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Saraspur Mills Co. Ltd. v. Ramanlal Chimanlal And Others
Factual and Procedural Background
The appellant company, statutorily obliged under Section 46 of the Factories Act, 1948 to maintain a canteen for its mill workers, permitted the Saraspur Mills Canteen Cooperative Society Limited to operate the facility. Canteen workers employed by the cooperative society filed an application under Section 79 of the Bombay Industrial Relations Act, 1946, seeking payment of wages and dearness allowance fixed in an earlier Industrial Court award (Reference No. 18 of 1947) and two supplementary awards (1956 and 1962). They asserted that amendments made in 1962 to the definitions of “employee” and “employer” in Section 3 of the Act rendered them statutory employees of the appellant company.
The 2nd Labour Court, Ahmedabad dismissed the claim on 14 April 1966, holding that the workers were employees of the cooperative society, not of the appellant. On appeal, the Industrial Court, Gujarat reversed that decision on 26 March 1968, directing the appellant to pay the differential wages and allowances. The present appeal to the Supreme Court was brought by special leave challenging that order.
Legal Issues Presented
- Whether canteen workers employed by an independently constituted cooperative society can, by virtue of the amended definitions in Section 3(13) and 3(14) of the Bombay Industrial Relations Act, 1946, be treated as employees of the appellant mill for wage-related purposes.
Arguments of the Parties
Appellant's Arguments
- The appellant’s obligation under the Factories Act was limited to providing canteen facilities; it did not employ, supervise, or pay the canteen staff.
- The workers were hired and remunerated exclusively by the cooperative society; therefore, wage settlements or awards binding the appellant’s own workforce could not extend to them.
Canteen Workers’ Arguments
- Amendments to the Act expanded the concept of “employee” to include persons executing work ordinarily forming part of the undertaking, even when employed through an intermediary.
- Running the canteen is an ordinary and statutory part of the mill’s undertaking; hence, the workers are statutory employees of the appellant and entitled to the benefits of the 1947 award and its supplements.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Civil Appeal No. 1044 of 1968 (Supreme Court, decided 14 April 1972) | Workers engaged through a contractor in tasks ordinarily or incidentally connected with the industry qualify as employees under extended statutory definitions. | The Court treated this earlier judgment as conclusive authority, equating canteen work with the gardening work considered in that case. |
| Basti Sugar Mills Ltd. v. Ram Ujagar, AIR 1964 SC 355 | Persons employed by a contractor to perform work ordinarily forming part of the undertaking are workmen under analogous statutory language. | Cited to reinforce that contractual intermediation does not defeat employee status when statutory conditions are met. |
| Ahmedabad Mfg. & Calico Printing Co. Ltd. v. Workmen, (1953) II LLJ 647 | Employees need not be directly involved in core manufacturing if their work is incidentally connected with the main industry. | Used to support the view that canteen operations, like garden maintenance, are incidentally connected with textile manufacturing. |
Court's Reasoning and Analysis
The Supreme Court adopted the interpretive approach previously outlined in Civil Appeal No. 1044 of 1968. It emphasised that Section 3(13) and 3(14) of the Act, as amended in 1962, intentionally created a statutory fiction extending employee status to individuals executing work “ordinarily a part of the undertaking” even when their immediate contractual relationship was with an intermediary.
The Court identified four conditions, distilled by the Industrial Court, for such statutory employment to arise: (1) entrustment of work by the owner; (2) entrustment in the course of conducting the undertaking; (3) entrustment otherwise than as a servant or agent; and (4) the work being ordinarily part of the undertaking. It agreed that all four conditions were satisfied because the appellant, to discharge its statutory duty under the Factories Act, entrusted the running of the canteen—an ordinary, statutory component of the mill’s operations—to the cooperative society.
Drawing on Basti Sugar Mills and Ahmedabad Mfg. & Calico Printing, the Court held that canteen services, like garden maintenance or press-mud removal, are operations “incidentally connected” with the main industry. Consequently, the cooperative society’s employees were, by statutory definition, employees of the appellant for purposes of wages and dearness allowance. No contrary contractual arrangement could override this legislative intent.
Holding and Implications
Appeal Dismissed with Costs.
The Industrial Court’s direction compelling the appellant to pay the differential wages and dearness allowance stands affirmed. The decision confirms that statutory obligations under the Factories Act, when coupled with the expanded definitions in the Bombay Industrial Relations Act, render workers engaged through intermediaries—such as cooperative societies—employees of the principal undertaking for labour-law purposes. While the ruling resolves the dispute between these parties, it also reiterates the broader principle that employers cannot evade wage liabilities by outsourcing statutory amenities integral to their undertaking.
A.N Grover, J.— This is an appeal by special leave from an Order of the Industrial Court, Gujarat which reversed an order made by the 2nd Labour Court, Ahmedabad.
2. Ramanlal Chamanlal and others are the workers of a canteen which is run by the Saraspur Mills Canteen Cooperative Society Limited, Ahmedabad (hereinafter called “the cooperative society”). The appellant Company is responsible for maintaining the canteen under the provisions of Section 46 of the Factories Act and the rules made thereunder. The appellant handed over to the cooperatrive society the task of running the canteen. The workers mentioned above filed an application before the 2nd Labour Court at Ahmedabad under Section 79 of the Bombay Industrial Relations Act, 1946 (hereinafter called “the Act”), complaining that the appellant was not paying them the wages and dearness allowances as per the directions contained in the Award of the Bombay Industrial Court made in Reference No. 18 of 1947 and supplementay Award given in certain miscellaneous applications of 1956 and 1962 respectively relating to additional wages sanctioned by the said Award. It was alleged by the applicants in support of their claim that by virtue of certain amendments made in the Act in the definition of the word “employer” they became workers of the appellant, which was bound to pay wages and dearness allowances, settled by the aforesaid Award and the supplementary Awards referred to. The case of the workmen was that the appellant was running the canteen only because it was under an obligation to do so under the Factories Act and the rules made thereunder. Thus the running of the canteen was an ordinary part of the undertaking of the appellant. It was admitted that the appellant did not run the canteen itself but handed over the premises to the cooperative society to run the canteen for the use and welfare of the mill's employees and discharge its legal obligations.
3. The appellant denied the allegation of the workmen that they were its employees. It was claimed that the aforesaid workers had never been employed either by the appellant or by its agent or contractor. The workers in fact were stated to have been employed by the licensee of the appellant and, therefore, there was no question of the wage settlements or Awards being binding on the appellant. The 2nd Labour Court by its Order, dated April 14, 1966, dismissed the claim of the workmen, who filed an appeal before the Industrial court, which was allowed by its order, dated March 26, 1968. The Industrial court held that the employees of the cooperative society, who were working in the canteen, were employees of the appellant and, their wages and dearness allowance, etc., were payable in accordance with the Awards mentioned before. The direction was made that the appellant should pay the difference in wages and dearness allowance in accordance with those Awards.
4. The only question which requires determination is whether the canteen workers employed by the cooperative society could be treated as employees of the appellant within the meaning of the relevant provisions of the Act for the purpose of payment of their wages in spite of the fact that they were employees of the cooperative society and were being paid wages by that society. Prior to the Act, Bombay Industrial Disputes Act, 1938, was in force in the erstwhile province of Bombay. Under that Act no statutory employees were. created but only those persons who were directly employed by the employer were treated as employees. The Act repealed the 1938 Act. Section 3(13) of the Act contained the definition of the term “employee”. Before its amendment this provision was as follows:
“(13) … and includes
(a) a person employed by a contractor to do any work for him in the execution of a contract with an employer within the meaning of sub-clause (e) of clause 14 …”
Sub-clause (e) of clause 14 is as follows:
“(14) ‘employer’ includes (e) where the owner of any undertaking in the course of or for the purpose of conducting the undertaking contracts with any person for the execution by or under the contractor of the whole or any part of any work which is ordinarily part of the undertaking, ‘the owner of the undertaking’ ”.
5. The Factories Act, 1948 came into force on April 1, 1949. Section 2(1) of that Act is as follows:
“(1) ‘worker’ means a person employed directly or through any agency, whether for wages or not, in any manufacturing process, or in cleaning any part of the machinery or premises used for manufacturing process, or in any other kind of work incidental to, or connected with, the manufacturing process, or the subject of manufacturing process.”
6. The expression “occupier” was also defined by Section 2(n) to mean the person who has ultimate control over the affairs of the factory, and where the said affairs were entrusted to a managing agent, such agent shall be deemed to be the occupier of the factory. The Bombay High Court had held in certain matters which were brought before it that in spite of the fact that the cooperative society was mentioned in the Bombay Factories Rules, 1950, the employees employed by the cooperative society could not be treated as employees under the Act. The Gujarat Legislature passed an Act in 1962 amending clauses (13) and (14) of Section 3 of the Act. After the amendment these clauses run as follows:
“(13) ‘employee’ means any person (including an apprentice) employed in any industry to any skilled or unskilled manual, supervisory, technical or clerical work for hire or reward, whether the terms of employment be express or implied and includes — (a) a person employed in the execution of any work in respect which the owner of an undertaking is an employer within the meaning of sub-clause (e) of clause (14).
* * *
(14) ‘employer’ includes —
* * *
(e) Where the owner of any undertaking in the course of or for the purpose of conducting the undertaking entrusts the execution of the whole or any part of any work which is ordinarily a part of the undertaking, to any person otherwise than as the servant or agent of the owner, the owner of the undertaking.”
7. The Industrial court was of the view that the term “employee” under the Act had been given an extended meaning. An employee was not only a person who was employed by the employer or over whom the employer had control, but also certain types of persons had been constituted statutory employees under the Act. Before such a person could become the employee of the owner of the undertaking, the conditions that must be fulfilled were: (1) the owner of the undertaking must entrust to any person the execution of the whole or any part of any work; (2) such entrustment must be in the course of or for the purpose of conducting the undertaking; (3) such entrustment must be otherwise than as the servant or agent of the owner; and (4) such work must be any work which is ordinarily a part of the undertaking.
8. The Industrial court referred to the earlier decisions including that of the Labour Appellate Tribunal and of the Bombay High Court and examined the circumstances in which the relevant provisions of the Act came to be amended. It was pointed out that in the statement of objects and reasons appearing in the Bill to the Amending Act, it was stated that the definition of an employee was being amended so as to cover persons employed by a contractor or any other person to whom the owner of an undertaking had entrusted the execution of any work which was ordinarily part of the undertaking. The definition of “employer” was also amended correspondingly. According to the Industrial court there was a statutory obligation on the part of the mills to provide a canteen and this obligation had been discharged by the mills by entrusting that task to the cooperative society, even if there was no positive evidence of such entrustment of work. It was pointed out that the activities of running the canteen could hardly have been undertaken by the cooperative society unless it was entrusted to it by the mills. It was finally held that although the cooperative society which was the real employer and not the present appellant, but by virtue of the fiction created by the amendment introduced in the Act, the employees of the society became the employees of the appellant. They were, therefore, entitled to the benefits of the Awards.
9. The sole point which has been strenuously urged on behalf of the appellant is that on a proper construction of the amended clauses (13) and (14) of Section 3 of the Act, the workers employed in the canteen which was being run by the cooperative society, could not have been held to be employees of the appellant. It is contended that the appellant was under a statutory obligation because of Section 46 of the Factories Act and the relevant rules made thereunder to maintain the canteen for the workers, nut the canteen was being actually run by the cooperative society and the appellant had nothing to do with it nor did it pay any wages to the employees of the society who were working in the canteen.
10. The matter seems to be concluded by the judgment of this Court in Civil Appeal No. 1044 of 1968 decided on April 14, 1972, in which an identical argument had been addressed that certain gardeners who had been employed by a contractor for working in the gardens of the textile mills, could not be said to fall within the definition of the word “employed” as contained in Section 3(13) of the Act. In that case reference was made to the decision in Basti Sugar Mills Ltd. v. Ram Ujagar AIR 1964 SC 355, (1964) 2 SCR 838, (1964) 2 SCJ 811, (1963) 2 Lab LJ 447. It had been held that the workmen fell within the definition of that word as given by Section 2(z) of the U.P Industrial Disputes Act, 1947 as they were persons employed in the industry to do manual work for reward. The workmen had been employed by a contractor with whom the mills had contracted in the course of conducting the industry for execution by the said contractor of the work of removal of press mud which is ordinarily a part of the industry.
11. The above case was treated as an authority for the proposition that an employee engaged in a work or operation which was incidentally connected with the main industry was a workman if other requirements of the statute were satisfied and that the malis in that case were workers. It was pointed out that the bungalows and gardens on which the malis in that case worked were a kind of amenity supplied by the mills to its officers and on this reasoning the malis were held to be engaged in operation incidentally connected with the main industry carried out by the employer. The High Court in Ahmedabad Mfg. & Calico Printing Co. Ltd. v. Workmen (1953) II LLJ 647 had relied on the above ratio and come to the conclusion that the workers in order to come within the definition of an “employee” need not necessarily be directly connected with the manufacture of textile fabrics. The decision in Basti Sugar Mills case AIR 1964 SC 355, (1964) 2 SCR 838, (1964) 2 SCJ 811, (1963) 2 Lab LJ 447 was treated as binding in the former case.
12. Since, under the Factories Act it was the duty of the appellant to run and maintain the canteen for the use of its employees, it appears to us that the ratio of the decision in Ahmedabad Manufacturing & Calico Printing Co. Ltd. v. Workmen would be fully applicable in which the same provisions of the Act were considered.
13. The appeal, therefore, must fail and it is dismissed with costs.
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