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Summary of Opinion — S.K. Kapur, J.

Factual and Procedural Background

This writ petition challenges an order of the Presiding Officer, Labour Court, Delhi, made on an application dated 20 December 1963 by Tapeshwari Dass (respondent) under Section 33-C(2) of the Industrial Disputes Act against Sher Singh (petitioner), alleged sole proprietor of Sher Singh and Sons.

The respondent's application alleged employment with Sher Singh since April 1933 at wages of Rs. 250 per month, and that the management closed the establishment in August without notice. The respondent invoked Section 25-FFF of the Industrial Disputes Act, 1947 and claimed monetary relief totalling Rs. 8,375, comprised (as pleaded) of retrenchment compensation (Rs. 3,125), notice pay (Rs. 250) and related computation under Section 33-C(2).

The petitioner filed a reply denying the employer–workman relationship, asserting that he worked as a sole goldsmith without employees and that the respondent was an independent contractor or co-worker paid on job-work basis. The petitioner asserted he was left without work from 10 January 1963 owing to the Government's gold control policy, surrendered the rented shop, and obtained a certificate as a bona fide displaced goldsmith. He also alleged a theft committed by the respondent and reported it to police.

The Labour Court framed three issues: (1) whether the applicant was a "workman" and whether master–servant relationship existed (and, if so, salary); (2) whether the business was closed due to unavoidable circumstances and the effect; and (3) what benefits the applicant was entitled to. The Labour Court held that the respondent was entitled to proceed under Section 33-C(2), that the closure was due to causes beyond the petitioner's control, and awarded retrenchment compensation equal to three months' wages (Rs. 750).

The petitioner instituted the present writ petition impugning the Labour Court's order on jurisdictional grounds.

Legal Issues Presented

  1. Was the applicant a "workman" as defined in the Industrial Disputes Act and did the relationship of master and servant exist between the parties (and, if so, what was his salary)?
  2. Was the business closed on account of unavoidable circumstances beyond the control of the employer, and if so, what was the effect on entitlement?
  3. To what benefits, if any, was the applicant entitled?
  4. Whether the Labour Court had jurisdiction under Section 33-C(2) to determine, as part of an application for computation of benefits, the foundational question of whether an employer–employee relationship existed (or whether such disputes fall under Section 10 and must be pursued as industrial disputes).

Arguments of the Parties

Petitioner's Arguments (Mr. D.D. Sharma)

  • The Labour Court had no jurisdiction to award the relief claimed under Section 33-C(2) when the very relationship of employer and workman was in dispute; that dispute should be decided under Section 10 as an industrial dispute.
  • If the respondent's claim is for money due under Chapter V-A, the appropriate remedy is an application to the appropriate Government for recovery under those provisions.
  • Accepted that "benefit" under Section 33-C(2) may include monetary and non-monetary benefits and acknowledged the Supreme Court's decision in Central Bank of India Ltd. v. P.S. Rajagopalan that Section 33-C(2)'s scope is wider than Section 33-C(1), but contended that certain categories (e.g., claims that a dismissal is wrongful) are not to be pursued under Section 33-C(2).
  • On the facts, asserted that the petitioner was a sole goldsmith with no employees, that the respondent was a co-worker/independent contractor and not entitled to computed monetary benefits, that the shop was surrendered due to gold control measures, and that theft by the respondent had been reported to police.

Respondent's Arguments (Mr. A.K. Jain)

  • The question whether the employer–workman relationship exists is incidental to the claim for computation of benefits and therefore within the scope of Section 33-C(2).
  • The mere raising of an objection by the employer to the existence of the relationship cannot oust the Labour Court's jurisdiction to entertain an application under Section 33-C(2); an inquiry into existence of the right may be necessary and incidental to computation.
  • Relied upon the Supreme Court's observations in Central Bank's case and a decision of the Bombay High Court in Ramkrishna Ramnath Bidi Manufacturing Kamptee v. Presiding Officer, Labour Court, to support this position.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Central Bank of India Ltd. v. P.S. Rajagopalan (Supreme Court) Established that Section 33-C(2) has a wider scope than Section 33-C(1); that "benefit" under Section 33-C(2) may include monetary and non-monetary benefits; and that in some cases the Labour Court may need to inquire into the existence of rights incidental to computation, but certain categories (for example, claims that a dismissal is wrongful) are not to be pursued under Section 33-C(2). The court analysed both sides' reliance on this decision. It accepted the Supreme Court's characterization of Section 33-C(2)'s wider scope but distinguished those aspects from the present situation where the existence of the employer–workman relationship itself was disputed. The court concluded that Central Bank does not authorize the Labour Court to decide foundational disputes about whether the claimant is a workman where that dispute is the central question.
Ramkrishna Ramnath Bidi Manufacturing Kamptee v. Presiding Officer, Labour Court (Bombay High Court) Cited by respondent's counsel in support of the proposition that questions about the employer–employee relationship can be treated as incidental to computation under Section 33-C(2). The court acknowledged reliance on this decision but treated the point as not free from difficulty. After analyzing the statute and Central Bank, the court proceeded to hold that where the dispute is whether the claimant is a workman at all, the matter properly falls under Section 10 and not Section 33-C(2).

Court's Reasoning and Analysis

The court began by setting out the factual matrix, the Labour Court's framed issues and its conclusions. It then addressed the rival contentions about the scope of Section 33-C(2), relying principally upon and engaging with the Supreme Court's observations in Central Bank of India Ltd. v. P.S. Rajagopalan.

The court accepted that Central Bank establishes that Section 33-C(2) is wider than Section 33-C(1) and that "benefit" may include both monetary and non-monetary advantages. However, the court focused on the statutory language and the limits of the Labour Court's jurisdiction when the existence of the employment relationship itself is contested.

The key analytical steps were:

  1. Reading Section 33-C(2) as a provision primarily enabling the Labour Court to compute and implement an existing individual right to benefits; the section presupposes that a workman is entitled to certain benefits which then require computation.
  2. Distinguishing between cases where the Labour Court may need to determine questions incidental to computation of benefits (for example, the scope or quantum of a benefit where the employment relationship is admitted) and cases where the central dispute is whether the claimant is a workman at all.
  3. Holding that where the existence of the employer–workman relationship is itself in dispute, that matter falls within the scope of Section 10 of the Industrial Disputes Act (i.e., an industrial dispute) and should not be converted into a Section 33-C(2) proceeding that would bypass the Section 10 machinery.
  4. Observing that allowing foundational disputes about workman status to be resolved under Section 33-C(2) would effectively reduce the role of Section 10 and permit employers to control access to remedies by simple denial—an outcome inconsistent with the statutory scheme.
  5. Concluding that the Labour Court erred in assuming jurisdiction to decide the primary issue of whether the claimant was a workman; that error went to the jurisdiction of the Labour Court and therefore warranted quashing of the impugned order.

The court noted it allowed the petitioner to raise the jurisdictional point even though it had not been raised before the Labour Court, because the issue went to the root of the proceedings.

Holding and Implications

Holding: The petition succeeds and is allowed; the impugned order of the Labour Court is quashed.

Implications:

  • The direct effect is that the Labour Court's computation and award under Section 33-C(2) (granting three months' wages / Rs. 750) is set aside because the Labour Court acted without jurisdiction in deciding the foundational question of whether the claimant was a workman.
  • The court held that where the existence of the employer–workman relationship is in dispute, the appropriate remedy is to treat the matter as an industrial dispute under Section 10 of the Industrial Disputes Act rather than resolving it under Section 33-C(2).
  • No order as to costs was made by the court.
  • The opinion confines itself to applying existing precedent and statutory construction to the facts; it does not purport to announce any broader novel precedent beyond its conclusion on jurisdiction in the present circumstances.

    Sher Singh Varma v. Rup Chandra And Another

    S.K Kapur, J.:— The present writ petition is directed against the order of the Presiding Officer, Labour Court, Delhi, made on the application of Tapeshwari Dass, respondent No. 2, under Section 33-C(2) of the Industrial Disputes Act against the petitioner. On December 20, 1963, Tapeshwari Dass, (hereafter referred to as respondent) made the aforesaid application claiming that he had been in employ of Sher Singh and Sons, of which Sher Singh, (hereafter referred to as the petitioner), is alleged to be the sole proprietor. The respondent further claimed in bis application that he had been in the employment since April, 1933 and his wages were Us. 250 per mensem. He alleged that the management closed the establishment in the month of August without any notice to the applicant and the petitioner had failed to pay the dues as required under Section 25-FFF of the Industrial Disputes Act, 1947. The respondent, therefore, claimed Rs. 8,375 as under:—

    1. Retrenchment compensation at the rate of 15 days wages p.m for 25 years' service. Rs. 3,125.00

    2. Notice pay for one month. Rs. 250.00

    2. On these facts the respondent prayed in his application under Section 33-C(2) that the Court may compute the amount due to him.

    3. The petitioner was called upon to file a reply in which he, inter alia stated as under:—

    (1) The relationship of employer and workman never existed between the parties and the Labour Court had no jurisdiction to proceed on merits without deciding this issue;

    (2) The surrendering of the possession of the shop to the landlord due to forced unemployment cannot be termed as “closing down of the undertaking” within the meaning of Section 25-FFF of the Industrial Disputes Act, 1947;

    (3) Tapeshwari Dass was not entitled to any benefits from Sher Singh which could be computed in terms of money by the Labour Court. The petitioner was a goldsmith by profession and was working as die-cutter under the name and style of Sher Singh Varma in a rented premises at Nai Sarak, Delhi. He carried on his work without the help of any employee;

    (4) Tapeshwari Dass who was a man of equal status and skill merely helped Sher Singh as a co-worker and used to perform the job work entrusted to him by the petitioner on contract basis as an independent contractor. Whenever there was some surplus work with Sher Singh he used to pass it on to Tapeshwari Dass as well as other goldsmith for completion and such goldsmits including Tapeshwari Das were paid for the job done. According to the petitioner, the relationship of employer and workman never existed between the parties. The petitioner also stated that he was left without any work with effect from January 10, 1963, due to the gold control policy of the Government of India and he, therefore, surrendered the possession of the premises after obtaining a certificate of being a bona fide displaced gold-smith from the Deputy Commissioner, Delhi; and

    (5) Tapeshwari Dass had also stolen Rs. 2,500 and a gold tagari on September 9, 1963, belonging to Sher Singh and he had already lodged a report with the police. On the above facts, the Labour Court framed the following three issues;—

    1. Was applicant a “workman” as defined in the Industrial Disputes Act. Did the relationship of master and servant exist between parties? If so, what was his salary?

    2. Was the business closed on account of unavoidable circumstances beyond control of employer? If so, its effect?

    3. To what benefits, if any, is applicant entitled?

    4. The Labour Court came to the conclusion that (a) Tapeshwari Dass was entitled to make an application under Section 33-C (2) of the Industrial Disputes Act; (b) closure of business by the petitioner was due to the causes beyond bis control and Tapesnwari Dass was, therefore, entitled only to three months wages as retirement compensation and (3) Tapeshwari Dass was drawing a salary of Rs. 250 and, therefore, he was entitled to Rs. 750.

    5. Mr. D.D Sharma, the learned counsel for the petitioner, has assailed the order of the Labour Court on the ground that the Labour Court had no jurisdiction to award the relief. He says that if the respondent's claim is on account of money due to him under the provisions of Chapter V-A, his remedy is to make an application to the appropriate Government for the recovery of the money. If, on the other hand, there is a dispute about the existence of relationship of employer and employee the respondent can raise an industrial dispute but not claim the amount under Section 33-C (2). He does not dispute that the word “benefit” under the said provision is not confined merely to non-monetary benefit which could be converted in terms of money and agrees that the section embraces benefits whether monetary or non monetary to which a workman may be entitled. Mr. Sharma also does not dispute that in view of the decision of their Lordships of the Supreme Court in Central Bank of India Ltd. v. P.S Rajagopalan (1), the scope of Section 33-C (2) is wider than the scope of Section 33-C(1) and the claims not based on settlements, awards or made under the provisions of Chapter V-A may in certain circumstances be competent under Section 33-C(2). His submission in short is that the dispute as to whether the relationship of employer and employee exists or whether he is entitled to any wages does not fall to be determined under Section 33-C (2), though it may be open to the employee to raise an industrial dispute. He strongly relies on the following observations of their Lordships of the Supreme Court in Central Bank's case, at page 55:—

    “…….It is unnecessary in the present appeals either to state exhaustively or even to indicate broadly what other categories of claims can fall under Section 33-C (2). There is no doubt that the three categories of claims mentioned in Section 33-C(1) fall under Section 33-C(2) and, in that senes, Section 33-C(2) can itself be deemed to be a kind of execution proceeding; but it is possible that claims not based on settlements, awards or made under the provisions of Chapter V-A, may also be competent under Section 33-C (2) and that may illustrate its wider scope. We would, however, like to indicate some of the claims which would not fall under Section 33-C(2), because they formed the subject-matter of the appeals which have been grouped together for our decision along with the appeals with which we are dealing at present. If an employee is dismissed or demoted and it is his case that the dismissal or demotion is wrongful, it would not be open to him to make a claim for the recovery of his salary or wages under Section 33-C (2). His demotion or dismissal may give rise to an industrial dispute which may be appropriately tried, but once it is shown that the employer has dismissed or demoted him, a claim that the dismissal or demotion is unlawful and, therefore, the employee conti-???ies to be the workman of the employer an is entitled to the benefits due to him under a pre-existing contract, cannot be made under Section 33-C(2)…………..”

    6. Mr. A.K Jain, on the other hand, submits that the question whether such relationship exists or not is incidental to the claim for computation of benefits and is, therefore, within the scope of Section 33-C (2). He says that merely because the employer has disputed the existence of such relationship cannot oust the jurisdiction of the Labour Court. He relies on the following observations of their Lordships of the Supreme Court in Central Bank's at page 53:

    “………Besides, it seems to us that if the appellant's construction is accepted, it would necessarily mean that it would be at the option of the employer to allow the workman to avail himself of the remedy provided by sub-section (2), because he has merely to raise an objection on the ground that the right claimed by the workman is not admitted to oust the juris-diction of the Labour Court to entertain the workman's application. The claim under Section 33-C(2) clearly postulates that the determination of the question about computing the benefit in terms of money may, in some cases, have to be preceded by an enquiry into the existence of the right and such an enquiry must be held to be incidental to the main determination which has been assigned to the Labour Court by sub-section (2)………”

    7. Mr. Jain has also relied on the decision of the Bombay High Court in Ramkrishna Ramnath Bidi Manufacturing Kamptee by Manager v. Presiding Officer, Labour Court (3). I must confess that the point is not free from difficulty. After the pronouncement of the Supreme Court in Central Bank's case it is clear that the scope of Section 33-C(2) is wider than Section 33-C(1) and that the expression “benefit” referred to therein includes both monetary and non-monetary benefits. The troublesome question, however, is for which benefits and on whose instance the said provision can be invoked. No doubt it is true that the employer by merely denying the right of the employee to claim benefit cannot oust the jurisdiction of the Court under Section 33-C(2). But, before that aspect can be permitted to affect the mind one has to see the scope and ambit of the section itself. The reading of the section shows that it is only where, a workman is entitled to certain benefits that the Labour Court can compute them. But, where the existence of relationship of workmen and employer is itself in dispute, the matter would fall under Section 10 of the Industrial Disputes Act, and, consequently, the remedy available to an employee would be to raise an industrial dispute. The Labour Court under Section 33-C(2) is primarily given power to execute or implement his existing individual right and it may, therefore, be necessary in some cases to determine such right. Such determination, however, must be confined to matters incidental to the main issue, namely, the computation of benefits to which a workman is entitled. The question whether the claimant is a workman at all or not would not, in my opinion, be incidental to the determination of the main question. It is said that the reasons which impelled the Supreme Court to hold that the Labour Court can enquire into the existence of a right fully apply to the determination of the question about the existence of the relationship of master and servant and an employer cannot be permitted to oust the jurisdiction of the Labour Court by merely raising a dispute that the claimant is not an employee at all. In my opinion, there is vast difference between the two. In the former, the relationship of master and servant is admitted and the Court has then to consider whether or not an employee is entitled to the benefit claimed and if so, what are those benefits. In the other category of cases the dispute centres round the point whether the claimant is a workman at all. If the respondent's contention be upheld then most of the industrial disputes could fall under Section 33-C(2) and the provisions of Section 10 would at least to a considerable extent be reduced to silence, I am, therefore, of the opinion that the Labour Court acted without jurisdiction in deciding the issue as to the existence of relationship of master and servant. I am not unmindful of the fact that this point was not raised by the petitioner before the Labour Court but since the point goes to the root of the whole matter and relates to the jurisdiction of the Labour Court I allowed the petitioner to raise this question.

    8. In the result, the petition succeeds and is allowed. The impugned order of the Labour Court is quashed but there will be no order as to costs.

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    Sher Singh Varma v. Rup Chandra And Another
    (Aug 11, 1965)