THE NATIONAL UNIVERSITY OF ADVANCED LEGAL STUDIES

1. M/S. TATA IRON & STEEL CO. LTD. vs. THE WORKMEN & ORS. 1972 AIR
1917 2. BALWANT RAI SALUJA VS. AIR INDIA LTD. (2014 LLR 1009)

Case Analysis
Sebin James Roll No- 1246 Semester 5 A

Submitted to- Dr. Liji Samuel

M/S. TATA IRON & STEEL CO. LTD. vs. THE WORKMEN & ORS.
1972 AIR 1917

Facts of the Case

The Coal Mines Provident Fund and Bonus Scheme Act, 1948, was enacted for making
provision for the framing of a provident fund scheme and bonus scheme for persons employed in
coal mines. Section 5 of the Act empowers the Central Government to frame the Coal Mines
Bonus Scheme which may provide for all or any of the matters-specified in third schedule to the
Act. Item 7 of the schedule extends to matters which may be necessary or proper for the purpose
of implementing the Scheme. Paragraph 8 of the Coal Mines Bonus Scheme provides for the
effect of participation in an illegal strike, and, in case a dispute arises as to whether the strike is
illegal or legal for the purpose of the scheme, which authority and according to what procedure,
is to decide that dispute.

In 1963, due to shortage of power, the appellant decided to stagger weekly rest days in all its
collieries. In one of them, Wednesday, and in another, Thursday, were introduced as rest days
instead of Sundays. The change was to take effect from September 22, which was a Sunday. The
workmen failed to turn up for work on that Sunday as well as on the next Sunday, September 29.
When they turned up for work on Wednesday, September 25, at one colliery and on Thursday
September 26, at the other colliery they were told that those days were weekly rest days and on
that ground they were not given any work.

The appellant filed four applications before the Regional Labour Commissioner, who was the
authority under para 8 of the Coal Mines Bonus Scheme for a declaration that there was an
illegal strike by the workmen on the Sundays on which they failed to turn up for work. The
respondents filed two applications before the same authority stating that there was an illegal
lockout on September 25 and September 26 at the two collieries respectively.
The Regional Labour Commissioner held in favour of the workmen that there was no illegal
strike. The order was confirmed in appeal by the Central Industrial Tribunal and in writ petitions,
by the High Court.

Question of Law

In appeal to this Court, it was contended that : (1) para 8 of the Scheme creating a quasi judicial
tribunal was ultra vires and that such a tribunal could only be created by the Legislature; and (2)
that change in the rest days did not affect any change in the conditions of service of Workmen in
respect of any matter specified in the Fourth Schedule to the Industrial Disputes Act, 1947 and
hence notice of change of rest days to workmen under s. 9A of that Act was not necessary.

Interpretation of the law by the Apex Court

Dismissing the appeal, the following observations were made by the court and the ratio
decidendi was as follows;

(1) (a) The increasing complexity of modern administrations and the need for flexibility capable
of rapid readjustment to meet the changing circumstances, which cannot always be foreseen, in
implementing the socioeconomic policy, pursuant to the establishment of a welfare state as
contemplated by the Constitution, have rendered it convenient,, practical and necessary, for the
legislatures to have frequent resort to the practice of delegating subsidiary or ancillary powers to
delegates of their choice.

Parliamentary procedure and discussion in getting through a legislative measure is time-

consuming, and such measures cannot provide for all possible contingencies since one cannot
visualise the various permutations and combinations of human conduct and behaviour. But the
delegation of legislative power is permissible only when the legislative policy and principle is
adequately laid down and the delegate is only empowered to carry out the subsidiary policy
within the guidelines laid down by the legislature.
The legislature cannot abdicate its authority and' cannot pass to some other body the obligation
and the responsibility imposed on it by the Constitution. It can only utilise other bodies or
authorities for the purpose of working out the details within the essential principles laid (town by
it. Therefore, it has to be seen if there is a delegation of the essential legislative 'function, or if it
is merely a case in which some authority or body, other than the legislature, is empowered to
work out the subsidiary and ancillary details within the essential guidelines, policy and principles
laid down by the legislative wing of the Government.

(b)In the present case, the relevant schedule read with s. 5 of the, Coal Mines Provident Fund and
Bonus Scheme Act clearly lays down the policy and principle for framing the scheme. Paragraph
8 of the scheme is a matter of detail which is subsidiary or ancillary to the main purpose of the
legislative measure for implementing the scheme. It par- takes of the character of subordinate
legislation on ancillary matters within the conditions laid down in the Act by s. 5 read with the
relevant schedule. Paragraph 8 of the scheme is accordingly valid and cannot be considered to
amount to excessive delegation of legislative power.

Section 9A of the Industrial Disputes Act, 1947, provides that no employer who proposes to
effect any change in the conditions of service applicable to any workman in respect of any matter
specified in the Fourth Schedule shall effect such change without giving notice to the workmen
likely to be affected by such change in the prescribed manner. Items 4. 5 and 8 of the Fourth
Schedule refer to hours of work and rest intervals, leave with wages and holidays and withdrawal
of any customary concession or privilege or change 'in usage; respectively.

The expression 'hours of work and Test interval;' and 'leave' with wages and holidays' are wide
enough to cover the case of illegal strikes and rest days. The expression 'withdrawal of
customary concession or privilege or change in usage' is also wide enough to take within its fold
the change of weekly holidays from Sunday to some other day of the week.

(c)The real object and purpose of the section is to afford an opportunity to the workmen to
consider the effect of the proposed change and. if necessary, to represent their point of view on
the proposal. Such consultation further serves to stimulate a feeling of common joint interest of
the management and workmen in industrial progress and increased productivity. This approach
on the part of the industrial employer would reflect his harmonious and sympathetic cooperation
in improving the status and dignity of the industrial employee in accordance with the egalitarian
and progressive trend of our industrial jurisprudence which 596 strives to treat capital and labour
as co-sharers and to break away from the tradition of labour's subservience to capital. In order to
effectively achieve the object underlying s. 9A, it would be more appropriate to place on the
Fourth Schedule read with s. 9A of the Industrial Disputes Act a construction liberal enough to
include change of weekly rest days from Sundays to some other week day.

(d) It is no doubt true that whether the paid day of rest is Sunday or some other week day would
cause no financial loss to the workmen. But financial benefit cannot be said to be the sole
criterion in considering the question. It should not be ignored that due to long usage and other
factors Sunday as a holiday may for conceivable reasons have assumed importance for workmen
and it may also have special significance because, on Sunday, when their school going children
have a holiday, the entire family may be able to take part in recreational or other social activities.

(e) Sections 2(f), 52 and 63 of the Factories Act, 1948, also fortify the view that it is not
immaterial or unimportant whether workmen are given a Sunday or some other week day as a
weekly rest day. The appellant having thus effected a change in the weekly days of rest without
complying with s. 9A read with the Fourth Schedule, the change was held to be ineffective and
the previous schedule of weekly day% of rest was held to be still operative.

Judgment

Therefore, the appellant's contention that the workmen concerned had resorted to illegal strike on
September 22 and 29, was rejected, and the respondents' contention that the appellant had
illegally declined to give work to them on September 25 and 26 and that the appellant had
declared a lock out on those two days which was illegal, has to be upheld. No doubt, mere
refusal to give work does not by itself amount to lock-out; but in the present case, when the
employers closed the two collieries respectively on September 25 and 26 they knew that this
change in the weekly days of rest was not acceptable to a considerable section of the workmen
who had not come to work on Sunday, September 22. The apex court observed that the closure
of collieries on the two days in question was thus deliberate. Coal having been declared a public
utility service and notice of closure at contemplated by S., 22 of the Industrial Disputes Act not
having been given, the lock out was illegal under s. 24 of the Act.
Balwant Rai Saluja vs. Air India Ltd. (2014 LLR 1009)

Introduction

In a recent judgment, the Supreme Court of India was concerned with determination of the
relevant factors which could be considered as relevant for ascertaining the question whether a
relationship of employer and employee exists in a given case.

In Balwant Rai Saluja vs. Air India Ltd. (2014 LLR 1009), the Apex Court while addressing the
question whether the workmen engaged in canteens through a contractor, could be treated as
employees of the principal establishment, after reviewing several earlier of its own decisions,
adopted and applied the ‘integrated approach’, namely, an integration of all the relevant tests
evolved earlier to find a reasonable solution in a problematic case. The Court was required to
ascertain whether workmen, engaged as casual or temporary employees by a contractor to
operate and run a canteen on the premises of a corporation could be said to be the workmen of
the corporation, re-dusted all the well-established and settled principles and then pronounced,
and in fact refashioned, a new and more comprehensive test to answer the vexed question which
continues to crop up repeatedly.

Facts of the Case

Briefly stated the facts in this case were that Air India in the capacity of the principal employer
had engaged Hotel Corporation of India (HCI) as a contractor to run a canteen on its corporate
premises which was a requirement under the Factories Act, 1948. In terms of the contract
between Air India and HCI, the responsibility to run the canteen was absolutely with HCI and
the employees for the canteen were provided by the latter.
The employees were engaged on a casual or temporary basis by HCI which acted as the
contractor for running and operating the canteen. The employees claimed to be the deemed
employees of the management of Air India on the ground that they worked in a canteen which
was established on the premises of Air India for the benefit of Air India employees. The claim of
the employees went from the Industrial Tribunal- cum- Labour Court to the High Court and
eventually wound up in the Supreme Court of India as the employees appealed the decision of
the Lower Courts.

Question of Law

Before Supreme Court the main issue for consideration before the Court in the present reference
is “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 Air India,
can be said to be the workmen of the said corporation”. In short, what in law was the status of the
employees?

The employees backed their claim on the grounds that under the Factories Act they were treated
as workmen and since they were working in a canteen established by statute, and since they were
workmen and worked under the control of Air India for whose benefit the canteen was being run,
they were not under the control of the contractor, who in turn had no control over the
management, administration and functioning of the canteen. It was alleged that the employees
worked under the supervision and control exercised by Air India’s management as HCI also
functioned under the control of Air India’s management.

Interpretation of Law by the Apex Court

Senior Counsel for the appellants- workmen contentions was; firstly, that in the event of a
statutory requirement to provide for a canteen or any other facility, the employees of the said
facility would automatically become employees of the principal employer, irrespective of the
existence of any intermediary that may have been employed to run that facility. Secondly, the
test of sufficient control by the principal employer over the operation of the canteen and
consequently over the appellants-workmen, should prevail.

Therefore, the Court should pierce the veil and take note of the fact that the contractor was a
mere camouflage, and the principal employer was in real control of the canteen and its workmen.
The appellant relied on the following cases in support of its submissions- Saraspur Mills Co. Ltd.
v. Ramanlal Chimanlal2; Hussainbhai v. Alath Factory Thezhilali Union 3; M.M.R. Khan v.
Union of India4; and Parimal Chandra Raha v. LIC 5. As per Appellant, the issue raised in these
appeals is squarely covered by the observations made by the Constitution Bench in the case of
Steel Authority of India Ltd. v. National Union Waterfront Workers6.

However, the above contentions of appellant-workmen were objected by the counsel for
respondent and it was stated that the above case laws cited by the learned counsel for the
appellants are not only distinguishable on facts, but are inapplicable to the facts of the present
case. He would also refer to the three-Judge Bench decision of this Court in the case of Indian
Petrochemicals Corpn. Ltd. v. Shramik Sena7, and then would submit that the proposition of law
enunciated in the Indian Petrochemicals case (supra) is followed by this Court in Hari Shankar
Sharma v. Artificial Limbs Mfg. Corpn.8; Workmen v. Coates of India Ltd.9; Haldia Refinery
Canteen Employees Union v. Indian Oil Corpn. Ltd.10; and Karnataka v. KGSD Canteen
Employees' Welfare Assn.11. It was also contended and emphasized by the counsel for the
respondent that it is not the test of sufficient control, but the test of effective and absolute control
which would be relevant, and that if the said test, in the given facts is applied, the appellants
would fail to establish the employer and employee relationship. In aid of his submissions, he
refers to Bengal Nagpur Cotton Mills v. Bharat Lal 12; International Airport Authority of India v.
International Air Cargo Workers' Union13; and National Aluminium Co. Ltd. v. Ananta Kishore
Rout & Ors.14.

The main issue for consideration before this Court in the present reference is "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".
During arguments, Hon'ble Apex Court observed that Respondent No. 1 is a company
incorporated under the Companies Act, 1956 and is owned by the Government of India. The
primary object of the said respondent is to provide international air transport/travel services.
Respondent No. 2-HCI is also a company incorporated under the Companies Act, 1956 and is a
separate legal entity from the Air India. As per the Memorandum of Association of Respondent
No. 2, the same is a wholly-owned subsidiary of the Air India. The main objects of the said
respondent, inter alia, are to establish refreshment rooms, canteens, etc. for the sale of food,
beverages, etc. Respondent No. 2 has various units and Respondent No. 3, being Chef air Flight
Catering (for short, "the Chefair"), provides flight catering services to various airlines, including
Air India. It is this Chefair unit of HCI that operates and runs the canteen. It requires to be
noticed that the appellants-workmen are engaged on a casual or temporary basis by the
respondent Nos. 2 and 3 to render canteen services on the premises of Respondent No.1 - Air
India.

It was observed that there is requirement to ascertain whether workmen, engaged on a casual or
temporary basis by a contractor to operate and run a statutory canteen on the premises of a
factory or corporation, can be said to be the workmen of the said factory or corporation. It was
noticed that workmen hired by a contractor to work in a statutory canteen established under the
provisions of the Act, 1948 would be the said workmen of the given factory or corporation, but
for the purpose of the Act, 1948 only and not for all other purposes. Therefore, the appellants-
workmen, in the present case, in light of the settled principle of law, would be workmen of the
Air India, but only for the purposes of the Act, 1948. Solely by virtue of this deemed status under
the Act, 1948, the said workers would not be able to claim regularization in their employment
from the Air India. As has been observed in the Indian Petrochemicals case (supra), the Act,
1948 does not govern the rights of employees with reference to recruitment, seniority,
promotion, retirement benefits, etc. These are governed by other statutes, rules, contracts or
policies.

To ascertain whether the appellants-herein would be entitled to other benefits and rights such as
regularization, the test of employer-employee relationship as noticed hereinabove was applied.
For the said purpose Memorandum of Association and the Articles of Association of the HCI
was referred to look into the nature of the activities it undertakes. The objects of the HCI, as
provided under its Memorandum of Association, inter alia, include the following:

i. To carry on the business of hotel, motel, restaurant, café, tavern, flight kitchen,
refreshment room and boarding and lodging, house-keepers, licensed victuallers, etc.;

ii. To provide lodging and boarding and other facilities to the public;

iii. To purchase, erect, take on lease or otherwise acquire, equip and manage hotels;

iv. To establish shops, kitchens, refreshment rooms, canteens and depots for the sale of
various food and beverages.

The objects incidental or ancillary to the main objects include, inter alia: "... (5) To carry on any
business by means of operating hotels etc. or other activity which would tend to promote or
assist Air-India's business as an international air carrier...."

It was observed by the Hon'ble Court that the primary objects of the HCI have no direct relation
with the Air India. It is only one of the many incidental or ancillary objects of the HCI that make
a direct reference to assisting Air India. The argument that the HCI runs the canteen solely for
Air India's purpose and benefit could not succeed in this light. The HCI has several primary
objects, which include the running of hotels, motels, etc., in addition to establishing shops,
kitchens, canteens and refreshment rooms. The Air India only finds mention under HCI's
ancillary objects. It cannot be said that the Memorandum of Association of the HCI provides that
HCI functions only for Air India. Nor can it be said that the fundamental activity of the HCI is to
run and operate the said statutory canteen for the Air India.

The Hon'ble Apex Court was not agreed with the contention that the HCI shall be a wholly-
owned subsidiary of the Air India and that its share capital shall be held by the Air India and/or
its nominees. Furthermore, the said Articles included provisions whereby Air India controls the
composition of the Board of Directors of the HCI, including the power to remove any such
director or even the Chairman of the Board. Further, Air India has the right to issue directions to
the HCI, which the latter is bound to comply with. In this regard, it may be contended that the
Air India has effective and absolute control over the HCI and that therefore latter is merely a veil
between the appellants-workmen and Air India. The Apex Court held that the doctrine of
piercing the veil cannot be applied in the given factual scenario. Despite being a wholly owned
subsidiary of the Air India, Respondent No. 1 and Respondent No. 2 are distinct legal entities.
The management of business of the HCI is under its own Board of Directors. The issue relating
to the appointment of the Board of Directors of the HCI by the Air India would be a consequence
of statutory obligations of a wholly owned subsidiary under the Act, 1956.

It has been held that the present facts would not be a fit case to pierce the veil, which as
enumerated above, was exercised sparingly by the Courts. Further, for piercing the veil of
incorporation, mere ownership and control is not a sufficient ground. It should be established that
the control and impropriety by the Air India resulted in depriving the Appellants-workmen
herein of their legal rights.

Therefore, the only consideration which Hon'ble Court noticed is the nature of control that the
Air India may have over the HCI, and whether such control may be called effective and absolute
control. Such control over the HCI would be required to be established to show that the
appellants-workmen were in fact the employees of the Air India.  On the issue of control, the
English cases had clarified that control would include the power of the employer to decide how
the thing was to be done, the means to be employed for doing it, the time and place where it was
to be done and above all such control must exist in a sufficient degree. And yet the Apex Court
found cases where earlier rulings qualified that no doubt control was one of the important tests
but was not to be taken as the sole test. In some cases to determine the true relationship between
employer and employee all other relevant facts and terms and conditions of the contract had also
been considered. Thus, on completing a complete tour de force of case law, the Supreme Court
felt that what was needed was an integrated approach, meaning thereby that in deciding complex
cases it would be necessary to integrate the relevant tests so as to examine whether the
employees in question were fully integrated into the employer’s business or concern or whether
they were independent of the concern although attached therewith to some extent.

Applying the integrated approach to the facts of the case, the Court found that the running of the
said canteen and control over its operations was with HCI and the functions of appointment,
payment of salary, removal from service, dismissal, and disciplinary action over the canteen staff
rested with the HCI. Despite the fact that Air India did exercise some supervision on the quality,
skill and performance of the staff, to ensure provision of good quality food and service, the Court
ruled that going by the integrated tests approach they were satisfied that the employees of HCI
stood on a different footing in as much as they were part of a separate legal entity and different
business concern which was set up for carrying out the activity of operating and running of
canteen services, nor, applying the test of control did the Court find that Air India exercised
absolute and effective control over HCI’s employees. All things considered they did not satisfy
the tests of employer- employee relationship vis-à-vis Air India which did not qualify as their
employer.

The Hon'ble Apex Court opined that such control would have nothing to do with the
appointment, dismissal or removal from service, or the taking of disciplinary action against the
workmen working in the canteen. 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.

It was observed 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. Accordingly, It has been held that,
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.
Judgement

The full bench of the Supreme Court reiterated its stance as follows;

“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 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 mere to ensure due
to the maintenance of standards and quality in the said canteen…. to be called the employees,
they would need to satisfy the test of an employer-employee relationship and it was shown that
the employer exercises absolute and effective control over the said workers.”

In terms of the above, it was held that 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 was shown that the employer exercises absolute and effective
control over the said workers. Accordingly, appeals were dismissed.

Going forward the Supreme Court’s ruling in this case is noteworthy for the Courts integration of
various tests evolved by it in the past and fashioning an integrated approach to virtually hold that
there cannot be a one size fit all approach and complex cases was resolved by application of a
holistic set of tests.