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Nitinkumar Nathalal Joshi And Others v. Oil And Natural Gas Corporation Ltd. And Others
Factual and Procedural Background
The appellants worked as Boiler Operators, Attendants, Helpers and Peons at the boiler house of Oil and Natural Gas Corporation Limited (ONGC). They were engaged through a contractor—Ahmedabad Electricity Co. Ltd.—and therefore classified as contract labour. After the Central Government issued a notification dated 8-9-1994 under Section 10(1) of the Contract Labour (Regulation and Abolition) Act, 1970 prohibiting contract labour for those posts, the appellants sought absorption as regular ONGC employees.
A Single Judge of the Gujarat High Court accepted their claim, deeming them direct employees of ONGC and directing parity of service conditions from the date of the notification. ONGC appealed. The Division Bench found disputed questions of fact unsuitable for determination under Article 226 and directed the appellants to pursue statutory conciliation, with any unresolved dispute to be referred under Section 10 of the Industrial Disputes Act to an Industrial Tribunal/Labour Court for decision within specified time-frames. The present appeal challenges that Division Bench judgment.
Legal Issues Presented
- Whether contract labourers are automatically absorbed as regular employees of the principal employer upon issuance of a prohibition notification under Section 10(1) of the Contract Labour Act.
- Whether the High Court was correct in declining writ relief and directing the parties to the Industrial Tribunal/Labour Court to resolve disputed factual questions regarding the genuineness of the contract and the employment status of the workers.
- Whether the Constitution Bench decision in Steel Authority of India Ltd. v. National Union Waterfront Workers, (2001) 7 SCC 1, applies prospectively so as to leave untouched the Single Judge’s absorption order.
Arguments of the Parties
Appellants' Arguments
- Following the 1994 notification, they must be deemed direct ONGC employees and entitled to service benefits identical to regular staff.
- The decision in Steel Authority of India Ltd. operates only prospectively; therefore, the favourable Single Judge order (prior to that decision) should stand.
- After 30-11-2000 ONGC allegedly terminated its contract with Ahmedabad Electricity Co. and engaged new contractors, yet some appellants continued to work on lower wages—facts indicating ongoing control by ONGC.
Respondents' Arguments
- Material facts regarding the appellants’ engagement, wages and continuity are disputed, rendering writ jurisdiction inappropriate.
- No automatic absorption follows a prohibition notification; instead, the test laid down in Steel Authority of India Ltd. must be satisfied.
- The appellants’ factual allegations about post-2000 employment and lower wages are denied.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Steel Authority of India Ltd. v. National Union Waterfront Workers, (2001) 7 SCC 1 |
|
The Supreme Court relied on this case “on all fours,” holding that the High Court’s direction to first resolve factual disputes before the Industrial Tribunal accords with the principles laid down, and rejecting the claim of automatic absorption. |
| Air India Statutory Corporation v. United Labour Union, (1997) 9 SCC 377 | Earlier view that contract labour stood automatically absorbed upon abolition; prospectively overruled by Steel Authority of India Ltd. | The Court noted that Air India had been prospectively overruled; since the appellants had not been absorbed before that overruling, they could not rely on it for relief. |
Court's Reasoning and Analysis
The Court first acknowledged that the question of automatic absorption after a Section 10(1) notification is governed by the Constitution Bench in Steel Authority of India Ltd. According to that decision:
- The Industrial Tribunal must determine whether the contractor is genuine or a camouflage.
- No automatic regularisation occurs unless the contract is found sham.
- If the contract is genuine, erstwhile contract labour may only claim preferential consideration.
Given these principles, the Division Bench was justified in refusing to decide disputed factual questions in writ proceedings and in directing recourse to the statutory machinery—conciliation followed, if necessary, by adjudication before the Industrial Tribunal/Labour Court. The appellants’ contention that Steel Authority of India Ltd. is purely prospective failed because they had not been absorbed prior to that ruling; the Single Judge’s directions in their favour were never implemented and hence did not attain finality.
The Supreme Court declined to examine fresh allegations that ONGC changed contractors and re-engaged some appellants on lesser wages, leaving those issues for the Industrial Tribunal/Labour Court to investigate.
Holding and Implications
APPEAL DISPOSED OF; the Supreme Court affirmed the Division Bench’s directions requiring the dispute to proceed through conciliation and, if needed, adjudication before the Industrial Tribunal/Labour Court, subject to the guidance in Steel Authority of India Ltd.
Implications: The appellants must pursue their claim before the statutory forums, where questions about the genuineness of the contract, the applicability of the abolition notification, and any entitlement to regularisation will be factually determined. The decision reiterates that no new precedent of automatic absorption is set; instead, it reinforces the analytical framework established in Steel Authority of India Ltd.
K.G Balakrishnan, J.— Leave granted.
2. The judgment of the Division Bench of the High Court of Gujarat at Ahmedabad in Letters Patent Appeal No. 395 of 1999 is challenged before us. The appellants alleged that they were workmen employed as contract labourers in the capacity of Boiler Operators through the Contractor, Ahmedabad Electricity Co. Limited. According to these appellant workmen, they were employed on contract labour with the first respondent-principal employer, namely, Oil and Natural Gas Corporation Limited (hereinafter being called as “ONGC Limited”). Consequent upon the notification dated 8-9-1994 under Section 10(1) of the Contract Labour (Regulation and Abolition) Act, 1970 by the Central Government, the contract labour in the posts of Boiler Operators, Attendants, Helpers and Peons was prohibited and these appellants claimed that they should be treated as the employees of the first respondent. They filed a writ petition before the High Court of Gujarat and learned Single Judge held that these appellants were persons engaged for attending different operations of the boiler in the boiler house of ONGC Ltd. through the contractor, which was clearly in breach of the provisions of the Act. It was held that these appellants must be deemed to be performing duties directly under the first respondent ONGC Limited and they must be given the terms of service as applicable to other employees of ONGC Limited with effect from the date of notification.
3. The judgment of the learned Single Judge was challenged before the Division Bench and the Division Bench was of the view that there were some disputed questions of fact and an investigation into facts regarding service conditions of contract labour was necessary before granting them the relief of direct employment with the principal employer and that the proceedings under Article 226 of the Constitution were not appropriate. It also held that there should be an investigation by the Industrial Tribunal and these appellants were directed to approach the Conciliation Officer of the area concerned and further direction was given to the Conciliation Officer to complete the conciliation proceedings within three months and if the dispute survived, the matter be referred to the Industrial Tribunal under Section 10 of the Industrial Disputes Act and the Industrial Tribunal/Labour Court to take a final decision in the matter within a period of four months thereafter. These directions are challenged before us.
4. We heard Shri T.R Andhyarujina, learned Senior Counsel on behalf of the appellants and Mr Mukul Rohatgi, learned ASG on behalf of the respondents. What is the effect of abolition of contract labour by virtue of the notification issued by the Central Government under Section 10 of the Industrial Disputes Act was considered in detail in Steel Authority of India Ltd. v. National Union Waterfront Workers (2001) 7 SCC 1. The main question that arose for consideration in that case was whether there should be an automatic absorption of contract labourers working in the establishment of principal employer as regular employees consequent upon the notification under Section 10(1) of the Act. This Court held in clauses (5) and (6) of paragraph 125 as under:
“125. (5) On issuance of prohibition notification under Section 10(1) of 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 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 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 notification under Section 10(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 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.”
5. In the present case, the appellants have alleged that after the filing of the said appeal, the contract between the first respondent ONGC Limited and the second respondent Ahmedabad Electricity Co. Limited came to an end on 30-11-2000 for operation of boilers and the first respondent ONGC Limited entered into a contract with M/s S.S Construction, Mumbai and M/s Essel Engineering Services, Mumbai for operation of the boilers at ONGC Limited with effect from 1-12-2000. They have also alleged that some of the appellants were given employment with a lesser payment but these facts have been denied by the first respondent. As these are disputed questions of fact, we do not propose to go into these questions and do not interfere with the directions given in the impugned judgment. However, we make it clear that the Industrial Tribunal/Labour Court shall also consider these allegations and shall give appropriate direction. We may also emphasise that the Constitution Bench of this Court in Steel Authority of India Ltd. case (2001) 7 SCC 1 in paragraph 107 observed as under:
“107. An analysis of the cases, discussed above, shows that they fall in three classes: (i) where contract labour is engaged in or in connection with the work of an establishment and employment of contract labour is prohibited either because the industrial adjudicator/court ordered abolition of contract labour or because the appropriate government issued notification under Section 10(1) of the CLRA Act, no automatic absorption of the contract labour working in the establishment was ordered; (ii) where the contract was found to be a sham and nominal, rather a camouflage, in which case the contract labour working in the establishment of the principal employer were held, in fact and in reality, the employees of the principal employer himself. Indeed, such cases do not relate to abolition of contract labour but present instances wherein the Court pierced the veil and declared the correct position as a fact at the stage after employment of contract labour stood prohibited; (iii) where in discharge of a statutory obligation of maintaining a canteen in an establishment the principal employer availed the services of a contractor the courts have held that the contract labour would indeed be the employees of the principal employer.”
6. These matters are also to be considered by the Industrial Court/Labour Court if reference ultimately reaches before that forum.
7. The learned counsel for the appellants contended that the decision in Steel Authority of India Ltd. case (2001) 7 SCC 1 is prospective in operation, therefore, these appellants should have been given the benefit of employment under the principal employer, the first respondent ONGC Limited. It is true that in Steel Authority of India Ltd. case (2001) 7 SCC 1 it was specifically made clear in clause (4) of paragraph 125 as follows:
“125. (4) We overrule the judgment of this Court in Air India case (1997) 9 SCC 377 prospectively and declare that any direction issued by any industrial adjudicator/any court including the High Court, for absorption of contract labour following the judgment in Air India case (2001) 7 SCC 1 shall hold good and that the same shall not be set aside, altered or modified on the basis of this judgment in cases where such a direction has been given effect to and it has become final.”
8. In the present case, the appellants were not absorbed by the principal employer. Therefore, it cannot be said that the decision in Steel Authority of India Ltd. case (2001) 7 SCC 1 cannot be applied. The directions issued by the learned Single Judge were modified by the Division Bench of the High Court and never given effect to. Therefore, the directions issued by this Court in Steel Authority of India Ltd. case (2001) 7 SCC 1 are applicable on all fours.
9. We do not find any reason to interfere with the directions given in the impugned judgment. They are to be complied with, subject to the observations made above and also having due regard to the decision rendered by this Court in Steel Authority of India Ltd. case (2001) 7 SCC 1. The appeal is disposed of accordingly.
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