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Bhilwara Dugdh Utpadak Sahakari Samiti Limited v. Vinod Kumar Sharma Dead By Lrs. And Others
Factual and Procedural Background
The appellant challenged two judgments of the High Court of Judicature for Rajasthan dated 23-8-2004 and 21-9-2004. The dispute originated when a group of workmen claimed to be regular employees of the appellant, whereas the appellant asserted that they were merely employees of an outside contractor. The Labour Court examined the facts and held that the workmen were, in truth, employees of the appellant, noting that they worked under the appellant’s officers and received higher daily wages (Rs 70) than those paid by the contractor (Rs 56). The High Court declined to interfere with this factual finding. The present proceeding is an appeal against those High Court judgments.
Legal Issues Presented
- Whether the Labour Court correctly found that the respondents were employees of the appellant rather than of an independent contractor.
- Whether the Supreme Court decision in SAIL v. National Union Waterfront Workers (2001) 7 SCC 1 governed the present dispute.
Arguments of the Parties
Appellant's Arguments
- The High Court erred in holding that the appellant had resorted to a “subterfuge,” as the Labour Court made no explicit finding to that effect.
- By implication, the appellant suggested that the Labour Court misappreciated the employment relationship and that the workers should be treated as contractor’s employees.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| SAIL v. National Union Waterfront Workers (2001) 7 SCC 1 | Employees of a contractor are not automatically absorbed by the principal employer upon issuance of a notification under Section 10 of the Contract Labour (Regulation and Abolition) Act, 1970. | The Court held this precedent inapplicable because, in the present case, the Labour Court had already found that the workers were never contractor’s employees; hence, no question of absorption arose. |
| Air India Statutory Corpn. v. United Labour Union (1997) 9 SCC 377 | Earlier view (since overruled) that such workers could be automatically absorbed. | Cited only to note that it had been overruled by SAIL; the Court did not rely on it. |
Court's Reasoning and Analysis
The Court expressed concern over employers’ use of contractual arrangements as a “subterfuge” to evade statutory obligations designed to protect workers who lack equal bargaining power. It emphasised that labour statutes exist to prevent exploitation and that economic liberalisation cannot come at the cost of workers’ rights.
Accepting the Labour Court’s detailed factual findings, the Court agreed that:
- The respondents took orders directly from the appellant’s officers.
- They were paid differently from genuine contractor’s employees, indicating separate employment status.
- These facts justified the inference that the contractor arrangement was a facade.
The appellant’s reliance on SAIL was rejected because that decision concerns workers who were admittedly contractor’s employees seeking absorption, whereas the present case involves a factual determination that the workers were, from the outset, employees of the appellant. Therefore, the High Court’s refusal to interfere with the Labour Court’s findings contained no legal error.
Holding and Implications
APPEAL DISMISSED. No costs were awarded.
The decision leaves in place the Labour Court and High Court findings that the workers are employees of the appellant, thereby entitling them to statutory protections and benefits. The ruling reinforces judicial intolerance of employer subterfuge but does not announce a new legal precedent beyond affirming established principles.
Order
1. Heard the learned counsel for the appearing parties. This appeal has been filed against the impugned judgments dated 23-8-2004 and dated 21-9-2004 passed by the High Court of Judicature of Rajasthan. This appeal reveals the unfortunate state of affairs prevailing in the field of labour relations in our country.
2. In order to avoid their liability under various labour statutes employers are very often resorting to subterfuge by trying to show that their employees are, in fact, the employees of a contractor. It is high time that this subterfuge must come to an end.
3. Labour statutes were meant to protect the employees/workmen because it was realised that the employers and the employees are not on an equal bargaining position. Hence, protection of employees was required so that they may not be exploited. However, this new technique of subterfuge has been adopted by some employers in recent years in order to deny the rights of the workmen under various labour statutes by showing that the workmen concerned are not their employees but are the employees/workmen of a contractor, or that they are merely daily-wage or short-term or casual employees when in fact they are doing the work of regular employees. This Court cannot countenance such practices any more. Globalisation/liberalisation in the name of growth cannot be at the human cost of exploitation of workers.
4. The facts of the case are given in the judgment of the High Court dated 23-8-2004 and we are not repeating the same here. It has been clearly stated therein that subterfuge was resorted to by the appellant to show that the workmen concerned were only workmen of a contractor. The Labour Court has held that the workmen were the employees of the appellant and not employees of the contractor. Cogent reasons have been given by the Labour Court to come to this finding. The Labour Court has held that, in fact, the workmen concerned were working under the orders of the officers of the appellant, and were being paid Rs 70 per day, while the workmen/employees of the contractor were paid Rs 56 per day. We are of the opinion that the High Court has rightly refused to interfere with this finding of fact recorded by the Labour Court.
5. The judgment of this Court in SAIL v. National Union Waterfront Workers (2001) 7 SCC 1 has no application in the present case. In that decision the question was whether in view of Section 10 of the Contract Labour (Regulation and Abolition) Act, 1970 the employees of contractors stood automatically absorbed in the service of the principal employer. Overruling the decision in Air India Statutory Corpn. v. United Labour Union (1997) 9 SCC 377 this Court held that they did not.
6. In the present case that is not the question at all. Here the finding of fact of the Labour Court is that the respondents were not the contractor's employees but were the employees of the appellant. The SAIL (2001) 7 SCC 1 judgment applies where the employees were initially employees of the contractor and later claim to be absorbed in the service of the principal employer. That judgment was considering the effect of the notification under Section 10 of the Act. That is not the case here. Hence, that decision is clearly distinguishable.
7. Mr Puneet Jain, learned counsel for the appellant submitted that the High Court has wrongly held that the appellant resorted to a subterfuge, when there was no such finding by the Labour Court. The Labour Court has found that the plea of the employer that the respondents were employees of a contractor was not correct, and in fact they were the employees of the appellant. In our opinion, therefore, it is implicit in this finding that there was subterfuge by the appellant to avoid its liabilities under various labour statutes.
8. For the reasons given above, there is no infirmity in the impugned judgment of the High Court. The appeal is dismissed accordingly. No costs.
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