn drains, Yards and Grass cutting.

(2) Dosing of Chemicals.

(3) Jobs in Canteen.
B
(4) Maintenance of Railway Track in the Plant.
~
(5) Material handling and
...
(6) Civil Engineering maintenance i.e., in the jobs of carpentry,
masonry, repairs to electrical switchgear and equipment such as pumps,
cutters, maintenance operators, maintenance helpers, Assistants in
c
Civil work, operators and general workers.

3. As the question of interpretation of the term "establishments"
·and applicability of the Act to township is pending before the
Constitution Bench of the Supreme Court and their ruling is awaited,
D
it has been decided not to prohibit the employment of contract labour
f in the job of Security Guards covered by the Maharashtra Private
Security Guards (Regulation of Employment and Welfare) Act, 1981,
deployed in the colonies, at present.

4. A notification prohibiting employment of contract labour in E
some other jobs/works in the establishment of Rashtriya Chemicals
and Fertilizers Limited, in their plants at Chembur, Mumbai Priyadarshini
Complex and Thal District Raigad, Maharashtra is being issued
separately in consultation with the Ministry of Law, Justice and
~
.. Company Affairs (Legislative Department).
F
5. The employment of contract labour in the loading and unloading
jobs being done by the Hathadi Workers are being referred back to
the Board for their elucidation."

11. As rightly contended by learned counsel for the appellants once the
respondent No. I-Association approached the High Court on the foundation G
-.;. that the Contract Labour (Regulation and Abolition) Act, 1970 (in short the
'Act') applied, it pre supposes existence of a valid contract. What the writ
petitioner (respondent No. I herein) wanted was quashment of Notification for
reconsideration. In view of what has been stated in second SAIL case (supra)
the High Court has to consider whether the stand taken in the writ petition
H
466 SUPREME COURT REPORTS [2007] 5 S.C.R.

A was inconsistent. Jn the instant case the writ petitioner itself accepted that
certain issues could not be decided in the writ petition. That being so, High
Court giving directions in the nature done, do not appear to be appropriate.
We are of the view that the High Court ought not to have given the directions
in the manner done and should have left the respondent No. I-Association to
B avail remedy available in the I.D. Act.

12. It is open to the respondent No. I-Association, if it is so advised,
to move the appropriate State Government seeking reference of the purported
dispute to the Tribunal. It is for the State Government to consider whether
any reference is called for. We make it clear that we have not expressed any
C op in ion on the desirability or otherwise of making reference.

13. Appeals are allowed with no orders as to costs.

N.J. Appeals allowed.

,j