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

Citation: [2006] SUPP. 6 S.C.R. 663

Court: Supreme Court of India

Bench: S.B. SINHA, DALVEER BHANDARI

Case summary

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

Judgment text

STEEL AUTHORITY OF INDIA LTD. v. UNION OF INDIA AND ORS. SEPTEMBER 26, 2006 [S. B. SINHA AND DALVEER BHANDARI, JJ. ] Labour Laws: . Industrial Disputes Act, J947-Section JO-Contract Labour (Regulation and Abolition) Act, J970--Section JO-Contract labour- 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 ofAppropriate Government who would 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 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 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 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, 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 alleging that the workmen were direct employees ofappellant 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 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 HELO: 1. 1.

The Contract Labour (Regulation and Abolition) Act, 1970 is complete code by itself. The matter relating to regulation and abolition of contract labour being governed by the provisions ofthe 1970 Act, the industrial court will have no jurisdiction in relation thereto. (668-Fl 1. 2. Relationship ofemployer and employee is essentially a question of fact. Determination ofthe 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 ofthe Appropriate Government. Adecision in that behalf is required to be taken upon following the procedure laid down in sub-section (1) ofSection 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) ofSection 10 of the 1970 Act are satisfied. (672-G-H; 673-B; 673-C-OJ 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( STEEL AUTHORITY OF INDIA LTD. v. U. 0. 1. 665 Steel Authority ofIndia Ltd and Ors. v. National Union Waterfront Workers 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 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 ofthe workmen. Adefinite 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 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 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 ofthe 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 Modi Spinning and Weaving Mills Company Ltd andAnr. 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 ofIndia v. Pramod Gupta (Dead) by Lrs. and Ors. , [2005) 12 SCC I 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 I0 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 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 - 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 Section IO(l)(d) ofthe 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 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. From the Final Judgment and Order dated 18. 12. 2003 ofthe High Court of Karanataka at Bangalore in Writ Appeals Nos. 1198-1813 of 2002 (LrrER. Harish N. Salve, Sunii Kumar Jain, S. Borthakur and B. Barooah for the Appellant. 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. 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. 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) ofthe Industrial Disputes Act, 1947 (for short, 'the 1947 Act'): "Are the contract workers employed in the nature of contract work listed as per Annexure working in the premises of Visveswaraya Iron 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 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 ofcontract 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 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 ofthe said dispute before the Labour Court, Appellant herein filed a writ petition, questioning the legality and/or 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. 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 be not maintainl! ble. A writ petition came to be filed by some trade unions alleging that the workmen were direct employees ofAppellant and were, thus, entitled to be absorbed as permanent workmen. 1 I A learned Single Judge ofthe High Court, by an order dated 05. 12. 2001, while holding the said writ petition to be not maintainable, directed : "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 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 Industrial Tribunal or the Labour Court for adjudication ofthe 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 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. " 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 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 under the Industrial Disputes Act also in the writ petition. The 1970 Act is a complete code by itself.

It not only prov ides for regulation ofcontract labour but also abolition thereof. Relationship ofemployer 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. In State ofKarnataka and Ors. v. KGSD Canteen Employees· Welfare Association and Ors. , [2006] I SCC 567, this Court held : "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. " 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 following the procedure laid down in sub-section (I) of Section I0 ofthe 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 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 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 ofIndia limited (supra) has been reiJerated by this Court subsequently. [See e. g. Nitinkumar Nathalal Joshi and Ors. v. Oil and Natural Gas Corporation Ltd and Ors. , [2002] 3 SCC 433 and Municipal Corporation ofGreater 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~~: ".... 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 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 : ".....

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..... " 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 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 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 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 1947 Act was enacted, namely, industrial peace and harmony. Industrial peace and harmony is the ultimate pursuit ofthe 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 1947 Act. It is interesting to note that in Modi Spinning & Weaving Mills Company 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 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 . 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 ofIndia v. Pramod Gupta (Dead) by lrs. and Ors. , / [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 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 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 ofthe suit property. Accordingly, on facts, we are not 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 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 ofthe written statement. Adding a new ground ofdefence or substituting or altering a defence does not raise the same problem as adding, altering or substituting a new cause of action. Accordingly, in the case ofamendment of written statement, the courts are inclined to be more liberal in allowing amendment ofthe 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. " 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 . 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 ! 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 ofthe 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 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 l0(1)(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 must prima facie satisfy itself that there exists dispute as to whether the workmen are in fact not employed by the 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.