IN THE HIGH COURT OF KERALA AT ERNAKULAM
OP.No. 201 of 2000(Y)
1. THE EXECUTIVE DIRECTOR KELTRON CONTROLS
... Petitioner
Vs
1. THE WORKMEN, KELTRON CONTROLS
... Respondent
For Petitioner :SRI.M.GOPIKRISHNAN NAMBIAR
For Respondent :SRI.P.RAMAKRISHNAN
The Hon'ble MR. Justice S.SIRI JAGAN
Dated :01/12/2009
O R D E R
S. SIRI JAGAN, J
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O.P. No. 201 of 2000
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Dated this the 1st day of December, 2009
J U D G M E N T
The Management in I.D. No. 5/89 before the Industrial
Tribunal, Allapuzha is the petitioner herein who is challenging
Ext.P1 award passed by the Tribunal in that I.D. The issue referred
for adjudication was the validity of the termination of service of 27
security personnel employed by the Management company through
a contractor. Originally by Ext.P1 award dated 3.3.1990, the
Tribunal held that since the Contract Labour (Regulation and
Abolition) Act prescribes that a principal employer who intends to
engage workers through a contractor and the contractor who
employs 20 or more workman shall get registration/licence under
the Act and the Management company and the contractor did not
obtain such licence, the contract between the management and the
contractor is a sham contract and therefore the workman are
employees of the management themselves and that the workmen
were terminated from service without following the procedure
prescribed under the Industrial Disputes Act. The Tribunal
directed that the workman shall be allowed to continue in their
O.P. No. 201 of 2000 -2-
respective places in which they were working, till they are replaced
by security guards/ Supervisors through Kerala Public Service
Commission. The workmen were directed to be reinstated, but
backwages were limited to from the date of publication of the
award. Both the management and the workmen challenged the
award to the extent the same was not favourable to them. By
Ext.P2 common judgment, in O.P. Nos. 10352 and 10766 of 1990 a
learned single Judge of this court set aside the award holding that
security guards in question are not workmen as defined under the
Industrial Disputes Act denying the relief to them. The workmen
challenged the same in W.A. No. 441 of 1992. By Ext.P3 judgment,
a Division Bench of this Court held that although the mere absence
of registrations/licence under the Contract Labour (Regulation and
Abolition) Act does not ipso facto lead to the conclusion that the
contract is a sham transaction, the question as to whether the
workmen are employees of the principal employer depends on
evidence adduced by the parties before the Tribunal. In that view,
the Division Bench remanded the matter for fresh consideration, on
the basis of the evidence to be adduced by both sides. Ext.P3
judgment is dated 17.6.1998. Thereafter the Industrial Tribunal
again considered the matter. By that time, the Supreme Court
O.P. No. 201 of 2000 -3-
rendered another decision, namely Secretary, Haryana State
Electricity Board v. Suresh and Others [1999 (3) SCC 601]
which held that the mere absence of registration/ licence under the
Contract Labour (Regulation and Abolition) Act itself would render
the contract between the principal employer and the contractor, a
sham transaction and that the workmen are employees of the
principal employer. Relying on that decision without going into any
other question as directed by the Division Bench, the Tribunal by
Ext.P4 award again held that in the absence of the registration/
licence under the Contract Labour (Regulation and Abolition) Act
the contract between the petitioner and the contractor is a sham
arrangement and therefore the workers concerned were the
employees of the management establishment. On that finding the
Tribunal by Ext.P4 award, again re-issued the same direction as in
Ext.P1 award except regarding backwages. That award is under
challenge before me. The petitioner challenges Ext.P4 award on
the ground that by Ext.P3 judgment a Division Bench of this court
had held that mere absence of registration/licence under the above
said Act itself would not be sufficient to hold that the workmen are
workmen of the principal employer and directed the Tribunal to
consider the matter on the basis of evidence to be adduced by the
O.P. No. 201 of 2000 -4-
parties. However, the Tribunal has without considering anything
else only on the basis of the absence of registrations/licence held
that the workman are direct workman of the petitioner
management. According to the petitioner this is in direct violation
of Ext.P3 judgment and for that reason alone Ext.P4 liable to be
quashed. He would further contend that in this case the
management had adduced sufficient evidence to show that the
contract between the employer and the contractor is a bonafide,
genuine contract for employment of contract labour and therefore
the workmen are workmen of the contractor and not that of the
principal employer.
2. The 1st respondent union would support the award.
According to them, the absence of registration / licence is one of
the major factors which would support the conclusion that the
contract is a sham contract, in view of the decision of the Supreme
Court in Haryana State Electricity Board’s case. They would
further contend that the evidence available before the Tribunal was
sufficient to come to the conclusion that the entire transaction was
only a sham transaction to avoid the legal consequences flowing
from the Industrial Disputes Act in respect of the workmen in
question.
O.P. No. 201 of 2000 -5-
3. I have considered the rival contentions in detail.
4. Apart from the decision of Dena Nath and others v.
National Fertilizers Ltd. and others [1992(1) SCC 695] relied
upon by this court in Exts.P2 and P3 judgments and the decision in
Haryana State Electricity Board’s case several other decisions have
been cited before me, namely the Steel Authority of India
Limited and others v. National Union Waterfront Workers
and others [2001 (7) SCC 1] and APSRTC and others v.
Sreenivas Reddy and others [2006 (3) SCC 674]. I am of
opinion that the conclusion which can be drawn from all these
decisions is that there cannot be any strait-Jacketed formula for
deciding the question as to whether a contract for employment of
contract labour is a sham contract or not. It depends on the facts
and circumstances of each case. The mere fact that there was no
registration/licence under the contract Labour (Regulation and
Abolition) Act itself would not lead to the conclusion that it is a
sham transaction as held in Steel Authority of India Limited’s case.
Of course the Haryana State Electricity Board’s case was not
referred to in steel authority of India Ltd’s case. But Dena Nath’s
case which was approved by the Supreme Court in Steel Authority
of India limited’s case certainly holds that the absence of
O.P. No. 201 of 2000 -6-
registration /licence is not the absolute criterion to decide the
question either way. I am of opinion that that question would
largely depend upon the contract itself. In other words, the terms
of the contract between the principal employer and the contractor
should be the main determining factor to decide the question as to
whether the contract is a sham contract or not. There would be
other factors as well, such as whether the work in question is of
perennial nature, whether the work is in the premises of the
employer, the control of the principal employer on the workman,
the extent of supervision of the work of the workman by the
principal employer, whether the work is an integral part of the
overall work of the principal employer and the like. The Tribunal
has to come to a conclusion after considering the evidence on all
these aspects taken together instead of deciding the question
solely on the basis of absence of licence/registration under the
Contract Labour (Regulation and Abolition) Act. In Ext.P4 award,
the Tribunal has decided the matter only on the basis of absence of
registration/licence, relying upon the decision in Haryana State
Electricity Board’s case which should be taken to be impliedly
overruled to that extent by the decision in Steel Authority of India
Ltd’s case. In view of my above findings, necessarily the matter
O.P. No. 201 of 2000 -7-
has to be remanded to the Industrial Tribunal for a fresh
adjudication taking into account the entire evidence adduced by
both sides in accordance with the direction hereinabove.
Accordingly, Ext.P4 is quashed. The Tribunal is directed to
re-adjudicate the dispute in the light of the finding hereinabove.
Fresh award shall be passed, as expeditiously as possible, at any
rate, within four months from the date of receipt of a copy of this
judgment. The parties shall appear before the Tribunal on
18.12.2009.
The original petition is disposed of as above.
Sd/-
S. SIRI JAGAN, JUDGE
rhs
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PA to Judge