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Case Number

Writ Appeals Nos. 881 and 882 of 1987 with Writ Petition No. 439 of 1986

Attorney(S)

Sri C. Ramakrishna, Staading Counsel.
Advocate-General and Sri G. Bikshapathi.

Judges

Sri K. Jayachandra Reddy
Sri N.D Patnaik, JJ.

Acts

rules 65 to 71 of the Andhra Pradesh Factories Rules. Rule 65
Andhra Pradesh Co-operative Societies Act
INDUSTRIAL DISPUTES ACT
S. 25-F of the Industrial Disputes Act
Section 46(1) of the Factories Act
provisions of rules 65 to 70
S. 46 of the Factories Act
MINIMUM WAGES ACT
sub-rule (1)

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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

The Andhra Pradesh Dairy Development Co-operative Federation Ltd. (the federation) operates a canteen for workers at its Lalapet establishment in Hyderabad. Petitioners 1–21 worked in that canteen and filed two writ petitions. Writ Petition No. 6720 of 1984 sought a mandamus directing the federation to treat them as federation employees and fix regular pay-scales. Writ Petition No. 13767 of 1986 challenged their termination and sought reinstatement with full back-wages.

Petitioners' factual account: until 1977 the canteen was run by a private contractor; thereafter the federation ran it under the welfare officer, and appointments were made by the welfare officer on behalf of the federation. Petitioners alleged uninterrupted service from their respective dates of appointment and claimed they were being paid meagre salaries without attendant benefits that regular federation employees received. They relied on S.46 of the Factories Act, alleging the canteen was established to discharge the federation's statutory obligation and therefore they should be treated as federation employees. They further alleged that a tender in January 1986 envisaged continuation of canteen workers, but the federation terminated them en masse effective 30 April 1986, an act they characterised as retrenchment under S.2(oo) and contrary to S.25-F of the Industrial Disputes Act.

Federation's factual position: by counter-affidavit it said the petitioners were not federation employees but employees of a co-operative society registered under the Andhra Pradesh Co-operative Societies Act in 1981, which had taken over running the canteen at the workers' request; the society appointed petitioners, and the federation had no employer-employee relationship with them. The federation stated the canteen was closed by that society on 30 April 1986, and later a private contractor was engaged; the federation disclaimed responsibility for the petitioners' unemployment.

The learned Single Judge accepted the petitioners' contentions, directing (in W.P. No. 6720 of 1984) that petitioners be treated as federation employees and be given regular pay-scales; and (in W.P. No. 13767 of 1986) that petitioners be reinstated within eight weeks without back-wages. The federation filed two writ appeals (Nos. 881 and 882 of 1987) against that judgment.

Separately, the federation filed Writ Petitions No. 439 of 1986 and 4971 of 1987 challenging Authority orders under the Minimum Wages Act which had directed the federation to pay differences in wages and compensation for delayed payment for different periods (specified in the opinion). These petitions were argued together with the employment-status issues.

Legal Issues Presented

Whether the workers employed in the canteen established under S.46 of the Factories Act are employees of the occupier (the federation) or employees of the co-operative society/contractor that ran the canteen?
Whether the federation's termination of the petitioners on 30 April 1986 amounted to unlawful retrenchment within the meaning of S.2(oo) and contrary to S.25-F of the Industrial Disputes Act?
Whether, if the workers are federation employees, the federation is liable under the Minimum Wages Act to pay the difference between wages actually paid and the statutory minimum wages for the periods identified, and whether compensation for delayed payment should be imposed on the federation?

Arguments of the Parties

Petitioners' Arguments

The canteen was established by the federation to discharge its statutory obligation under S.46 of the Factories Act; therefore the canteen workers are federation employees and entitled to regular pay-scales and attendant benefits.
The federation's tender and subsequent termination of petitioners on 30 April 1986 amounted to retrenchment under S.2(oo) of the Industrial Disputes Act and (being in contravention of S.25-F) void ab initio; they sought reinstatement with back-wages.

Federation's Arguments

The petitioners were employees of a co-operative society formed in 1981 under the Andhra Pradesh Co-operative Societies Act that took over running the canteen; the society appointed and controlled them, so there was no employer-employee relationship between the federation and the petitioners.
The federation contended it had constructed the canteen as required by S.46 and that the running of the canteen was entrusted to the co-operative society; a managing committee (including worker representatives) managed the canteen and the federation denied responsibility for the workers' termination on 30 April 1986 because the society had closed the canteen and a private contractor later took over.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Saraspur Mills Company, Ltd. v. Ramanlal Chimanlal [1973 — I L.L.N 423]	The principle that workers employed in a canteen established under S.46 and handed over to a co-operative society cannot be treated as separate from the regular employees of the company; they may be regarded as employees of the occupier.	The court relied on this decision to support the conclusion that canteen workers, even if the canteen was run by a co-operative society, are not to be treated as separate from the occupier's regular employees and therefore are employees of the occupier.
Kanpur Suraksha Karamchari Union (Regd.) v. Union of India [1988 — II L.L.N 919]	The Supreme Court's statements that (i) employees of a canteen run as required under S.46 are employees of the occupier and not of the managing committee; (ii) the managing committee cannot be the employer in the true sense; and (iii) where a co-operative society or contractor runs the canteen the position may differ but generally the occupier remains responsible.	The court relied on this authority to conclude that once a canteen is established under S.46, the canteen employees become employees of the occupier; it distinguished the role of a managing committee and noted that, while a contractor or co-operative society might be the employer in some situations, the statutory responsibility under S.46 commonly makes the occupier liable.

Court's Reasoning and Analysis

The court proceeded by reference to the factual matrix and the statutory framework. It accepted as common ground that the Dairy Development Federation is a factory and that the canteen was established by the federation in compliance with S.46 of the Factories Act. The court examined the rules framed under S.46 (Andhra Pradesh Factories Rules, rules 65–71 and rule 71-A) and specifically noted:

Rule 65 requires provision of a canteen by the employer in factories where more than 250 workers are ordinarily employed.
Rule 68(2) provides that certain items of expenditure shall not be taken into account in computing prices charged in the canteen because those expenditures are to be borne by the occupier; clause (5) under Rule 68 refers expressly to the wages of employees serving in the canteen and the cost of uniforms, indicating those wages are to be paid by the occupier and not taken into account when fixing prices.
Rule 70 provides for a managing committee to be appointed to advise on quality, menus, times of meals and other matters, but the committee's functions are consultative.

Applying these statutory provisions and rules, the court emphasized that Rule 68(2)'s requirement that the occupier bear the wages of canteen employees supports the position that such employees are the occupier's employees. The court then relied on case law: Saraspur Mills and Kanpur Suraksha Karamchari Union, noting the Supreme Court's analysis that canteen employees established under S.46 are ordinarily employees of the occupier and that a managing committee (which is not an incorporated employer) cannot be treated as the legal employer. The Kanpur decision was noted to leave open that if a canteen is run by a contractor or co-operative society the position "may be different," but the court read the precedent as generally enforcing occupier liability where a canteen is established to comply with S.46.

On this basis the court agreed with the petitioners that they are employees of the federation. Regarding remedies and relief:

The court accepted that petitioners sought direction to fix suitable pay-scales; it held that it is for the federation to fix pay considering the nature of work and pay for similar categories.
Concerning Minimum Wages Act petitions, the court held that because the petitioners are federation employees the federation is liable to pay any difference between wages paid and statutory minimum wages for the specified periods. However, the court set aside the awards of compensation for delayed payment because the matter had been pending before the Court; therefore two specific compensation awards were vacated (see Holding & Implications for amounts).

Holding and Implications

Holding:

1. The canteen workers are employees of the Andhra Pradesh Dairy Development Co-operative Federation.

2. The federation's writ appeals against the Single Judge's orders were dismissed.

3. The federation is liable under the Minimum Wages Act to pay the difference between the wages actually paid and the statutory minimum wages for the periods identified; however, specified awards of compensation for delayed payment were set aside.

Direct consequences and implications:

As a result of dismissal of the federation's appeals, the directions of the Single Judge (that petitioners be treated as federation employees and that appropriate regular pay-scales be fixed) remain operative; the court expressly left it to the federation to fix pay-scales in light of the nature of the work and comparable categories.
On the Minimum Wages Act matters, the federation must pay the minimum-wage differentials ordered by the Authority for the relevant periods; however, the court set aside the compensation awards of Rs. 41,805 (in Writ Petition No. 4971 of 1987) and Rs. 80,215 (in Writ Petition No. 439 of 1986). The rest of the awards under the Minimum Wages Act were confirmed.
No costs were awarded in relation to the appeals and the writ petitions as the court recorded.
Advocate's fee was fixed at Rs. 250 (consolidated for all four cases), as recorded in the opinion.

The opinion applies existing precedent and statutory rules to the facts. The judgment does not purport to announce a novel legal principle; it applies prior authorities to hold that canteen workers, where a canteen is established under S.46 and the rules, are employees of the occupier.

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Andhra Pradesh Dairy Development Co-Operative Federation, Ltd. v. Shivadas Pillay And Other

Patnaik, J.:— The writ appeals are filed against the judgment of a learned Single Judge in Writ Petitions Nos. 6720 of 1984 and 13767 of 1986.

2. The Andhra Pradesh Dairy Development Co-operative Federation, Ltd. (hereinafter referred to as the federation), is running a canteen for the workers employed in the factory and office establishment at Lalapet in Hyderabad. Petitioners 1 to 21 were working in the said canteen. They filed Writ Petition No. 6720 of 1984 for the issue of a writ of mandamus directing the federation to treat them as employees of the federation and to fix appropriate regular scales of pay as applicable to the employees of the federation. The other Writ Petition No. 13767 of 1986 was filed by them challenging the illegal and unlawful termination of the petitioners with a prayer to reinstate them into service with full back-wages. The petitioners alleged in their affidavit that till 1977 the canteen was being run by a private contractor and afterwards it was run by the federation itself under the supervision of the welfare officer and all appointments were being made by the welfare officer on behalf of the federation. The petitioners were appointed in the canteen from various dates from 1 March, 19???9, and were working without break. The grievance of the petitioners is that though the other employees are being given regular pay-scales, the petitioners are being paid meagre salaries without attendant benefits, which accrue to the regular employees of the federation. They contended that under S. 46 of the Factories Act, the federation is under an obligation to establish and maintain a canteen for the workmen and hence the canteen has been established in discharge of the statutory obligation cast upon the federation. Therefore, they contend that they must be regarded as employees of the federation and not as workers in the canteens. They further alleged that on 16 January, 1986, the federation issued a tender inviting quotations from outsiders for managing the canteen and one of the terms and conditions is that the 24 workers in the canteen shall be continued to be in the employment of the canteen. While matters stood thus, the respondent terminated ail the petitioners en masse from 30 April, 1986. This action of the federation amounts to retrenchment within the meaning of S. 2(oo) of the Industrial Disputes Act and the termination being in contravention of S. 25-F of the Industrial Disputes Act the same is void ab initio.

3. In the counter-affidavit filed on behalf of the federation it is contended that the petitioners are not the employees of the federation, but they are only the employees of the canteen run by the co-operative society which was registered under the Andhra Pradesh Co-operative Societies Act in 1981. They have been appointed by the management of the said society and the federation has nothing to do with their appointment or their continuance in service. There is no employee-employer relationship between the petitioners and the respondent. It is further alleged that during 1981 the workers of the federation have expressed their desire to run the canteen on co-operative basis and the co-operative canteen was formed in 1981 and the canteen was handed over to the said society. On 30 April, 1986, the canteen was closed down by the said society abruptly. Subsequently after calling for quotations a private contractor was appointed and he started running the canteen. The respondent federation is not at all responsible for keeping the petitioners out of service from 30 April, 1986.

4. The learned Single Judge accepted the petitioners' contention that they are the employees of the federation and allowed both the writ petitions. In Writ Petition No. 6720 of 1984 he directed the federation to treat petitioners 1 to 21 as employees of the federation and fix appropriate regular scales of pay as applicable to the employees of the federation. In Writ Petition No. 13767 of 1986 he directed that the petitioners should be reinstated in the service of the federation within a period of 8 weeks from the date of receipt of the order, but the petitioners are not entitled to any back-wages and other attendant benefits during the period between termination and reinstatement and allowed the writ petition accordingly. The federation has filed the two Writ Appeals Nos. 881 and 882 of 1987 against the said order.

5. Writ Petition No. 439 of 1986, is filed by the federation challenging the order of the Authority under the Minimum Wages Act in Miscellaneous Application No. 1 of 1985 directing the federation to pay the difference of wages between the wages paid to the workers of the canteen and ??? minimum wages payable to then for the period from 2 March, 1983 to 2 February, 1985 together with compensation. Writ Petition 4971 of 1987 was filed by the federation challenging the order of the Authority under the Minimum Wages Act, dated 12 February, 1987, ordering the federation to pay to the workers the difference in wages paid under the Minimum Wages Act for the period 3 February, 1985 to 3 January, 1986, accepting the contention of the workers that the federation is liable to pay the minimum wages to the workers in the canteen.

6. As could be seen from the respective contentions while the workers are contending that they are the employees of the federation, the federation is contending that they are the employees of the canteen, run by a co-operative society but not the employees of the federation. So, the main question which arises for determination in all these matters is whether the workers in the canteen are the employees of the federation. Section 46(1) of the Factories Act provides that the State Government may make rules requiring that in any specified factory wherein more than two hundred and fifty workers are ordinarily employed, a canteen or canteens shall be provided and maintained by the occupier for the use of the workers. Sub-section (2) says that without prejudice to the generality of the foregoing power, such rules may provide for the matters enumerated in the said sub-section. It is not in dispute that the Dairy Development Federation is a factory. It is also not in dispute that the canteen is established by the federation as required under S. 46 of the Factories Act. The contention of the federation is that as required under the rules they have constructed the canteen but the running of the canteen was entrusted to the employees co-operative society and as that co-operative society had appointed the petitioners they are not the employees of the federation. It also contended that a managing committee was appointed for running the canteen, which included representatives of the workers and that the committee was managing the affairs of the canteen. Rules have been framed as prescribed under S. 46. They are rules 65 to 71 of the Andhra Pradesh Factories Rules. Rule 65 lays down that the employer of every factory where more than 250 workers are ordinarily employed shall provide in or near the factory, a canteen according to the standards prescribed by the rules. It also provides for specification of the canteen building. Rule 66 deals with dining hall. Rule 67 deals with equipment, i.e., utensils, crockery, etc. Rule 68 deals with prices to be charged. Rule 69 deals with the accounts. Rule 70 deals with the managing committee. Rule 71 deals with the medical examination of the canteen staff. Rule 71-A empowers the Chief Inspector to relax the provisions of rules 65 to 70 in the case of some factories. Rule 68(2) which deals with the prices to be charged says that in computing the prices referred to in sub-rule (1) the items of expenditure enumerated therein shall not be taken into consideration but will be borne by the occupier. Clause (5) refers to the wages of the employees serving in the canteen and the cost of uniforms if any provided to them. According to this rule the wages of the employees have to be paid by the occupier and it shall not be taken into consideration while fixing the prices. This rule, according to the contention of the learned counsel for the employees, shows that the workers in the canteen are the employees of the federation. Rule 70 provides that the manager shall appoint a canteen managing committee which shall be consulted from time to time regarding quality and quantity of the foodstuffs to be served in the canteen, the arrangement of the menus, times of meals in the canteen and any other matter as may be directed by the committee.

7. A similar question arose for consideration in Saraspur Mills Company, Ltd. v. Ramanlal Chimanlal [1973 — I L.L.N 423]. In that case the management set up a canteen as required in S. 46 of the Factories Act and the rules made therein. The company then handed over the management of the canteen to a co-operative society. A dispute arose between the workmen in the canteen and the company about the payment of wages and dearness allowance in accordance with the direction contained in the award of the Bombay Industrial Court which was applicable to the said company. The Supreme Court held that the workers employed in the canteen, though it was being run by a co-operative society could not be treated as being different or separate from the regular employees of the company. In a recent case in Kanpur Suraksha Karamchari Union (Regd.) v. Union of India [1988 — II L.L.N 919], it was pointed out by the Supreme Court that the employees of a canteen run by the Defence Industrial Installations as required under S. 46 are the employees of the occupier of the factory and not co-operative managing committee. It was pointed out by Venkataramiah, J. (as he then was), as follows, in Para 6, at page 923:

“… There cannot be a canteen without sufficient number of workers working in the canteen. They have to be appointed by the occupier. Otherwise he would not be fully complying with S. 46 of the Act. The managing committee cannot be the employer of those workmen in true sense of the term. The managing committee constituted under S. 46 of the Act which is not an incorporated body and whose financial position is uncertain cannot be considered to be the employer who has to bear the legal responsibilities under the several labour laws in force in India…”

It was further observed as follows, in Para 6, at page 923:

“… We may, however, add that in the case of a canteen run by a contractor or a co-operative society or some other body, the position may be different…”

Relying on this observation the learned Advocate-General appearing for the federation contended that since the canteen was being run by a co-operative society the workers of the canteen ace not the employees of the federation and that there is no relationship of master and servant between the federation and the canteen workers. But the decision further says in Para 6, at page 923 of 1988—II L.L.N:

“… But even then there has to be a managing committee, if such a canteen is treated as a canteen established for purposes of satisfying the requirements of S. 46 of the Act. Even in this case the contractor or the co-operative society or some other body will be the employer, but not the managing committee. In this situation it is difficult to hold that the employees in canteens established under S. 46 of the Act would not be employees of the occupier, even though for purposes of management a canteen managing committee whose functions are advisory as pointed out above, has to be constituted under the rules.”

It is therefore, clear that when once a canteen is established under S. 46 of the Factories Act the employees in the canteen would become employees of the occupier.

8. Therefore, we agree with the contention of the learned counsel for the workers that they are the employees of the federation.

9. The workers also wanted that a direction may be given to the federation to fix suitable pay-scales for them. It is for the federation to fix their pay taking into consideration the nature of work done by them and the pay given to similar categories of employees. The two appeals are dismissed. No costs.

Writ Petitions Nos. 439 of 1986 and 4971 of 1987:

10. In these two writ petitions the orders of the Authority under Minimum Wages Act is questioned. The authority has directed the federation to pay the minimum wages of the workers and directed them to pay compensation for the delayed payment. In view of our decision that they are employees of the federation, the minimum wages have to be paid to them. But, so far as the compensation is concerned, we do not think that the corporation should be mulcted with, since the matter was pending in the Court. Therefore, the compensation of Rs. 41,805 awarded in Writ Petition No. 4971 of 1987 and a sum of Rs. 80,215 awarded in Writ Petition No. 439 of 1986 is set aside. The rest of the awards are confirmed. The two writ petitions are ordered to the extent indicated above. No costs.

11. Advocate's fee Rs. 250 (consolidated in all the four cases).

Andhra Pradesh Dairy Development Co-Operative Federation, Ltd. v. Shivadas Pillay And Other

Structured Summary of the Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioners' Arguments

Federation's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Andhra Pradesh Dairy Development Co-Operative Federation, Ltd. v. Shivadas Pillay And Other

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