2014 (8) TMI 1084 - SC - Indian Laws

Workmen engaged in statutory canteens through a contractor - nature of control - whether workers, engaged on a casual or temporary basis by a contractor (HCI) to operate and run a statutory canteen, under the provisions of the Act, 1948, on the premises of a factory Air India, can be said to be the workmen of the said factory or corporation?- liability of the principal employer running statutory canteens - status of the workmen engaged Held that - The mere fact that the Air India has a certain degree of control over the HCI, does not mean that the employees working in the canteen are the Air India s employees. The Air India exercises control that is in the nature of supervision. Being the primary shareholder in the HCI and shouldering certain financial burdens such as providing with the subsidies as required by law, the Air India would be entitled to have an opinion or a say in ensuring effective utilization of resources, monetary or otherwise. The said supervision or control would appear to be merely to ensure due maintenance of standards and quality in the said canteen. The appellants-workmen could not be said to be under the effective and absolute control of Air India. The Air India merely has control of supervision over the working of the given statutory canteen. Issues regarding appointment of the said workmen, their dismissal, payment of their salaries, etc. are within the control of the HCI. It cannot be then said that the appellants are the workmen of Air India and therefore are entitled to regularization of their services. It would be pertinent to mention, at this stage, that there is no parity in the nature of work, mode of appointment, experience, qualifications, etc., between the regular employees of the Air India and the workers of the given canteen. Therefore, the appellants-workmen cannot be placed at the same footing as the Air India s regular employees, and thereby claim the same benefits as bestowed upon the latter. It would also be gainsaid to note the fact that the appellants-herein made no claim or prayer against either of the other respondents, that is, the HCI or the Chefair. Thus the workers engaged by a contractor to work in the statutory canteen of a factory would be the workers of the said factory, but only for the purposes of the Act, 1948, and not for other purposes, and further for the said workers, to be called the employees of the factory for all purposes, they would need to satisfy the test of employer-employee relationship and it must be shown that the employer exercises absolute and effective control over the said workers.

Issues Involved:
1. Whether the workmen engaged in statutory canteens through a contractor could be treated as employees of the principal establishment.
2. The liability of the principal employer running statutory canteens.
3. The status of the workmen engaged in statutory canteens.
4. The necessity to pierce the corporate veil to ascertain the relationship between the principal employer and the workmen.
5. The applicability of the Constitution Bench decision in the Steel Authority of India case.
6. Whether the workers should be treated as employees of the principal employer only for the purposes of the Factories Act, 1948, or for other purposes as well.

Issue-wise Detailed Analysis:

1. Whether the workmen engaged in statutory canteens through a contractor could be treated as employees of the principal establishment:
The judgment clarified that workmen hired by a contractor to work in a statutory canteen established under the Factories Act, 1948, would be considered workmen of the factory for the purposes of the Act, 1948, only and not for all other purposes. This conclusion was based on the precedent set by the Indian Petrochemicals case, which held that the Act, 1948 does not govern the rights of employees concerning recruitment, seniority, promotion, retirement benefits, etc., which are covered by other statutes, rules, contracts, or policies.

2. The liability of the principal employer running statutory canteens:
The court noted that the principal employer, in this case, Air India, has a statutory obligation under Section 46 of the Factories Act, 1948, to provide and maintain a canteen. However, the court emphasized that this obligation does not extend to making the canteen workers employees of the principal employer for all purposes. The liability of the principal employer is limited to ensuring the canteen's operation and maintenance as per statutory requirements.

3. The status of the workmen engaged in statutory canteens:
The court reiterated that the workmen of a statutory canteen are deemed employees of the establishment for the purposes of the Factories Act, 1948, only. This status does not automatically entitle them to regularization or other employment benefits from the principal employer. The court emphasized that the nature of control exercised by the principal employer over the canteen workers is crucial in determining their employment status.

4. The necessity to pierce the corporate veil to ascertain the relationship between the principal employer and the workmen:
The court discussed the doctrine of piercing the corporate veil and concluded that it should be applied sparingly. It held that mere ownership and control of a subsidiary (HCI in this case) by the principal employer (Air India) are insufficient grounds to pierce the corporate veil. There must be evidence of impropriety or misuse of the corporate structure to avoid liability. The court found no such evidence in this case and held that HCI and Air India are distinct legal entities.

5. The applicability of the Constitution Bench decision in the Steel Authority of India case:
The court clarified that the Constitution Bench decision in the Steel Authority of India case dealt with the issue of automatic absorption of contract workers upon the abolition of contract labor under the Contract Labour (Regulation and Abolition) Act, 1970. The court held that the observations in that case regarding statutory canteens were not binding precedents for the present case, as the issues were different.

6. Whether the workers should be treated as employees of the principal employer only for the purposes of the Factories Act, 1948, or for other purposes as well:
The court held that the workmen of a statutory canteen would be considered employees of the establishment only for the purposes of the Factories Act, 1948, and not for other purposes. For the workers to be considered employees of the principal employer for all purposes, they must satisfy the test of employer-employee relationship, which includes factors such as who appoints the workers, who pays their salaries, who has the authority to dismiss them, and the extent of control and supervision exercised by the principal employer.

Conclusion:
The court concluded that the appellants, who were workers in the statutory canteen operated by HCI on Air India's premises, could not be considered employees of Air India for all purposes. The court dismissed the appeals, holding that the workers were employees of Air India only for the purposes of the Factories Act, 1948, and not entitled to regularization or other employment benefits from Air India.

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