Holding

The Industrial Disputes Act cannot be used to decide the abolition of contract labour; only the appropriate Government may do so under the Contract Labour Act, though an industrial adjudicator may deem a contract a sham and treat the workers as direct employees, but workers cannot contradict their earlier admission of being contract labour.

Summary

The Steel Authority of India Ltd., a government company, engaged contractors to manufacture steel, and workers employed by those contractors claimed they were permanent employees of the company and sought absorption. The State Government referred the dispute to a Labour Court under Section 10(1)(c) of the Industrial Disputes Act, 1947, but the company argued that matters of contract labour regulation and abolition fall exclusively under the Contract Labour (Regulation and Abolition) Act, 1970, and that no prohibition notification had been issued. The High Court directed the Union of India to refer the matter to an industrial tribunal, a direction later challenged on jurisdictional grounds. The Supreme Court held that the Industrial Disputes Act cannot be used to decide the abolition of contract labour, which is the sole domain of the appropriate Government under the 1970 Act, though an industrial adjudicator may determine if a contract is a sham and thus treat the workers as direct employees. It further ruled that the workers, having admitted they were employed by contractors, could not later claim they were employees of the principal employer, invoking estoppel and the principle against inconsistent pleas. Consequently, the Court set aside the High Court’s order and allowed the appeal, affirming that the reference to the Labour Court was invalid.

Issues considered

The jurisdiction of the Industrial Disputes Act, 1947 to entertain a dispute concerning the abolition of contract labour.
Whether the appropriate Government must issue a notification under Section 10 of the Contract Labour (Regulation and Abolition) Act, 1970 before a reference can be made to an industrial tribunal.
Whether an industrial adjudicator can determine if a contract between a principal employer and a contractor is a sham, thereby treating contract workers as direct employees.
Whether workers who admitted employment under contractors can later claim they are permanent employees of the principal employer (estoppel and inconsistent plea).

Legislation cited

Contract Labour (Regulation and Abolition) Act, 1970s. 10(1), s. 10(2)
Indian Evidence Act, 1872s. 58
Industrial Disputes Act, 1947s. 10(1)(c), s. 12(1), s. 18(3)(b)

Subjects

contract labourabsorptionindustrial disputejurisdictionappropriate governmentsham contractestoppellabour lawIndustrial Disputes ActContract Labour Act

Judgment

STEEL AUTHORITY OF INDIA LTD. A
v.
UNION OF INDIA AND ORS.

SEPTEMBER 26, 2006

[S.B. SINHA AND DALVEER BHANDARI, JJ.] B

Labour Laws:

. Industrial Disputes Act, J947-Section JO-Contract Labour
(Regulation and Abolition) Act, J970--Section JO-Contract labour- C
Workers employed by contractors of Government Company-Claim of
absorption as permanent employees-Reference by State. Government -
Direction by High Court to the Government to make reference of industrial
dispute to the Industrial tribunal-Correctness of-Held: Labour Court or
Writ Court cannot decide whether contract labour should be abolished or
not-It is within the exclusive domain of Appropriate Government who would D
issue Notification prohibiting employment of contract labour under section
IO of J970 Act-However, industrial adjudicator would have the jurisdiction
to determine the plea that contract between management and contractor is
a sham one since if it is sustainable, workers employed by contractor would
in effect be direct employees of management-Workers having made an E
admission that they were working under contractors, cannot withdraw the
same taking an inconsistent plea--Power ofthe Government to make reference,
though an administrative order, not beyond judicial review--Thus, High
Court erred in holding reference maintainable.

Appellant-Government Company appointed contractors for F
manufacturing steel and other products. Respondent nos. 4 to 618-employees
of the contractors raised an industrial dispute before State Government
claiming absorption as permanent employees of the appellant. State
Government referred the dispute to the labour court. Appellant contended that
the reference under Industrial Disputes Act, 1947 was not permissible since G
the matter relating to the regulation and abolition of contract labour is
governed by Contract Labour (Regulation and Abolition) Act, 1970; and that
the State Government having not issued any notification prohibiting
employment of contract labour in terms of section 10 of the 1970 Act,

663
H
664 SUPREME COURT REPORTS (2006) SUPP. 6 S.C.R.

A workmen did not have any legal right to claim absorption. During pendency
of the Industrial dispute, appellant challenged the reference. High Court
disposed of the writ petition. However, workmen raised an additional claim
that contracts between the appellant and the contractors were sham and bogus
and as such were direct employees of the management. Thereafter, tribunal
held the reference to be not maintainable. Trade union filed writ petition
B alleging that the workmen were direct employees of appellant and were entitled
to be absorbed as permanent workmen. Single Judge of High Court directed
the Government to make reference of the industrial dispute to the Industrial
tribunal. Thereafter, appeals were filed on the ground that no industrial
dispute could be raised by the workmen; and that the award of Labour Court
C having been accepted by the workmen, the matter relating to abolition of
contract labour could only be decided by the Appropriate Government in terms
ofsection 10 of the 1970 Act. Division Bench dismissed the same. Hence the
present appeals.

Allowing the appeal, the Court
D
HELO: 1.1. The Contract Labour (Regulation and Abolition) Act, 1970
is a complete code by itself. The matter relating to regulation and abolition of
contract labour being governed by the provisions of the 1970 Act, the industrial
court will have no jurisdiction in relation thereto. (668-Fl

E 1.2. Relationship of employer and employee is essentially a question of
fact. Determination of the said question would depend upon a large number of
factors. Ordinarily, a writ court would not go into such a question. Neither
the Labour Court nor the writ court could determine the question as to whether
the contract labour should be abolished or not, the same being within the
exclusive domain of the Appropriate Government. A decision in that behalf is
F required to be taken upon following the procedure laid down in sub-section
(1) of Section 10 of the Industrial Disputes Act, 1947. A notification can be
issued by an Appropriate Government prohibiting employment of contract
labour if the factors enumerated in sub-section (2) of Section 10 of the 1970
Act are satisfied. (672-G-H; 673-B; 673-C-OJ
G
1.3. The industrial adjudicator would have jurisdiction to determine the
issue that the contract entered into by and between the management and the
contractor was really a camouflage or a sham one, as in the event if it be held
it to be sustainable, the employees appointed by the contractor would, in effect
and substance, be held to be direct employees of the management. (673-D-E(
H
STEEL AUTHORITY OF INDIA LTD. v. U.0.1. 665
Steel Authority of India Ltd and Ors. v. National Union Waterfront Workers A
and Ors., 120011 7 SCCI; State of Karna/aka and Ors. v. KGSD Canteen
Employees' Welfare Association and Ors., 1200611 SCC 567; Nitinkumar
Nathalal Joshi and Ors. v. Oil and Natural Gas Corporation Ltd. and Ors.,
12002) 3 SCC 433; Municipal Corporation a/Greater Mumbai v. K. V. Shramik
Sangh and Ors., 1200214 SCC 609 and A.P. SRTC and Ors. v. G. Srinivas B
Reddy and Ors., [2006) 3 SCC 674, relied on.

1.4. The workmen whether before the Labour Court or in writ
proceedings were represented by the same Union. A trade union registered
under the Trade Unions Act is entitled to espouse the cause of the workmen.
A definite stand was taken by the employees that they had been working under
the contractors. Thus, it would not lie in their mouth to take a contradictory C
and inconsistent plea that they were also the workmen of the principal
employer. To raise such a mutually destructive plea is impermissible in law.
Such mutually destructive plea should not be allowed to be raised even in an
industrial adjudication. Common law principles of estoppel, waiver and
acquiescence are applicable in an industrial adjudication. Thus, it is evident D
that by taking recourse to an amendm.ent made in the pleading, the party
cannot be permitted to go beyond his admission. The principle would be applied
in an industrial adjudication having regard to the nature of the reference made
by the Appropriate Government as also in view of the fact that an industrial
adjudicator derives his jurisdiction from the reference only.
(674-C-D; 676-C-DI E
Modi Spinning and Weaving Mills Company Ltd and Anr. v. Ladha Ram
and Co., (197614 SCC 320; Panchdeo Narain Srivastava v. Km. Jyoti Sahay
and Anr., AIR (1983) SC 462; Sangramsinh P. Gaekwad and Ors. v.
Shantadevi P. Gaekwad (Dead) through Lrs. and Ors., [20.051 11 SCC 314;
Union of India v. Pramod Gupta (Dead) by Lrs. and Ors., [2005) 12 SCC I F
and Baldev Singh and Ors. etc. ·v. Manohar Singh and Anr. etc., [20061 7
SCALE 517, relied on.
Heeralal v. Kalyan Mal and Ors., (1998( I SCC 278, referred to.
1.5. For the purpose of exercising jurisdiction under Section I 0 of the G
1970 Act, the appropriate Government is required to apply its mind. Its order
may be an administrative one but the same would not be beyond the pale of
judicial review. Therefore, it must 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 H
666 SUPREME COURT REPORTS [2006) SUPP. 6 S.C.R.

- A Section IO(IXd) of the 1947 Act be issued, although it stands judicially
determined that the 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 a Labour Court or a Tribunal under
B Section IO(l)(d) of the 1947 Act. While issuing a notification 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 mustprimafacie satisfy itself
that there exists a dispute as to whether the workmen are in fact not employed
C by the contractor but by the management. Therefore, the order of High Court
directing the Government to make reference of industrial dispute to the
Industrial tribunal cannot be accepted. (676-E-H; 677-AI

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4263 of2006.

D From the Final Judgment and Order dated 18.12.2003 of the High Court
of Karanataka at Bangalore in Writ Appeals Nos. 1198-1813 of 2002 (LrrER.

Harish N. Salve, Sun ii Kumar Jain, S. Borthakur and B. Barooah for the
Appellant.

E V.N. Raghupathy, Ranji Thomas, T.S. Doabia, Manish Sharma and V.K.
Verma for the Respondents.

The Judgment of the Court was delivered by

S.B. SINHA, J. Leave granted.
F
Appellant is a Government company. In carrying out its activities of
manufacture of steel and other products it appointed several contractors.
Respondent Nos. 4 to 618 herein are said to have been employees of the
contractors. They raised a dispute before the State Government demanding
their absorption as permanent employees.
G
By a notification dated 19.11.1985, the State Government referred the
following industrial dispute for adjudication by the Presiding Officer, Labour
Court, in exercise of its power under Section 10(1Xc) of the Industrial Disputes
Act, 1947 (for short, 'the 1947 Act'):

H "Are the contract workers employed in the nature of contract work
STEEL AUTHORITY OF INDIA LTD. v. U.0.1. [SINHA, J.) 667
listed as per Annexure working in the premises of Visveswaraya Iron A
and Steel Ltd., Bhadravathi, justified in demanding absorption as
regular permanent employees of Visveswaraya Iron & Steel Ltd.
Bhadravathi"

In the said proceedings, the workmen in their statements of claim filed
on 26.02.1986 prayed for their absorption as permanent employees in the B
employment of Appellant. Inter alia, a jurisdictional question was raised by
Appellant herein on the premise that the matter relating to the regulation and
abolition of contract labour being governed by the Contract Labour (Regulation
and Abolition) Act, 1970 (for short, 'the 1970 Act'), the reference made by
the State Government was impermissible in law. It was contended that the C
State Government.having not issued any notification prohibiting employment
of contract labou{i~ terms of Section 10 of the 1970 Act, the workmen did
not have any legal right to claim absorption.

Indisputably, during the pendency of the said dispute before the Labour
Court, Appellant herein filed a writ petition, questioning the legality and/or D
validity of the said reference, which was marked as Writ Petition No.26874 of
1995. One of the questions which was raised therein was that the State ·
Government had no jurisdiction to make a reference in relation thereto. The
writ petition was disposed of by the High Court observing that Appellant may
raise a preliminary issue in that behalf.
E
The workmen, however, on 21.11.1997 filed an additional claim statement
alleging that the contracts entered into by and between Appellant and the
contractors being sham and bogus, they were direct employees of the
management.

By reason of an award dated 13.07.1999, the said reference was held to F
be not maintainl!ble. A writ petition came to be filed by some trade unions
alleging that the workmen were direct employees of Appellant and were, thus,
entitled to be absorbed as permanent workmen. 1

I
A learned Single Judge of the High Court, by an order dated 05.12.2001,
while holding the said writ petition to be not maintainable, directed : G
"For the reasons stated supra, these writ petitions are allowed.
with a direction to the Union of India - the 2nd respondent to accept
the petition presented before this C~urt as the ~etition submitted by
the petitioner - Union raising an industrial dispute in terms of Section H
668 SUPREME COURT REPORTS (2006] SUPP. 6 S.C.R.

A 2(k) read with Section 12(1) of the l.D. Act and also under the
provisions of the Contract Labour (Regulation and Abolition) Act,
1970. Further, keeping in view the law laid down by the Supreme Court
in the Steel Authority of India Ltd. case and notwithstanding the fact
that the conciliation proceedings are conducted, the second respondent
shall in exercise of its power, make reference to the appropriate Central
B Industrial Tribunal or the Labour Court for adjudication of the existing
industrial dispute between the workmen of the petitioner/Union and
the respondent No. I Management within eight weeks from the date
of receipt of a copy of this order. The respondents 2 and 3 while
exercising their power under Section IO(l)(d) of the l.D. Act shall not
c consider the pendency of these petitions before this Court from the
year 1999 keeping in view the law laid down by the Apex Court in the
Steel Authority's case referred to and pass appropriate order making
reference either to Central Industrial Tribunal or Labour Court for
adjudication of the existing Industrial dispute between the workmen
and first respondent."
D
Intra-court appeals were filed thereagainst on the ground that no industrial
dispute could be raised by the workmen concerned in terms of the judgment
of this Court in Steel Authority of India Ltd. and Ors. v. National Union
Waterfront Workers and Ors., [2001] 7 SCC I. It was further contended that
E the award of the Labour Court having been accepted by the workmen, the
matter relating to abolition of contract labour could only be decided by the
Appropriate G<Wernment in terms of Section I0 of the 1970 Act and not
otherwise. By reason of the impugned judgment, the said appeals have been
dismissed.

F It is not disputed before us that the matter relating to abolition of
contract labour being governed by the provisions of the 1970 Act, the Industrial
Court will have no jurisdiction in relation thereto. It is also not in dispute that
the decision of the Constitution Bench of this Court in Steel Authority of
India Ltd. (supra) governs the field.

G In the said decision, it was, inter a/ia, held :

"(3) Neither Section I0 of the CLRA Act nor any other ptovision
in the Act, whether expressly or by necessary implication, provides
for automatic absorption of contract labour on issuing a notification
by the appropriate Government under sub-section (I) of Section I0,
H prohibiting employment of contract labour, in any process, operation
STEEL AUTHORITY OF INDIA LTD. v. U.0.1. [SINHA, J.] 669
or other work in any establishment. Consequently the principal A
employer cannot be required to order absorption of the contract
labour working in the establishment concerned.

JOO( xxxxxx
(5) On issuance of prohibition notification under Section 10(1) of B
the CLRA Act prohibiting employment of contract labour or otherwise,
in an industrial dispute brought before it by any contract labour in
regard to conditions of service, the industrial adjudicator will have to
consider the question whether the contractor has been interposed
either on the ground of having undertaken to produce any given
result for the establishment or for supply of contract labour for work C
of the establishment under a genuine contract or is a mere ruse/
camouflage to evade compliance with various beneficial legislations
so as to deprive the workers of the benefit thereunder. If the contract
is found to be not genuine but a mere camouflage, the so-called
contract labour will have to be treated as employees of the principal D
employer who shall be directed to regularise the services of the
contract labour in the establishment concerned subject to the
conditions as may be specified by it for that purpose in the light of
para 6 hereunder.

(6) If the contract is found to be genuine and prohibition E
notification under Section I0(1) of the CLRA Act in respect of the
establishment concerned has been issued by the appropriate
Government, prohibiting employment of contract labour in any process,
operation or other work of any establishment and where in such
process, operation or other work of the establishment the principal
employer intends to employ regular workmen, he shall give preference F
to the erstwhile contract labour, if otherwise found suitable and, if
necessary, by relaxing the condition as to maximum age appropriately,
taking into consideration the age of the workers at the time of their
initial employment by the contractor and also relaxing the condition
as to academic qualifications other than technical qualifications." . G

The industrial dispute was raised by two Unions, namely, Visveswaraya
Iron & Steel Ltd. Workers Association, Bhadravathi and Visveswaraya Iron
& Steel Ltd. Contract Employees' Union, Bhadravathi.

The award dated 13.07.1999 was confined to only one issue, namely, H
670 SUPREME COURT REPORTS [2006) SUPP. 6 S.C.R.
A Issue No.6 framed by the Labour Court. The said issue was determined by
the Labour Court pursuant to or in furtherance of the order of the High Court
passed in Writ Petition No.26874 of 1995. While determining the said question,
the Labour Court framed seven issues by an order dated 31. 12.1998, some of
which are:

B "(i) Whether the 1st party proves that they were employed by the
2nd party Management in the job of permanent and perennial in
nature.

(ii) Whether the 2nd party Management proves that the !st party
workmen were employed under different contractors in the job of
c permanent and perennial in nature in various departments of the
Management.

(iii) Whether the 2nd party proves that system of contract labour
in respect of the nature of the workers involved in this Reference was
not abolished in the 2nd party Industry and that this Reference is not
D sustainable."

The Labour Court opined :

"... The plain reading of the first point in dispute to be decided by this
Court is that "are the contract workers employed in the nature of
E contract work, justified in demanding absorption as regular permanent
employees of the management VISL, Bhadravathi (hereinafter called
the Management). Therefore the point in dispute pre-supposes that
the I party Union Employees are the contract workers employed in the
nature of contract work under certain contractors and whether such
contract workers are to be absorbed by the Management. The fact
F
that the Union Employees who seek their absorption by the
Management are the contract workers is further very much evident
from the averments made in the claim statement preferred on behalf
of the I party Union. Para I of the claim statement reads that they are
representing the contract labourers of the Management against whom
G the present reference is made by the Government.. .."

The learned Presiding Officer of the Labour Court observed that in the
light of the judgment of the High Court between the parties, the moot question
that arose for consideration was as to whether the court could decide the
validity of the reference as it stood, holding :
H
STEEL AUTHORITY. OF INDIA LTD. .1•. U.0.1. [SINHA, J.] 671
"... .It was contended that the dispute under reference since pertained A ·
to the abolition of contract labour which contract 'labour was not abolished
by the appropriate Government under Sec.I 0 of the Contract Labour Act by·
way of Notification as contemplated under the sa•id provision the reference
is bad in law inoperative and illegal. I find substance in his arguments.
Undisputedly, there is no abolition of Contract Act under Sec. 10 of the said B
Act by the appropriate Government in this case. It was well argued that the
Industrial Disputes Act where under the present reference is made is a general
enactment and therefore, a special central enactment namely, the Contract
Labour Act shall prevail to the extent that it applies over the provisions of
l.D. Act.. .."

It was further held :
c
"..... This Court certainly has got no jurisdiction to pass Award in
favour of the employees holding them to be the employees of principal
employer namely the management. The question under reference, raised
before this Court, certainly, relates to the abolition of contract labour D
and that question cannot be decided by this Court but by the
competent appropriate Government under the provisions of Sec. 10 of
the Contract Labour Act.. .."

The Labour Court also took into consideration the contention raised by
the representatives of the Union that the issue as to whether the members E
of the Unions were really the employees of the management and not those
of the employees of the contractors was to be tried and decided by the said
court as both the parties had led their oral and documentary evidences in that
behalf. Having regard to the nature of reference by the Appropriate Government,
which fell for consideration before the Labour Court, it declined to go into
the said question, opining that it was not within its province to go into the F
question as to who the actual employer was as the s~me did not fall in the
. category of matters, which can be said to be incidental to the main dispute.
It was opined :

" .... Therefore, it is clear that the I party Union itself apprehended that G
the reference made to this Court was not in accordance with the law.
The principle laid down by his lordship of our Hon'ble High Court in
the case reported in !LR 1994 Karnataka page 2603, taken support of
by Learned Representative for the I Party Union contending that
jurisdiction point cannot be raised by the management at this belated
stage, in my opinion again had no much substance the management H
672 SUPREME COURT REPORTS [2006] SUPP. 6 S.C.R.

A in this case has challenged the jurisdiction of this court at earliest
point of time at para 2 of its counter statement. Therefore, it cannot
be said that the jurisdiction point was raised by the management at
a belated state. Therefore, as contended for the management and as
observed by nis lordship of our Hon 'ble High Court in the above said
unreported judgment, the proper course and remedy available for the
B I party Union was not by way of reference on hand at least with the
present terms, but by way of approaching the Hon'ble High Crnrt
invoking its writ jurisdiction seeking directions to the Ceniral
Government to take a decision under Section I 0 of the Cont~act
Labour Act, as was already done in respect of the 23 employees at
c SI. No.26 Annexure to reference on hand. Therefore, for the rea~;ons
foregoing I am constrained to hold that reference is not valid and
proper and that this court has no jurisdiction to adjudicate upor the
same. Accordingly Issue No. 6 is answered in the affirmative and
following order is passed."

D Before adverting to the questions raised before us, we may at this
juncture notice the contention of Mr. V.N. Raghupathy that whereas i 1 the
reference only 26 workmen were made parties, more than 600 workmen were
made parties in the writ petition and, thus, only because before the appro xiate
Government a demand was raised by some of the workmen contend in~ that
E they were workmen of the contractors, an industrial dispute could be ·aised
that the contract was a sham one and in truth and substance the workmen
were employed by the management.

Writ Petitioner No. I was Visveswaraya Iron & Steel Limited GJntract
Employees' Union. 615 workmen were parties thereto. They were adrr.ittedly
p represented by Writ Petitioner No. I only. An industrial dispute was also
raised, as noticed hereinbefore, by Visveswaraya Iron & Steel Ltd. Workers
Association and Visveswaraya Iron & Steel Limited Contract Employees Union.
The Contract Employees' Union was common both in the proceeding> under
the Industrial Disputes Act also in the writ petition.

G The 1970 Act is a complete code by itself. It not only prov ides for
regulation of contract labour but also abolition thereof. Relationship of employer
and employee is essentially a question of fact. Determination of the said
question would depend upon a large number of factors. Ordinarily, a writ
court would not go into such a question.

H In State of Karnataka and Ors. v. KGSD Canteen Employees· Welfare
STEEL AUTHORITY OF INDIA LTD. v. U.0.1. [SINHA, J.] 673
Association and Ors., [2006] I SCC 567, this Court held : A
"Keeping in view the facts and circumstances of this case as also
the principle of law enunciated in the above-referred decisions of this
Court, we are, thus, of the opinion that recourse to writ remedy was
not apposite in this case."
B
We may reiterate that neither the Labour Court nor the writ court could
determine the question as to whether the contract labour should be abolished
or not, the same being within the exclusive domain of the Appropriate
Government.

A decision in that behalf undoubtedly is required to be taken upon C
following the procedure laid down in sub-section (I) of Section I0 of the 1947
Act. A notification can be issued by an Appropriate Government prohibiting
· employment of contract labour if the factors enumerated in sub-section (2) of
Section I0 of the 1970 Act are satisfied.

When, however, a contention is raised that the contract entered into by D
and between the management and the contractor is a sham one, in view of
the decision of this Court in Steel Authority of India limited (supra), an
industrial adjudicator would /be entitled to determine the said issue. The
industrial adjudicator would have jurisdiction to determine the said issue as
in the event if it be held that the contract purportedly awarded by the E
management in favour of the contractor was really a camouflage or a sham
one, the employees appointed by the contractor would, in effect and substance,
be held to be direct employees of the management.

· The view taken in the Steel Authority of India limited (supra) has been
reiJerated by this Court subsequently. [See e.g. Nitinkumar Nathalal Joshi F
and Ors. v. Oil and Natural Gas Corporation Ltd and Ors., [2002] 3 SCC
433 and Municipal Corporation of Greater Mumbai v. K. V. Shramik Sangh
and Ors., [2002] 4 SCC 609.

In A.P. SRTC and Ors v. G. Srinivas Reddy and Ors., [2006] 3 SCC 674,
ili~Coort~~: G
".... If respondents want the relief of absorption, they will have to
approach the Industrial Tribunal/Court and establish that the contract
labour system was only a ruse/camouflage to avoid labour law benefits
to them. The High Court could not, in exercise of its jurisdiction under
H
674 SUPREME COURT REPORTS (2006] SUPP. 6 S.C.R.

A Article 226, direct absorption of respondents, on the ground that work
for which respondents were e~gaged as contract labour, was perennial
in nature."

It was further held :

B "..... The only remedy of respondents, as noticed above, is to approach
the Industrial Tribunal for declaring that the contract labour system
under which they were employed was a camouflage and therefore,
they were, in fact, direct employees of the Corporation and for
consequential relief.. ... "

C Similar view has been taken in KGSD Canteen Employees' Welfare
Association (supra).

The workmen whether before the Labour Court or in writ proceedings
were represented by the same Union. A trade union registered under the
Trade Unions Act is entitled to espouse the cause of the workmen. A definite
D stand was taken by the employees that they had been working under the
contractors. It would, thus, in our opinion, not lie in the1:r mouth to take a
contradictory and inconsistent plea that they were also the workmen of the
principal employer. To raise such a mutually destructive plea is impermissible
in law. Such mutually destructive plea, in our opinion, should not be allowed
E to be raised even in an industrial adjudication. Common law principles of
estoppel, waiver and acquiescence are applicable in in industrial adjudication.

The 1947 Act was enacted, as the preamble indicates, for investigation
and settlement of industrial dispute and for certain other purposes. It envisages
collective bargaining. Settlement between Union representing the workmen
F and the Management is envisaged thereunder. It provides for settlement by
mutual agreement. A settlement or an award in terms of Section 18(3)(b) of
the 1947 Act is binding on all workmen including those who may be employed
• in future.

What assumes importance is the ultimate goal wherefor the 194 7 Act
G was enacted, namely, industrial peace and harmony. Industrial peace and
harmony is the ultimate pursuit of the said Act, having regard to the underlying
philosophy involved therein. The issue before us is required to be determined
keeping in view the purport and object of the 194 7 Act.

It is interesting to note that in Modi Spinning & Weaving Mills Company
H
STEEL AUTHORITY OF INDIA LTD. v. U.0.1. [SINHA, J.] 675
Ltd. & Anr. v. Ladha Ram & Co., [1976] 4 SCC 320, this Court opined that A_
when an admission has been made in the pleadings, even an amendment
thereof would not be permitted.

We are not oblivious of the decision of this Court in Panchdeo Narain
Srivastava v. Km. Jyoti Sahay and Anr., AIR (1983) SC 462 = [1984] Supp.
sec 594], wherein it has been held that an admission made by a party can B
be withdrawn and/or explained away; but we may notice that subsequently
a Division Bench of this Court distinguished the said decision in Heeralal v.
Kalyan Mal and Ors., [1998] l SCC 278.

The effect of an admission in the context of Section 58 of the Indian
Evidence Act has been considered by this Court in Sangramsinh P. Gaekwad C
. and Ors. v. Shantadevi P. Gaekwad (Dead) through lrs. and Ors., [2005] l l
sec 314, wherein it was categorically held that judicial admissions by
themselves can be made the foundations of the rights of the parties and
admissions in the pleadings are admissible proprio vigore against the maker
thereof. [See also Union of India v. Pramod Gupta (Dead) by lrs. and Ors., D
/ [2005J 12 sec 1

Recently this Court in Baldev Singh and Ors. etc. v. Manohar Singh
& Anr. etc., (2006) 7 SCALE 517, held :

"Let us now take up the last ground on which the application E
for amendment of the written statement was rejected by the High
Court as well as the Trial Court. The rejection was made on the ground
that inconsistent plea cannot be allowed to be taken. We are unable
to appreciate the ground of rejection made by the High Court as well
as the Trial Court. After going through the pleadings and also the
statements made in the application for amendment of the written F
statement, we fail to understand how inconsistent plea could be said
to have been taken by the appellants in their application for amendment
of the written statement, excepting the plea taken by the appellants
in the application for amendment of written statement regarding the
joint ownership of the suit property. Accordingly, on facts, we are not G
satisfied that the application for amendment of the written statement
could be rejected also on this ground. That apart, it is now well settled
that an amendment of a plaint and amendment of a written statement
are not necessarily governed by exactly the same principle. It is true
that some general principles are certainly common to both, but the
H
676 SUPREME COURT REPORTS [2006) SUPJ>. 6 S.C.R.

A rules that the plaintiff cannot be allowed to amend his pleadings so
as to alter materially or substitute his cause of action or the nature
of his claim has necessarily no counterpart in the law relating to
amendment of the written statement. Adding a new ground of defence
or substituting or altering a defence does not raise the same problem
as adding, altering or substituting a new cause of action. Accordingly,
B in the case of amendment of written statement, the courts are inclined
to be more liberal in allowing amendment of the written statement than
of plaint and question of prejudice is less likely to operate with same
rigour in the former than in the latter case."

C While laying down the principle, this Court followed Modi Spinning &
Weaving Mills Co. (supra) and distinguished Hira Lal (supra).

It is, thus, evident that by taking recourse to an amendment made in the
pleading, the party cannot be permitted to go beyond his admission. The
principle would be applied in an industrial adjudication having regard to the
.D nature of the reference made by the Appropriate Government as also in view
of the fact that an industrial adjudicator derives his jurisdiction from the
reference only.

There is another aspect of the matter which should also not be lost
sight of. For the purpose of exercising jurisdiction under Section 10 of the
E ! 970 Act, the appropriate Government is required to apply its mind. Its order
may be an administrative one but the same would not be beyond the pale of
judicial review. !t 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
F authority on the basis of the materials that a notification under Section
IO(IXd) of the 1947 Act be issued, although it stands judicially determined
that the workmen were employed by the contractor. The State exercises
administrative power both in relation to abolition of contract labour in terms
of Section I0 of the 1970 Act as also in relation to making a reference for
industrial adjudication to a Labour Court or a Tribunal under Section l 0(1 )(d)
G of the 1947 Act. While issuing a notification 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
H exists a dispute as to whether the workmen are in fact not employed by the
STEEL AUTHORITY OF INDIA LTD. v. U.0.1. [SINHA, J.] 677
contractor but by the management. We are, therefore, with respect, unable to A
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 I0 of the 1970 Act.
B
For the reasons aforementioned, the impugned judgment cannot be
sustained, which is set aside accordingly. The appeal is allowed. In the facts
and circumstances of this case, however, there shall be no order as to costs.

NJ. Appeal allowed.