Companies Act Case Law Air India Statutory Corporation Vs United Labour Union & Ors

PETITIONER:
AIR INDIA STATUTORY CORPORATION.

Vs.

RESPONDENT:
UNITED LABOUR UNION & ORS.

DATE OF JUDGMENT: 06/11/1996

BENCH:
K. RAMASWAMY, B.L. HANSARIA, S.B. MAJMUDAR

 
ACT:

 

HEADNOTE:

 

JUDGMENT:
THE 6TH DAY OF DECEMBER, 1996.
Present :
Hon’ble Mr. Justice K. Ramaswamy
Hon’ble Mr. Justice B.L. Hansaria
Hon’ble Mr. Justice S.B. Majmudar
Ashok Deasai, Attorney General, T.R. Andhyarujuna, Solicitor
General, P.P. Malhotra, Ms. Indira Jaising, K.K. Singhvi,
Sr. Advs., M.D. Sisodia, K. Swamy, Lalit Bhasin, Ms. Nina
Gupta, Ms. Kiran Bhardwaj, Vineet Kr., Ms. Ethel Pereira,
Ms. Ritu Makkar, P.P. Singh, G. Nagesware Reddy, C.V.S. Rao
Ms. Anil Katiyar, Ms. Anita Shenoi, Sanjay Parikh, B.N.
Singhvi, Sanjay Singhvi, Anil K. Gupta, Ms. Pushpa Singhvi,
T. Sridharan, P.K. Malhotra, S.R. Bhat, Brig Bhushan, R.N.
Keshwani, and Ms. C. Ramamurthy, and A.K. Sanghi, Advs. with
them for the appearing parties.
J U D G M E N T S
The following Judgments of the Court were delivered”
WITH
CIVIL APPEAL NOS. 15536-37, 15532-15534 OF 1996
(Arising out of SLP (C) Nos. 7418-19/92 and 12353-55/95)
J U D G M E N T
K. Ramaswamy, J.
Leave granted.
These appeals by special leave arise form the judgment
of the Division Bench of the Bombay High Court dated April
28, 1992 made in Appeal No. 146 of 1990 and batch. The facts
in appeal arising out of S.L.P. 7417/92, are sufficient to
decide the questions of law that have arisen in these
appeals. The appellant initially was a statutory authority
under International Airport Authority of India Act. 1971
(for short, ‘IAAI Act’) and on its repeal by the Airports
Authority of India Act, 1994 was amalgamated with National
Airport Authority (for short, the ‘NAA’) under single
nomenclature, namely, IAAI. The IAAI is now reconstituted as
a company under Companies Act, 1956.
The appellants engaged, as contract labour the
respondent union’s members, for sweeping, cleaning dusting
and watching of the building owned ad occupied by the
appellant. The Contract Labour (Regulation and Abolition)
Act, 1970 (for Short, the ‘Act’) regulates registration of
the establishment of principal employer, the contractor
engaging and supplying the contract labour in every
establishment i which 20 or more workmen are employed o ay
day of the preceding 12 months as contract labour. The
appellant had obtained on September 20,1971 a certificate of
registration form Regional Labour Commissioner (Central)
under the Act. The Central Government, exercising the power
under Section 10 of the Act, on the basis of recommendation
and in consultation with the Central Advisory Board
constituted under Section 10(1) of the Act, issued a
notification on December 9,1976 prohibiting “employment of
contract labour on and from December 9,1976 for sweeping,
cleaning, dusting and watching of buildings owned or
occupied by the establishment in respect of which the
appropriate government under the said act is the Central
Government”. However, the said prohibition was not apply to
“outside cleaning and other maintenance operations of multi-
storeyed building where such cleaning or maintenance cannot
be carried out expect with specialised experience.” It would
appear that Regional Labour Commissioner(Central) Bombay by
letter dated January 20,1972 informed the appellant that the
State Government is the appropriate Government under the
Act. Therefore, by proceedings dated May 22, 1973 the
Regional Labour Commissioner (Central) had revoked the
registration. By Amendment Act 46 of 1982, the Industrial
Disputes Act, 1947 (for short, the ‘ID Act’) was made
applicable to the appellant and was brought on statute book
specifying the appellant as one of the industries in
relation to which the Central Government is the appropriate
Government and the appellant has been carrying on its
business “by or under its authority” with effect form August
21,1982. The Act was amended bringing within its ambit the
Central Government as appropriate Government by amendment
Act 14 of 1986 with effect from January 28,1986.
Since the appellant did not abolish the contract system
and failed to enforce the notification of the Government of
India dated December 9,1976, the respondents came to file
writ petitions for direction to the appellant to enforce
forthwith the aforesaid notification abolishing the contract
labour system in the aforesaid services and to direct the
appellant to absorb all the employees doing cleaning,
sweeping, dusting, washing and watching of the building
owned or occupied by the appellant-establishment, with
effect from the respective dates of their joining as
contract labour in the appellant’s establishment with all
consequential rights/benefits, monetary or otherwise, The
writ petition was allowed by the leaned single judge on
November 16,1989 directing that all contract workers be
regularised as employees of the appellant from the date of
filing of the writ petition. Preceding thereto, on November
15, 1989, the Government of India referred to the Central
Advisory Board known as While Committee under section
10(1), which recommended to the Central Government not to
abolish the contract labour system in the aforesaid
services. Under the impugned judgment dated April 3,1992,
the learned judges of the Division Bench dismissed the
appeal. Similar was the fate of other appeals. Thus these
appeals by special leave.
Shri Ashok Desai, the learned Attorney General, Shri
Andhyarujina, the learned Solicitor General, Appearing for
Union of India and the appellant respectively, contended
that the term “appropriate Government” under section 2
(1)(a) of the Act, as on December 9, 1976, was the State
Government. The appellant was not carrying on the business
as an agent of the Central Government nor the Central
Government was its principal. This Court, in Heavy
Engineering Majdoor Union v. The State of Bihar & Ors. [
(1969) 3 SCR 995 (for short, the “Heavy Engineering case”],
had interpreted the phrase “the appropriate Government” and
held that the Central Government was not the appropriate
Government under the ID Act. The ratio therein was followed
in Hindustan Aeronautics Ltd. v. The Workmen & Ors. [(1975)
4 SCC 679] and Rashtriya Mill Mazdoor Sangh v. Model Mills
Nagpur & Anr. [1984 Supp. SCC 443] and food Corp. of India
Workers’ Union v. Food Corp. Of India & Ors.[(1985) 2 SCC
294], It is thus firmly settled law that the appropriate
Government until the Act was amended with effect from
January 28,1986. Therefore, the view of the High Court that
the appropriate Government is the Central Government is not
correct in law. The learned Attorney General Further argued
that the interpretation of this Court in Heavy Engineering
case has stood the test of time and the parties have settled
the transaction its basis. It would, therefore, not be
correct to upset that interpretation. The learned Solicitor
General contended that the notification published by the
Central Government under Section 10 of the Act on December
9, 1976 was without jurisdiction. The Advisory Board
independently should consider whether the contract labour in
each of the aforestated services should be abolished taking
into consideration the perennial nature of the work, the
requirement of number of employees in the respective
specified services in the establishment of the appellant.
The Advisory Board had not adverted to the prescribed
criteria of Section 10 (2) of the appellant’s
establishment. Mohile Committee after detailed examination,
had recommended to the Central Government not to abolish the
contract labour system in the aforesaid services. It was
contended that the notification dated December 9, 1976 is
without authority of law or, at any rate, is clearly illegal
and so the direction by the High Court to enforce the
offending notification is not correct in law. It was come
into force from January 28, 1986, the Central Government
being the appropriate Government, had accepted the
recommendation of Mohile Committee of not abolishing the
contract labour system. The notification dated
December 9, 1976 no longer remained valid for enforcement.
The High Court, therefore was not right in directing the
appellant to enforce the notification. Alternatively, it was
contended that even assuming that the notification is valid
and enforceable, it would be effective only from January,
1986. However, by abolition of contract labour system, the
workmen would not automatically became the employees of
the appellant. In Dena Nath and Ors. [(1992) 1 SCC 695],
this court had held that the High Court, in exercise of its
power under Article 226, has o power to direct absorption
of the contract labour as its direct employees. The
impugned judgment was expressly disapproved in Dena Nath’s
case. Therefore, its legality has been knocked off its
bottom. It was further contended that the Act, on abolition
of the contract labour system, does not envisage to c r ea
t e direct relationship between the principal employer and
the contract labour. The erstwhile contract labour have to
seek and obtain industrial award under the ID Act by virtue
of which the appellant would be entitled to satisfy the
Industrial Court that there was no need to absorb all the
contract labour but only smaller number is required as
regular employees. On recording finding in that behalf, the
industrial court would make his award which would be
enforceable by the workmen. This court in Gujarat
Electricity Board v. Hind Mazdoor Sabha & Ors. [(1995) 5 SCC
27] had pointed out the lacuna in the act and given
directions of the manner in which the industrial action has
to be take on abolition of the contract labour system. The
High Court, therefore, was not right in its direction that
the workmen require to be absorbed in the respective service
of the establishment of the appellant. it is also contented
that the appellant, though initially was a statutory
Corporation under the IAAI Act, on its abolition and
constitution as a company, is entitled to regulate its own
affairs on business principal and the direction for
absorption would lead to further losses in which it is being
run. The learned Solicitor General has, therefore, submitted
a scheme under which its subsidiary, namely, Air Cargo
Corporation would take the workmen ad absorb them into
service, subject to the above regulation. It has to consider
as to how many of the contract labour require to be
absorbed. Prescription of qualification for appointment
was necessary; the principle of reservation adopted by the
Central Government requires to be followed; their names
require to be called from Employment Exchange.
The workmen should be absorbed o the principle of “last come
first go” subject to their fitness, qualifications and
probation etc.
Shri K.K. Singhvi and Mrs. Indira Jai Singh, learned
senior counsel and A.K. Gupta, learned counsel for the
respondents, contended that the appellant is an industry
carrying on its business of Air Transport Services. Prior to
the IAAI Act, it was under the control of Civil Aviation
Department, Government of India; after the IAAI Act, the
appellant has been carrying on its industry by or under the
authority of the Central Government. The relevant provisions
in the IAAI Act would establish the deep and pervasive
control the Central Government has over the functions of the
appellant. Whether the appellant is an industry carrying on
business by, or under the authority of the Central
Government, must be determined keeping in view the language
of the statute that gave birth to the Corporation, and the
nature of functions under the IAAI act and the control the
Central Government is exercising over the working of the
industry of the appellant to indicate that right form its
inception the appellant has been carrying on its business,
by or under the authority of the Central Government. Rightly
understanding that legal position, the Central Government
had referred the matter to the Central Advisory Board under
Section 10(1) of the Act and on the basis of its report had
issued the notification dated December 9,1976 abolishing
the contract labour system in the aforestated services.
Therefore, it is valid in law. The Bench in Heavy
Engineering case narrowly construed the meaning of the
phrase “the appropriate Government” placing reliance on the
common law doctrine of “principle and agent”. The public law
interpretation is the appropriate principle of construction
of the phrase “the appropriate Government”. In view of
internal evidence provided in the IAAI Act ad the nature
of the business carried on by the appellant by or under the
control of the Central Government, the appropriate
Government is none other than the Central Government. In
particular, after the development of law of “other
authority” or “instrumentality of the State” under Article
12 of the Constitution, the ratio in Heavy Engineering case
is no longer good law. In Hindustan Aeronautics Ltd. and
Food Corp of India cases, this court had not independently,
laid any legal preposition. Food Corporation of India case
was considered with reference to the regional
warehouses of the FCI situated in different States and in
this functional perspective, this court came to the
conclusion that the appropriate Government would be the
State Government.
This Court in Sukhdev Singh & Ors. v. Bhagatram Sardar
Singh & Anr. [(1975) 3 SCR 619]; R.D. Shetty v. Airport
Authority & Ors. [(1979) 3 SCR 1014]; Managing Director,
U.P. Warehousing Corporation & Anr. v. V.N. Vajapayee
[(1980) 2 SCR 733]; Ajay Hasia etc. v. Khalid Mujib
Sehravardi & Ors. etc. [(1981) 2 SCR 79] – wealth of
authorities – had held that settled legal position would
lend aid to interpret the phrase “appropriate
Government” in public law interpretation; under the Act the
Central Government is the appropriate Government to take a
decision under section 10 of the Act to abolish the contract
labour system. It is further contended that the central
Government, after notifying abolition of contract labour
system is devoid of power under section 10(1) to appoint
another Advisory Board to Consider whether or not to
abolish the same contract labour system in the aforesaid
services in the establishments of the appellant. The
recommendation of the Mohile Committee and the resultant
second notification were, therefore, without authority of
law. The two Judge Benches in Dena Nath and Gujarat
Electricity Board’s cases have not correctly interpreted
the law. After abolition of the contract labour system, if
the principle employer omits to abide by the law and fails
to absorb the labour worked in the establishments of the
appellant on regular basis, the workmen have no option but
to seek judicial redress under Article 226 of the
Constitution. Judicial Review being the basis feature of the
Constitution, the High Court is to have the notification
enforced. The citizen has a fundamental right to seek
redressal of their legal injury by judicial process to
enforce his rights in the proceedings under Article 226. The
High Court, therefore, was right to dwell into the question
and to give the impugned direction in the judgment. The
workmen have a fundamental right to life. Meaningful right
to life springs from continued work to earn their
livelihood. The right to employment, therefore, is an
integral facet of right to life. When they were engaged as
contract labour and were continuously working in the
establishments of the appellant, to make their right to
social and economic justice meaningful and effective, they
are required to be continuously engaged as contract labour
so long as the work is available in the establishment. When
work is of perennial nature and on abolition of contract
labour system, they are entitled, per force, to be absorbed
labour system, they are entitled, per force, to be absorbed
on regular basis transposing their erstwhile contractual
status into that of an employer – employee relationship so
as to continue to eke out their livelihood by working under
the employer and be entitled to receive salary prescribed
to that post. Thereby, they became entitled to be absorbed
without ay hiatus with effect from the date of abolition. If
any action is needed to be taken thereafter against the
employee, it should be only in accordance with either the
statutory rules or the ID Act, if applicable. In either
event, the right to absorption assures to the workmen the
right to livelihood as economic empowerment, right to
social justice and right to dignity of person which are the
concomitants of social democracy. These facets of
constitutional rights guaranteed to the workmen as their
Fundamental Rights should be kept in view in interpreting
the expression “appropriate Government enjoined under
Section 10(1) of the Act and other regulatory provisions in
relation to the employment of the workmen. Therefore, the
view in Dena Nath’s case is not correct is law and requires
to be overruled.
There is no hiatus in the operation of the Act on
abolition of the contract labour system under Section 10.
The object and purpose of the Act are twofold. As long as
the work in an industry is not perennial, the Act regulates
the conditions of the workmen employed through the
contractor registered under the Act. The services of the
workmen are channelised through the contractor. The
principle employer is required to submit the number of
workmen needed for employment in its establishment who
are supplied by the contractor, an intermediary; but the
primary responsibility lies upon the principle employer to
abide by law; the violation thereof visits with penal
consequences. The Act regulates systematic operation. Wages
to the contract labour should be paid under the direct
supervision of the principle employer. The principle
employer is enjoined to compel the contractor to pay over
the wages and on his failure, the principle employer should
pay and recover it from the contractor/intermediary. The
principle employer alone is required to provide safety,
health and other amenities to ensure health and safe working
conditions in the establishment of the principle employer.
This would clearly indicate the pervasive control the
principle employer has over the contract labour employed
through intermediary and regulation of the work by the
workmen during the period of service. On advice by the Board
that the work is of perennial nature etc, and on being
satisfied of the conditions specified under Section 10(2),
the appropriate Government takes a decision to abolish the
contract labour and have the decision published by a
notification. It results in abolition of the contract
labour. Consequently, the linkage of intermediary/contractor
is removed from the operational structure under the Act. It
creates direct connection between the principle employer and
the workmen. There is no escape route for the principle
employer to avoid workmen because it needs their services
and the workmen are not meant to be kept in the lurch. The
words “principal employer” do indicate that the
intermediary/contractor is merely a supplier of labour to
the principal employer. On effacement of the contractor by
abolition of the contract labour system, a direct
relationship between the principal employer and the workmen
stands knitted. Thereby the workman becomes an employee of
the principal employer and it relates back to the date of
engagement as a contract labour. The details of the workmen,
the requirement of the work force, duration of the work etc,
are regulated under the Act and the Rules. The Act, the
Rules and statutory forms do furnish internal and
unimpeachable evidence obviating the need to have industrial
adjudication; much less there arises any dispute. There is
no machinery for workmen under the ID Act to seek any
industrial adjudication. if any industrial adjudication is
to be sought, it would be only by a recognised union in the
establishment of the appellants who are unlikely to espouse
their dispute. Therefore, the methodology suggested in
Gujarat Electricity Board’s case, by another bench of two
Judges, apart from being unworkable and incongruous, is not
correct in law. On abolition of the contract labour, the
principle employer is left with no right but duty to
enforce the notification, absorb the workmen working in the
establishment on contract basis transposing them as its
regular employee with all consequential rights and duties
attached to a post on which the workmen working directly
under the appellant was entitled or liable. The Act gave no
option to pick and choose the employees at the whim of the
principal employer. The view of the High Court, therefore,
is correct to the extent that the notification should be
enforced with effect from date of abolition, namely,
December 9,1976. The subsequent amendment with effect from
January 28,1986 is only a recognition of ad superimposition
of preexisting legal responsibility of the Central
Government as the appropriate Government. It does not come
into being only from the date the amendment came into
force. Consequently, the workmen, namely, the members of the
respondent-Union must be declared to be the employees with
effect from the respective dates on which they were
discharging their duties in the respective services of the
appellant’s establishment either as Sweeper, Duster,
Cleaner, Watchman etc. The view, therefore, of the High
Court to the extent that they should be absorbed with
effect from the date of the judgment of the learned single
Judge, is not correct in law. Therefore, to do complete
justice, direction may be given to absorb the workmen with
effect from the date abolition, i.e. December 9, 1976 under
Article 142 of the Constitution.
The respective contentions would give rise to the
following questions:
1. What is the meaning of the word “appropriate Government
under Section 2(1) (a) of the Act,
2. Whether the view taken in Heavy Engineering case is
correct in law?
3. Whether on abolition the contract labour are entitled
to be absorbed; if so, from what date ?
4. Whether the High Court under Article 226 has power
to direct their absorption; if so, from what date ?
5. Whether it is necessary to make a reference under
Section 10 of the ID Act for adjudication of dispute
qua absorption of the contract labour?
6. Whether the view taken by this Court in Dena Nath and
Gujarat State Electricity Board’s case is correct in
law ?
7. Whether the workmen have got a right for absorption
and, if so, what is the remedy for enforcement ?
Section 2 (1) (a) of the Act defines “appropriate
Government” to mean-
“”(1) in relation to an
establishment in respect of which
the appropriate Government under
the Industrial Disputes Act, 1947
(Act 14 of 1947), is the Central
Government, the Central Government;
“”(2) in relation to any other
establishment, the Government of
the State in which that other
establishment is situated.”
Prior to the Amendment Act 14 of 1986, the definition
was as under :
“2 (1) (a) “Appropriate Government”
means-
(1) in relation to –
(i) any establishment pertaining to
any industry carried on by or under
the authority of the Central
Government, or pertaining to any
such controlled industry as may be
specified in this behalf by the
Central Government, or
(ii) any establishment of any
railway, Cantonment Board, Major
port, mine or oil-field, or
(iii) any establishment of a
banking or insurance company,
the Central Government,
(2) in relation to any other
establishment the Government of the
State in which that other
establishment is situate.”
Section 2(a)(i) of the ID Act defines “appropriate
Government” thus :”… Unless there is anything repugnant in
the subject or context, “appropriate Government” means, in
relation to any Industrial Disputes concerning any industry
carried on by or under the authority of the Central
Government or by a railway company for concerning any such
controlled industry as may be specified in this behalf by
the Central Government…” and India Airlines and Air India
Corporation established under Section 3 of the Air
Corporation Act 1953 are enumerated industries under
Amendment Act 46 of 1982 which came into force with effect
from 21.8.1984.
In Heavy Engineering case (supra), industrial dispute
was referred under Section 10 of the ID Act by the State
Government of Bihar to the Industrial Tribunal for its
adjudication. The competency of the State Government was
questioned by the Mazdoor Union contending that the
appropriate government to refer the dispute was the Central
government. The High Court negatived the contention and had
upheld the validity of reference, On appeal, a Bench of two
Judges had held that the words “under authority of” means
pursuant to the authority, such as an agent or a servant’s
acts under or pursuant to the authority of its principal or
master. The Heavy Engineering Company cannot be said to be
carrying on its business pursuant to the authority of the
Central Government. Placing reliance on common law
interpretation, the Bench was of the opinion that the
company derived its powers and functions from its Memorandum
ad Articles of Association. Though the entire share capital
was contributed by the Central Government and all the shares
were held by the President and officers of the Central
Government were in-charge of the management, it did not make
any difference. The company and the share holders are
distinct entities. The fact that the President of India and
certain officers hold all its shares did not make the
company an agent either of the President or of the Central
Government. The power to decide how the company should
function ; the power to appoint Directors and the power to
determine the wages all salaries payable by the company to
its employees, were all derived form the Memorandum of
company and Articles of Association of the Company and not
by the reason of the Company being the agent of the Central
Government. The learned judges came to that conclusion on
the basic of concessions and on private law of principal and
agent and as regards a company registered under the
Companies Act, on the basic of the power of internal
management. In Hindustan Aeronautics Ltd. case (supra),
learned judges merely followed the ratio of Heavy
Engineering case. It further concluded that the enumeration
of certain statutory Corporations in the definition would
indicate that those enumerated Corporations would come
within the definition of the “appropriate Government”
without any further discussion. In Rashtriya Mill Mazdoor
Sangh’s case, a Bench of three judges, while interpreting
Section 32 (iv) of the Payment of Bonus Act, considered the
purpose of the expression “under the authority of any
department of the Central Government for purpose of payment
of bonus”. The meaning and scope of the expression “industry
carried on by or under the authority of any department of
the Central Government”, was examined and it was held that
the industrial undertaking retains its identity,
personality and status unchanged though in its management,
the Central Government exercised the power to give a
direction under section 16 and the management is subjected
to regulatory control. It is seen that the above decision
was reached in the context in which the payment of bonus was
to be determined and paid to the employees by the
department. In Food Corporation of India’s case (supra), a
Bench of two Judges was to consider whether regional office
of the Food Corporation of India and the warehouses etc.
were an “establishment” within the meaning of Section
2(i)(e) of the Act and whether FCI is an industry carried on
by or under the authority of the Central Government.
Following the aforesaid three decisions, it was held that a
bare reading of the definition under the Act means inter
alia any place, any industry, trade, business, manufacture,
warehouse, godown or the place set up by the corporation
where its business is carried on. Though for the purpose of
industrial disputes the Central Government is an appropriate
Government in relation to Food Corporation of India, its
establishment at various places is not under the control of
the Government of India. Therefore, appropriate Government
under the Industrial Disputes Act is the state Government.
In that behalf, the learned Judges, undoubtedly, relied upon
Heavy Engineering case. It would thus be seen that the
construction adopted on the phrase “appropriate Government”
under the ID Act was considered with reference to its
functional efficacy. The Heavy Engineering case, as held
earlier, had proceeded on common law principles and the
concession by the counsel.
As noted, the appellant, to start with, was a statutory
authority but pending appeal in this court, due to change in
law and in order to be in tune with open economy, it became
a company registered under the Companies Act. To consider
its sweep on the effect of Heavy Engineering case on the
interpretation of the phrase ‘appropriate Government’, it
would be necessary to recapitulate the Preamble, Fundamental
Rights (Part III) and Directive Principle (Part IV) –
trinity setting out the conscience of the Constitution
deriving from the source “We, the people”, a charter to
establish an egalitarian social order in which social and
economic justice with dignity of person and equality of
status and opportunity, are assured to every citizen in a
socialist democratic Bharat Republic. The Constitution, the
Supreme law heralds to achieve the above goals under the
rule of law. Life of law is not logic but is one of
experience, Constitution provides an enduring instrument,
designed to meet the changing needs of each succeeding
generation altering and adjusting the unequal conditions to
pave way for social and economic democracy within the spirit
drawn from the Constitution. So too, the legal redressal
within the said parameters. The words in the Constitution or
in an Act are but a framework of the concept which may
change more than words themselves consistent with the march
of law. Constitutional issues require interpretation broadly
not by play of words or without the acceptance of the line
of their growth, Preamble of the Constitution, as its
integral part, is people including workmen, harmoniously
blending the details enumerated in the Fundamental Rights
and the Directive Principles. The Act is a social welfare
measure to further the general interest of the community of
workmen as opposed to the particular interest of the
individual enterpreneur. It seeks to achieve a public
purpose, i.e., regulated conditions of contract labour and
to abolish it when it is found to be of perennial nature
etc. The individual interest can, therefore, no longer stem
the forward flowing tide and must, of necessity, give way to
the broader public purpose of establishing social and
economic democracy in which every workmen realises socio-
economic justice assured in the preamble, Articles 14,15 and
21 and the Directive Principles of the Constitution.
The founding fathers of the Constitution, cognizant of
the reality of life wisely engrafted the Fundamental Rights
and Directive Principles in Chapters III and IV for a
democratic way of life to every one in Bharat Republic, the
State under Article 38 is enjoined strive to promote the
welfare of the people by securing and protecting as
effectively as it may, a social order in which justice,
social, economic and political shall inform all the
institutions of the national life and to minimise the
inequalities in income and endeavour to eliminate the
inequalities in status, facilities and opportunities, not
only amongst individuals but also amongst groups of people
residing in different areas or engaged in different
vocations, Article 39(a) provides that the State shall
direct its policies towards securing the citizens, men and
women equally, the right to an adequate means of livelihood;
clause (d) provides for equal pay for equal work for both
men and women; clause (e) provides to secure the health and
strength of workers. Articles 41 provides that within the
limits of its economic capacity and development, the state
shall make effective provision to secure the right to work
as fundamental with just and human conditions of work by
suitable legislation or economic organisation or in any
other way in which the worker shall be assured of living
wages, conditions of work ensuring a decent standard of life
and full enjoyment of leisure and social and cultural
opportunities to the workmen. The poor, the workman and
common man can secure and realise economic and social
freedom only through the right to work and right to adequate
means of livelihood, to just and human conditions of work,
to a living wage, a decent standard of life. education and
leisure. To them, these are fundamental facets of life.
Article 43A, brought by 42nd Constitution (Amendment) Act,
1976 enjoins upon the State to secure by suitable
legislation or in any other way, the participation of
workers in the management of undertakings, establishments or
other organisations engaged in any industry. Article 46
gives a positive mandate to promote economic and educational
interest of the weaker sections of the people.
Correspondingly, Article 51A imposes fundamental duties on
every citizen to develop the scientific temper, humanism and
to strive towards excellence in all spheres of individual
and collective activity, so that the nation constantly rises
to higher levels of endeavour and achievement. To make these
rights meaningful to workmen and meaningful right to life a
reality to workmen, shift of judicial orientation from
private law principles to public law interpretation
harmoniously fusing the interest of the community. Article
39A furnishes beacon light that justice be done on the basis
of equal opportunity and no one be denied justice by reason
of economic or other disabilities. Courts are sentinal in
the quivive of the rights of the people, in particular the
poor. The judicial function of a Court, therefore, in
interpreting the Constitution and the provisions of the Act,
requires to build up continuity of socio-economic
empowerment to the poor to sustain equality of opportunity
and status and the law should constantly meet the needs and
aspiration of the society in establishing the egalitarian of
the society in establishing the egalitarian social order.
Therefore, the concepts engrafted in the statute require
interpretation from that perspectives, without doing
violence to the language. Such an interpretation would
elongate the spirit and purpose of the Constitution and make
the aforesaid rights to the workmen a reality lest
establishment of an egalitarian social order would be
frustrated and Constitutional goal defeated.
Keeping this broad spectrum in view, let us consider
whether the interpretation given in Heavy Engineering case
is consistent with the scheme and spirit of the
Constitution. In Rajasthan State Electricity Board, Jaipur
v. Mohan Lal & Ors. [(1967) 3 SCR 377, a Constitution Bench,
composing the learned judges who formed the Bench in Heavy
Engineering case, considered the issue interpretation and
Bhargava, J. speaking on behalf of the majority, had held
that “other authority” within the meaning of Article 12 of
the Constitution need no necessarily be an authority to
perform governmental functions. The expression ‘other
authority’ is wide enough to include within it every
authority created by a statute on which powers are conferred
to carry out governmental functions or the “functions under
the control of the Government”. It is not necessary that
some of powers conferred be Governmental sovereign function
to carry on commercial activities. Since the State is
empowered under Articles 19 (1) (g) and 298 to carry on any
trade or business, it was held that Rajasthan State
Electricity Board was “other authority” under Article 12 of
the Constitution. The significance of the observation is
that an authority under the control of the State need not
carry on Governmental functions. It can carry on commercial
activities. At this juncture, it is relevant keep at the
back of our mind, which was not brought to the attention of
the Bench which decided Heavy Engineering case, that Article
19(2) of the Constitution grants to the State, by clause
(ii) thereof, monopoly to carry on, by the State or by a
Corporation owned or controlled by the State, any trade,
business, industry or service whether to the execlusion,
complete or partial, of citizens or otherwise. The narrow
interpretation strips the State of its monopolistic power to
exclude citizens from the field of any activity, to carry on
any trade, business, industry or service, total or partial.
A reverse trend which would deflect the constitutional
perspective was set in motion by the same Bench in Praga
tools Corporation v. C.V. Imanual [(1969) 3 SCR 773] decided
on February 19,1969,24 days prior to the date of decision in
Heavy Engineering case; in which it was held in main that
writ under Article 226 would not lie against a company
incorporated under Companies Act and the declaration that
dismissal of the workmen was illegal, given by the High
Court was set aside. But the operation of the above ratio
was put to stop by the Constitution Bench decision in
Sukhdev Singh & Ors. v. Bhagat Ram & Anr. [(1975) 3 SCR
619]. In that behalf, the interpretation given by Mathew, J.
in a separate but concurrent judgment is of vital
significance taking away the State action from the clutches
of moribund common law jurisprudence; it set on foot forward
march under public law interpretation. Mathew, J. had held
that the concept of State had undergone drastic change. It
cannot be conceived of simply as a cohesive machinery
yielding the thunderbolt of authority. The State is a
service Corporation. It acts only thorough its
instrumentalities or agencies of natural and juridical
person. There is a distinction between State action and
private action. There is nothing strange in the notion of
the State acting through a Corporation and making it an
agency or instrumentality of the State with an advent of the
welfare State. The framework of the civil service
administration became increasingly insufficient for handling
new tasks which were often of a specialised and highly
technical character. Development of policy of public
administration, through separate Corporations which would
operate largely according to business principles and
separately accountable though under the Memorandum of
Association or Articles of Association become the arm of the
Government. Though their employees are not civil servants,
it being a public authority and State Corporation,
therefore, is subject to control of the Government. The
public corporation, being a corporation of the State, is
subject to the constitutional limitation as the State
itself. The governing power, wherever located, must be
subject to the fundamental constitutional limitations. The
Court, therefore, had laid the test to see whether the
Corporation is an agency or instrumentality of the
Government to carry on business for the benefit of public.
Thus, the ratio in Praga Tools case, no writ would lie
against the Corporation is not a statutory body, as it is
not a authority, it is an instrumentality of the State.
In R.D. Shetty v. International Airport Authority of
India & Ors. [(1979) 3 SCR 1014], this Court had held that
due to expansion of welfare and social service functions,
the State increasingly controls material and economical
resources in the society involving large scale industrial
and commercial activities with their executive functions
affecting the lives of the people. It regulates and
dispenses special services and provides large number of
benefits. When the Government deals with the public, it
cannot act arbitrarily. Where a corporation is an
instrumentality or agency of the Government, it would be
subject to the same constitutional or public law limitation
as the Government. The limitations of the action by the
Government must apply equally when such action are dealt
with by Corporation having instrumentality element with
public and they cannot act arbitrarily, Such a functioning
cannot enter into relationship with any person it likes at
its sweet will. Its action must be in conformity with some
principle which meets the test of reason and relevance.
Therefore, the distinction between a statutory corporation
and the company incorporated under the Companies Act was
obliterated.
In Managing Director, U.P. Warehousing Corpn. v. V.N.
Vajpayee [(1980) 2 SCR 773], Chinnappa Reddy, J. in this
separate but concurrent judgment laid down the relevant
principles. The Government establishes and manges large
number of industries and institutions which have become
biggest employer and there is no good reason why the
Government should not be bound to observe the equality
clause of the Constitution in a matter of employment and its
dealings with its employees; why the Corporation set up or
owned by the Government would not equally be bound and why
instead such Corporation would become citadels of patronage
and arbitrary action. Such a distinction perhaps would mock
at the Constitution and the people; some element of public
employment is all that is necessary to take the employee
beyond the reach of rule which denies him the protection of
Articles 14 and 16. Independence and integrity of the
employees in the public sector should be secured as much as
the independence and integrity of the Civil servants. it
was, therefore, held that a writ would lie against the
warehousing corporation.
In Ajay Hasia etc. v. Khalid Mujib Sehravardi &
Ors. etc. [(1961) 2 SCR 79], a Constitution Bench was to
consider whether a Society registered under the J & K
Societies Registration Act would be a State under Article 12
of the Constitution amenable to the reach of the writ
jurisdiction. The Constitution Bench laid the following
tests to determine whether the entity is an instrumentality
or agency of the State : (1) if the entire share capital of
the corporation is held by the Government, it would go a
long way towards indicating that the corporation is an
instrumentality or agency or Government ; (2) where the
financial assistance of the State is so much as to meet
almost entire expenditure of the corporation being
impregnated with governmental character; (3) it must also
be relevant factor whether the corporation enjoys monopoly
status which is State conferred of State protected; (4)
existence of deep and pervasive State control may afford an
indication that the corporation is a State agency or
instrumentality (5) if the functions of the corporation are
of public importance and closely related to governmental
functions, it would be a relevant factor in classifying the
corporation as a instrumentality or agency of Government ;
(6) specifically, if a department of Government is
transferred to a corporation, it would be a strong factor
supportive of the inference of the corporation being an
instrumentality or agency of Government. In Delhi Transport
Corporation v. D.T.C. Mazdoor Corpn.[AIR 1991 SC 101], it
was held that the State has a deep and pervasive control
over the functioning of the society and, therefore, is an
agency of the state. In Som Prakash Rekhi v. Union of India
& Ors. [(1981) 2 SCR 111], it was held that the settled
position in law is that any authority under the control of
the Government of India comes within the definition of a
State. Burmashell oil Co, was held to be an instrumentality
of the State though it was a Government company. The
authority in administrative law is a body having
jurisdiction in certain matters of public nature. Therefore,
the ability conferred upon a person by a law is to alter his
case own will directed to that end. The rights; duties and
liabilities or other legal relations, either of himself or
other person must be present to make a person an authority.
When the person is an agent or functions on behalf of the
State, as an instrumentality, the exericse of the power is
public. Sometimes, the test id formulated by asking whether
corporation was formed by or under the statute. The true
test is not how it is founded in legal personality but when
it is created, apart from discharging public function or
doing business as the proxy of the State, whether there is
an element of ability in it to effect the relations by
virtue of power vested in it by law. In that case, it was
held that the above tests were satisfied and the company was
directed to pay full pension.
In Manmohan Singh Jaitla v. Commissioner. Union
Territory of Chandigarh & Ors. [(1984) supp. SCC 540], it
was held that an educational institution receiving 952 of
the grant-in-aid from the Government is “other authority”
under Article 12 of the Constitution. It was, therefore,
held that the termination of the service without enquiry was
without jurisdiction. Dismissal from service without enquiry
was declared illegal under Article 226. In P.K. Ramachandra
Iyer & Ors. v. Union of India & Ors. [(1984) 2 SCC 141],
ICAR, a Society registered under the Societies Registration
Act, was held an adjunct of the Government of India. Its
budged was voted as part of the budget of the Ministry of
Agriculture. It was held that it was the State under Article
12 and was amenable to jurisdiction under Article 32 of the
Constitution. The Project and Equipment Corporation of India
which is subsidiary owned by State Trading Corporation was
held by this Court in A.L. Kalra v. Project and Equipment
Corpn. of India Ltd. [(1984) 3 SCR 316], to be an agency of
the Government within the meaning of Article 12 of the
Constitution of India. In Central Inland Water Transport
Corpn. Ltd. & Anr. v. Brojonath Ganguly & Anr. [(1986) 3 SCR
156], a Government Company incorporated under Companies Act
was held to be an instrumentality or agency. In this case,
this court construed the Fundamental rights under Articles
14 to 17, the Director Principle under Article 38,41 and 42,
the Preamble of the Constitution and held that the River
Steam Navigation Co. Ltd, was carrying on the same business
as the corporation was doing. A scheme of arrangement was
entered into between the corporation and the company. They
were managed by the board of Directors appointed and
removable by the Central Government. It was, therefore, held
that it was an agency or instrumentality of the State under
Article 12. In that behalf this court pointed out that the
trade of business activity of the State constitutes public
enterprise; the structural forms in which the Government
operates in the field of public enterprises are many and
varied. They may consist of governmental department,
statutory body, statutory corporation of government
companies etc.; immunities and privileges possessed by
bodies so set up by the Government under Article 298 are
subject to Fundamental Rights and Directive Principles to
further the State policy. For the purpose of Article 12, the
Court must see necessarily through corporate veil to
ascertain behind the veil the face of instrumentality or
agency of the State has assumed the garb of a governmental
company, as defined in Section 3(7) of the Companies Act, it
does not follow thereby that it ceases to be an
instrumentality or agency of the State. Applying the above
test, it was held that Inland Water Transport Corporation
was State.
When its correctness was doubted and its reference to
the Constitution Bench was made in Delhi Transport Corpn.
case (supra), while holding that Delhi Road Transport
Authority was an instrumentality of the State, it was held
that employment is not a bounty from the State nor can it
survival be at their mercy. Income is the Foundation of any
Fundamental Rights. Work is the sole source of income. The
right to work become as much fundamental as right to life.
Law as a social machinery requires to remove the existing
imbalances and to further the progress serving the needs of
the Socialist Democratic Republic under the rule of law.
Prevailing social conditions and actualities of the life are
to be taken into account to adjudge the dispute and to see
whether the interpretation would submerge the purpose of the
Society.
In Lucknow Development Authority v. M.K. Gupta [(1984)
1 SCC 243], the question was whether a Government Authority
is amenable to the regulation of Consumer Protection Act. It
was held in paragraph 5 and 6 that a Government or a semi-
Government body or local authority are amenable to the Act
as much as any other private body rendering similar service.
This is a service to the society and they are amenable to
public accountability for health and growth of society,
housing construction or building activities, by private or
statutory body rendering service within the meaning of
Section 2(0) of the said Act. In Star Enterprises & Ors. v.
C.I.D.C. of Maharashtra Ltd. [(1990) 3 SCR 280], it was held
that the State or its instrumentality entering into
commercial field must act in consonance with the rule of
law. In paragraph 10, it was held the judicial review of
administrative action has become expansive and its scope is
becoming wider day by day. The traditional limitations have
been vanishing and the sphere of judicial scrutiny is being
expanded, State activity too is becoming fast perversive as
the State has descended into the commercial field and joint
public sector undertaking has grown up. The State action
must be justified by judicial review, by opening up of the
public law interpretation. Accordingly, it was held that the
action of company registered under the Companies Act was
amenable to judicial review.
In LIC of India & Anr. v. Consumer Eduction & Research
Centre & Ors. [(1995) 5 SCC 482], it was held that in the
contractual field of State action, the State must act
justly, fairly and reasonably in public interest
commensurate with the constitutional conscience and socio-
economic justice; insurance policies of LIC, terms and
conditions prescribed therein involve public element. It
was. therefore, held in para 23 at page 498 that every
action of the public authority or the person acting in
public interest or any act that gives rise to public
element, should be guided by public power or action hedged
with public element that becomes open to challenge. If it is
shown that the exercise of the power is arbitrary, unjust
and unfair, it should be no answer for the State, its
instrumentality, public authority or person whose acts have
the insignia of public element, to say that their actions
are in the field of private law and they are free to
prescribe any conditions or limitations in their actions.
They must be based on some rational and relevant principles.
It must not be guided by irrational or irrelevant
considerations. Every administrative decision must be hedged
by reasons. At page 501 in para 28 it was held that though
the dispute may fall within the domain of contractual
obligation, it would not relieve the State etc, of its
obligation to comply with the basic requirements of Article
14. To this extent, the obligation is of public character,
invariably in every case, irrespective of there being any
other right or obligation. An additional contractual
obligation cannot divest the claimant of the guarantee under
Article 14 of non-arbitrariness at the hands of the State
etc, in any of its actions.
In G.B. Mahajan & Ors. v. Jalgaon Municipal Council &
Ors. [(1991) 3 SCC 91 at 109, para 38], it was held that in
interpretation of the test of reasonableness in
Administrative law, the words “void” and “voidable” found in
private law area are amenable to public law situations and
“carry over with them meanings that may be inapposite in
the changed context. Some such thing has happened to the
words ‘reasonable’ or reasonableness etc.” In Shrisht Dhawan
(Smt.) v. M/s. Shaw Brothers [(1992) 1 SCC 534 at 553, para
20] the private law principle of fraud and collusion in
section 17 of the Contract Act was applied to public law
remedy and it was held “that fraud in public law is not the
same as fraud in private law. Nor can the ingredient, which
has established fraud and commercial transaction be of
assistance in determining fraud in administrative law. It
has been aptly observed in Khwaja vs. Secretary of State for
the Home Department & Ors. [(1983) 1 All. E.R. 765] that it
is dangerous to introduce maxims of common law as to the
effect of fraud while determining fraud in relation to the
statutory law”. In Khwaja’s case (supra), it was held
“despite the wealth of authority on the subject, there is
nowhere to be found in the relevant judgments (perhaps
because none was thought necessary) a definitive exposition
of the reasons why a person who has obtained leave to enter
by fraud is an illegal entrant. To say that the fraud
‘vitiates’ the leave or that the leave is not ‘in accordance
with the Act’ is, with respect, to state a conclusion
without explaining the steps by which it is reached. Since
we are here concerned with purely statutory law, I think
there are dangers in introducing maxims of the common law
as to the effect of fraud on common law transaction and
still greater dangers in seeking to apply the concepts of
‘void and voidable’. In a number of recent cases in your
Lordships’ House, it has been pointed out that these
transplants from the field of contract do not readily take
root in the field of public law. This is well illustrated in
the judgement of the Court of Appeal in the instant case of
Khawaja [1982] 1 WLR 625 at 630; of [1982] 2 All ER 523, at
527, where Donaldson LJ spoke of the appellant’s leave to
enter as being ‘voidable ab initio’, which I find, with
respect, an impossibly difficult legal category to
comprehend”. Thus, the limitations in private law were
lifted and public law interpretation of fraud was enlarged.
It must be remembered that the Constitution adopted
mixed economy and control over the industry in its
establishment, working and production of goods and services.
After recent liberalised free economy private and multi-
national entrepreneurship has gained ascendancy and
entrenched into wider commercial production and services,
domestic consumption goods and large scale industrial
productions. Even some of the public Corporation are thrown
open to the private national and multi-national investments.
It is axiomatic, whether or not industry is controlled by
Government or public Corporations by statutory form or
administrative clutch or private agents, juristic persons,
Corporation whole or corporation sole, their constitution,
control and working would also be subject to the same
constitutional limitation in the trinity, viz., Preamble,
the Fundamental Rights and the Directive Principles. They
throw open an element of public interest in its working.
They share the burden and shoulder constitutional
obligations to provide facilities and opportunities enjoined
in the Directive Principles, the Preamble and the
fundamental rights enshrined in the Constitution. The word
‘control’, therefore, requires to be interpreted in the
changing commercial scenario broadly in keeping with the
aforesaid constitutional goals and perspectives.
From the above discussion, the following principles
would emerge:
[1] The constitution of the Corporation or instrumentality
or agency or corporation aggregate or Corporation sole
is not of sole material relevance to decide whether it
is by or under the control of the appropriate
Government under the Act.
[2] If it is a statutory Corporation, it is an
instrumentality or agency of the State. If it is a
company owned wholly or partially by a share capital,
floated from public exchequer, it gives indicia that it
is controlled by or under the authority of the
appropriate Government.
[3] In commercial activities carried on by a Corporation
established by or under the control of the appropriate
Government having protection under Articles 14 and 19
[2], it is an instrumentality or agency of the State.
[4] The State is a service Corporation. It acts through its
instrumentalities, agencies or persons natural or
juridical.
[5] The governing power, wherever located, must be subject
to the fundamental constitutional limitations and abide
by the principles laid in the Directive Principles.
[6] The framework of service regulations made in the
appropriate rules or regulations should be consistent
with and subject to the same public law principles and
limitations.
[7] Though the instrumentality, agency or person conducts
commercial activities according to business principles
and are separately accountable under their appropriate
bye-laws or Memorandum of Association, they become the
arm of the Government.
[8] The existence of deep and pervasive State control
depends upon the facts and circumstances in a given
situation and in the altered situation it is not the
sole criterion to decide whether the agency or
instrumentality or persons is by or under the control
of the appropriate Government.
[9] Functions of an instrumentality, agency or person are
of public importance following public interest element.
[10] The instrumentality, agency or person must have an
element of authority or ability to effect the relations
with its employees or public by virtue of power vested
in it by law, memorandum of association or bye-laws or
articles of association.
[11] The instrumentality, agency or person renders an
element of public service and is accountable to health
and strength of the workers men and women, adequate
means of livelihood, the security for payment of living
wages, reasonable conditions of word, decent standard
of life and opportunity to enjoy full leisure and
social and cultural activities to the workmen.
[12] Every action of the public authority, agency or
instrumentality or the person acting in public interest
or any act that gives rise to public element should be
guided by public interest in exercise of public power
or action hedged with public element and is open to
challenge. It must meet the test of reasonableness,
fairness and justness.
[13] If the exercise of the power is arbitrary, unjust and
unfair, and public authority, instrumentality, agency
or the person acting in public interest, though in the
field of private law, is not free to prescribe any
unconstitutional conditions or limitations in their
actions.
It must be based on some rational and relevant
principles. It must not be guided by irrational or
irrelevant considerations and all their actions ******
satisfy the basic law requirements of Article 14. The public
law interpretation is the basic tools of interpretation in
that behalf relegating common law principles to purely
private law field.
From this perspective and on deeper consideration, we
are of the considered view that the two-judge Bench in Heavy
Engineering case narrowly interpreted the words “appropriate
Government” on the common law principles which no longer
bear any relevance when it is tested on the anvil of Article
14. It is true that in Hindustan Machine Tool’s R.D.
Shetty’s and Food Corporation of India cases the ratio of
Heavy Engineering case formed the foundation. In Hindustan
Machine Tool’s case, there was no independent consideration
except repetition and approval of the ratio in Heavy
Engineering case. It is to reiterate that Heavy Engineering
case is based on concession. In R.B. Shetty’s case, the need
to dwelve indepth into this aspect did not arise but
reference was make to the premise of private law
interpretation which was relegated to and had given place to
constitutional perspectives of Article 14 which is
consistent with the view we have stated above. In Food
Corporation of India’s case, the Bench proceeded primarily
on the within the jurisdiction of different State
Governments which led it to conclude that the appropriate
Government would be the State Government.
In the light of the above principles and discussions,
we have no hesitation to hold that the appropriate
Government is the Central Government from the inception of
the Act. The notification published under Section 10 on
December 9,1976, therefore, was in exercise of its power as
appropriate Government. So it is valid in law. The learned
Solicitor General is not right in contending that the
relevant factors for abolition of the contract labour system
in the establishment of the appellant was not before the
Central Advisory Board before its recommendation to abolish
the contact labour system in the establishment of the
appellant. The learned Attorney General has placed before us
the minutes of the Board which do show the unmistakable
material furnished do indicated that the work in all the
establishments including those of the appellants, is of
perennial nature satisfying all the tests engrafted in
Section 10(2) of the Act. Accordingly, on finding the work
to be of perennial nature, it had recommended and the
Central Government had considered and accepted the
recommendation to abolish the contract labour system in the
aforesaid services. Having abolished it, the Central
Government was denuded of its power under Section 10(1) to
again appoint insofar as the above services of the Mohile
Committee to go once over into the self-same question and
the recommendation s of the latter not to abolish the
contract labour system in the above services and the
acceptance thereof by the Central Government are without any
legal base and, therefore, non est.
The next crucial question for consideration is: whether
the High Court was right in directing enforcement of the
notification dated December 9,1976 issued by the Central
Government ? Before adverting to that aspect, it is
necessary to consider the relevant provisions of the Act.
The Constitutionality of the Act was challenged in M/s.
Gammon India Ltd. & Ors. v. Union of India & Ors. [(1974) 1
SCC 596] on the touchstone of the Fundamental Rights given
by Articles 14.15,19(1) (g) and of Article 265. The
Constitution Bench elaborately considered the provisions of
the Act and had held that the Act in Section 10 empower the
Government to prohibit employment of contract labour. The
Government, under that Section, has to apply its mind to
various factors, before publishing the notification in the
official Gazette prohibiting employment of contract labour
in any process, operation or other work in any
establishment. The words ” other work in any establishment”
were held to be important. The work in the establishment
will be apparent from Section 10 (2) of the Act as
incidental or necessary to the industry, trade, business,
manufacture or occupation that is carried on in the
establishment. The Government before notifying prohibition
of contract labour work which is carried on in the
establishment, will consider whether the work is of a
perennial nature in that establishment or work is done
ordinarily through regular workmen in that establishment.
The words “work of an establishment” which are used in
defining workmen as contract labour being employed in
connected with the work of an establishment indicate that
the work of the establishment there is the same as word in
the establishment contemplated by Section 10 of the Act. The
contractor under takes to produce a given result for the
establishment through contract labour. He supplies contract
labour for any work of the establishment. The entire site is
the establishment and belongs to the principal employer who
has a right of supervision and control; he is the owner of
the premises and the end product and from whom the contract
labour receives its payment either directly or through a
contractor. It is the place where the establishment intends
to carry on its business, trade, industry, manufacture,
occupation after the construction is complete. Accordingly,
the constutionality of the Act was upheld.
The appalling conditions of contract labour who are
victims of exploitation have been engaging the attention of
various committees for a long tie and in furtherance of the
recommendations, the Act was enacted to benefit, as a
welfare measures, viz., provisions for canteens rest room,
facilities for supply of drinking water, latrines, urinals,
first aid facilities and amenities for the dignity of human
labour, are in larger interests of the community.
Legislature is the best judge to determine what is needed
as the appropriate condition for employment of contract
labour. The legislature is guided by the needs of the
general public in determining the reasonableness of such
requirements under the Act and the rules made thereunder.
Suffice it would, for the purpose of this case, to
concentrate on the definition of “contract labour” under
Section 2(b), “contractor” under Section 2(c),
“establishment” under Section 2(e), “principal employer”
under Section 2 (g), “wages” under Section 2 (h) and of
“workman” under Section 2 (i) Under Section 2 (c),
“contractor” in relation to an establishment, means a person
who undertakes to produce a given result for the
establishment, other than a mere supply of goods or articles
of manufacture to such establishment, through contract
labour of who supples contract labour for any work of the
establishment and includes a sub-contractor.
“Establishment”, under Section 2(e), means any office of
department of government of a local authority, or any place
where any industry, trade, business, manufacture or
occupation is carried on. “Principal employer”, under
Section 2(g), means, in relation to any office or department
of the Government or a local authority, as the case may be
may specify in this behalf; and in a factory, it means the
owner or occupier of the factory and where a person has been
named as the manager of the factory under the Factories Act,
1948, the person so named; in a mine, it means the owner or
agent of the mine and where a person has been named as the
manager of the mine, the person so named; and in any other
establishment, any person responsible for the supervision
and control of the establishment, is the principal employer.
“Workman”, under Section 2 (i), means any person employed in
or in connection with the work of any establishment to do
any skilled, semi-skilled or unskilled, manual, supervisory,
technical or clerical work for hire or reward, whether the
terms of employment be express or implied, but does not
include any such person categorised in clauses (a) to (e)
which are not relevant for the purpose of this case.
Every principal employer of an establishment under the
Act is enjoined under Section 7 to apply for registration
and have it registered thereunder. The registration is
subject to the revocation under Section 8 on fulfilment of
certain conditions enumerated therein. The effect of non-
registration is enumerated in Section 9 in the mandatory
language that no principal employer shall employ contract
labour in the establishment af ter the specified period.
Section 12 enjoins similar obligations on the contractor for
registration, with mandatory language, that from the
appropriate date, no contractor to whom the Act applies,
hall undertake or execute any work through contract labour
except under and in accordance with the licence issued in
that behalf by the licensing officer.
Licence is grated under Section 13 and revocation,
suspension and amendment thereof have been provided, in
Section 14 with which we are not concerned in this case. The
welfare measures mandated in Chapter V be complied with by
every establishment. Under Section 21, every principal
employer shall nominate his representative to be present at
the time of disbursement of wages by the contractor and the
contractor should be responsible for payment of wages to
every such workman. Representative of the principal employer
should ensure and certify that wages was paid in the
prescribed manner. In case of default committed by the
contractor in paying wages within the prescribed period or
for short payment , the principal employer period or for
short payment of wages in full or the unpaid balance due, as
the case may be, to the contract labour employed by the
recover the amount so paid from the contractor either by
deduction form any amount payable to the contractor under
any contract or as a debt payable by the contractor.
Section 10 prohibits employment of contract labour
with a non obstante clause. The appropriate Government,
after consultation with the Central Advisory Board or, as
the case may be, State Board Prohibit, by notification
published in the official Gazette, employment of contract
labour in any establishment. Before issue of any such
notification, the appropriate Government is enjoined to have
regard to the conditions of work and benefits provided for
the contract labour in the establishment and other relevant
factors, such as -(a) whether the process, operation or
other work is incidental to, or necessary for the industry,
trade, business, manufacture or occupation that is carried
on in the establishment; (b) whether it is of perennial
nature, that is to say, it is of sufficient duration having
regard to the nature of industry, trade, business,
manufacture of occupation carried on in that establishment;
(c) whether it is done ordinarily through regular workmen in
that establishment or an establishment similar thereto; and
(d) whether it is sufficient to employ considerable number
of whole-time workmen. Section 20 makes it mandatory to
provide the amenities of welfare and health facilities
enjoined in Sections 16 and 19. The expenses incurred in
that behalf may be recovered, by the principal employer,
from the contractor. The penalty for non-compliance is
provide in Sections 23 and 24 of the Act. Offences by
companies are dealt with under Section 25. For the
prosecution of non-cognisable offences, complaint is to be
laid with previous sanction of the Inspector in writing.
Section 27 prescribes limitation for laying prosecution.
Rules have been prescribed in that behalf for effective
enforcement of the Act. Forms and terms and conditions of
licence have been prescribed in Rules 21 to 25. Chapter V
of the Central Rules deals with welfare and health of the
contract labour. Chapter VI deals with payment of wages to
the workmen and the manner of payment has also been provided
therein. Form III referred to in Rule 18 (3) envisages,
among others, name and address of the contractor, nature of
work in which contract labour is to be employed on any day,
maximum number of contract labour to be employed on any
date, probable duration of employment of contract labour
etc. The licence issued in Form IV under Rule 21(1)
indicates the particulars envisaged in Forms III. Form XIII
under Rule 75 requires information as to the list of workmen
employed by the contractor and also to be specified, the
name and surname of the workmen, Sl. No., age and sex,
father’s/husband’s name, nature of employment, designation,
permanent home address of the workmen, date of commencement
of employment, signature/thumb impression of workmen, date
of termination. Certificate of completion of the work has
been provided in form XV as per Rule 77, Forms XVII as per
Rule 78 (1) (a) (i) is Register of wages and provides the
particulars, apart from other details, number of days
worked, units of work done, daily-rate of wages/piece rate
etc. Register of wages-cum-Muster Roll is prescribed in Form
XVIII referred to in Rule 78 (i) (a) (i) and requires
details in particular as to daily attendance, units worked,
designation/nature of work, total attendance, units of work
done, overtime wages etc.
It would thus be seen that before the Central or State
Advisory Board advises the appropriate Government under
Section 10(1) on the issue whether or not to abolish the
contractor labour system, it has before it all the relevant
factual material and the appropriate Government after the
receipt and consideration of the recommendations and the
material and then takes decision.
The pivotal question for consideration is : on
abolition of the contract labour by publication of a
notification in the Gazette under sub-section (1) of Section
10, what would be the consequences ? It is seen that so long
as the contract labour system continues, the principal
employer is enjoined to ensure payment of wages to the
contract labour and to provide all other amenities envisaged
under the Act and the Rules including provisions for food,
potable water, health and safety and failure thereof visits
with penal consequences.
The 42nd Constitution (Amendment) Act, 1976, brought
explicitly in the Preamble socialist and secular concepts in
sovereign democratic republic of Bharat with effect form
January 3,1977. The Preamble was held as part of
Constitution in His Holiness Kesavananda Bharati
Sripadagalavaru vs. State of Kerala [1973 Supp. SCR 1]. The
provisions of the Constitution including Fundamental Rights
are alterable but the result thereof should be consistent
with the basic foundation and the basic structure of the
Constitution. Republican and democratic form of Government,
secular character of the Constitution, separation of powers,
dignity and freedom to the individual are basic features and
foundations easily discernible, not only from the Preamble
but the whole scheme of the Constitution. In S.R. Bommai vs.
Union of India [(1994) 3 SCC 1], it was held that Preamble
of the Constitution is the basic feature. Either prior to
42nd Constitution (Amendmet) Act, or thereafter, though the
word “socialist” was not expressly brought out separately in
the main parts of the Constitution, i.e., in the Chapters on
Fundamental Rights or the Directive Principles, its seed-
beds are right to participation in public offices, right to
seek consideration for appointment to an office or post;
right to life and right to equality which would amplify the
roots of socialism in democratic form of Government; right
to equality of status and of opportunity, right to equal
access to public places and right to freedoms, protective
discrimination, abolition of untouchability, its practice in
any form an constitutional offence, as guaranteed in Part
III & IV i.e., Fundamental Rights and Directive Principles
which to every citizen are Fundamental Rights. In Minerva
Mills Ltd. & Ors. vs. Union of India & Ors. [(1981 (1) SCR
206 = AIR 1980 SC 1789], the Constitution Bench had held
that the Fundamental Rights and the Directive Principles are
two wheels of the chariot in establishing the egalitarian
social order. Right to life enshrined in Article 21 means
something more than survival of animal existence. It would
include the right to live with human dignity [vide Francis
Coralie Mullin vs. The Administrator, Union Territory of
Delhi & Ors. (AIR 1981 SC 746 para 3); Olga Tellis vs.
Bombay Municipal Corporation vs. D.T.C. Mazdoor Congress
[AIR 1991 SC 101 para 223,234 and 259 = (1991) supp. 1 SCC
600]. Right to means of livelihood and the right to dignity,
right to health, right to potable water, right to pollution
free environment and right to life. Social justice has been
held to be Fundamental right in consumer Eduction and
Research Centre vs. Union of India [(1995) 3 SCC 42 = 1995
(1) SCALE 354 at 375]. The Directive Principles in our
Constitution are fore-runners of the U.N.O. Convention on
Right to Development as inalienable human right and every
persons and all people are entitled to participate in,
contribute to and enjoy economic, social cultural and
political development in which all human right, fundamental
freedoms would be fully realised. It is the responsibility
of the State as well as the individuals, singly and
collectively, for the development taking into account the
need for fuller responsibility for the human rights,
fundamental freedoms as well as the duties to the community
which alone can ensure free and complete fulfilment of the
human being. They promote and protect an appropriate social
and economic order in democracy for development. The State
should provide facilities and opportunities to ensure
development and to eliminate all obstacles to development by
appropriate economic and social reforms so as to eradicate
all social injustice. These principles are imbedded, as
stated earlier, as integral part of our Constitution in the
Directive Principles. Therefore , the Directive Principles
now stand elevated to inelienable fundamental human rights.
Even they are justiciable by themselves. Social and economic
democracy is the foundation for stable political democracy.
To make them a way of life in the Indian polity, law as a
social engineer, is to create just social order, remove the
inequalities in social and economic life and socio-economic
disabilities with which people are languishing; and to
require positive opportunities and facilities as individuals
and groups of persons for development of human personality
in our civilised democratic set up so that every individual
would strive constantly to rise t higher levels. Dr.
Ambedkar, in his closing speech in the Constituent Assembly
on November 25, 1949, had lucidly elucidated the meaning of
social and political democracy. He stated that it means a
way of life which recognised liberty, equality and
franternity as the principles of life. They form an integral
union. One cannot divorce from the other; otherwise it would
defeat the very purpose of democracy. Without equality,
liberty would produce supremacy of the few over the many
equality without liberty would kill the initiative to
improve the individual`s excellence, political equality
without socio-economic equality would run the rusk of
democratic institutions to suffer a set back. Therefore, for
establishment of just social order in which social and
economic democracy would be a way of life inequalities in
income should be removed and every endeavour be made to
eliminate inequalities in status through the rule of law.
“Socialism” brought into the preamble and its sweep
elaborately was considered by this Court in several
judgments. It was held that the meaning of the word
“socialism” in the Preamble of the Constitution was
expressly brought in the Constitution to establish an
egalitarian social order through rule of law as its basis
structure. In Minerva Mills Ltd. case, the Constitution
Bench had considered the meaning of the word “socialism” to
crystalise a socialistic state securing to its people
socio-economic justice by interplay of the Fundamental
rights and the Directive Principles. In D.S. Nakara & Ors.
v. Union of India [(1983) 2 SCR 165], another Constitution
Bench had held that the democratic socialism achieves socio-
economic revolution to end poverty, ignorance, disease and
inequality of opportunity. The basic framework of socialism
was held to provide security from cradle to grave. The less
equipped person shall be assured to decent minimum standard
of life to prevent exploitation in any form, equitable
distribution of national cake and to push the disadvantaged
to the upper ladder of life. It was further held that the
Preamble directs the centers of power, the Legislative,
Executive and Judiciary, to strive to shift up from a wholly
feudal exploited slave society to a vibrant, throbbing
socialist welfare society which is a long march; but during
the journey to the fulfilment of goal, every State action,
whenever taken, must be directed and must be so interpreted
as to take the society towards that goal. Dr. V.K.R.V Rao,
one of the eminent economists of India in his “Indian
Socialism – retrospect and prospect” has stated that
equitable distribution of the income and maximisation of the
production is the object of socialism under the Constitution
to solve the problems of umemployment, low income and mass
poverty and to bring about a significant improvement in the
national standard of living. he also stated that to bring
about socialism, deliberate and purposive action on the part
of the State, in regard to production as sell as
distribution and the necessary savings, investment, use of
human skills and use of science and technology should be
brought about. Changes in property relations, taxation,
public expenditure, education and the social services are
necessary to make a socialist State under the Constitution,
a reality. It must also bring about, apart from distribution
of income, full employment as also increase in the
production. In State of Karnataka v. Shri Ranganatha Reddy &
Anr. [(1978) 1 SCR 641], a Bench of nine judges of this
Court, considering the nationalisation of the contract
carriages, had held that the aim of socialism is the
distribution of the material resources of the community in
such a way as to subserve the commonhood. The principle
embodied in Article 39(b) of the Constitution is one of the
essential directives to bring about the distribution of the
material resources. It would give full play to the
distributive justice. It fulfills the basic purpose of re-
structuring the economic order. Article 39(b), therefore,
has a social mission. it embraces the entire material
resources of the community. Its task is to distribute such
resources. Its goal is to undertake distribution as best to
subserve the common good. In Sanjeev Coke Manufacturing Co.
v. Bharat Cooking Coal Ltd. & Anr. [(1983) 1 SCR 1000],
another Constitution Bench interpreted the word “socialism”
and Article 39(b) of the Constitution and had held that the
broad egalitarian principle of economic justice was implicit
in every Directive Principle. The law was designed to
promote broader egalitarian social goals to do economic
justice for all. The object of nationalisation of mining was
to distribute nation’s resources. In State of Tamil Nadu
etc. v. L. Abu Kavur Bai & Ors. etc. [(1984) 1 SCR 725], the
same interpretation was given by another Constitution Bench
upholding nationalisation of State Carriages and Contract
Carriages (Acquisition) Act. Therefore, all State actions
should be such to make socio-economic democracy with
liberty, equality and fraternity, a reality to all the
people through democratic socialism under the rule of law.
In Consumer Education & Research Centre & Ors. v. Union
of India & Ors. [(1995) 3 SCC 42], a Bench of three Judges
(to which one of us, K. Ramaswamy, J., was a member) had to
consider whether right to health of workers in the Asbestos
industries is a fundamental right and whether the management
was bound to provide the same? In that context, considering
right to life under Article 21, its meaning, scope and
content, this Court had held that the jurisprudence of
personhood or philosophy of the right to life envisaged
under Article 21 enlarges its sweep to encompass human
personality in its full blossom with invigorated health
which is a wealth to the workman to earn his livelihood, to
sustain the dignity of person and to live a life with
dignity and equality. The expression “life” assured in
Article 21, does not connote mere animal existence or
continued drudgery through life. It has a much wider meaning
which includes right to livelihood, better standard of
living, hygienic conditions in the workplace and leisure.
Right to health and medical care to protect health and
vigour, while in service or after retirement, was held a
fundamental right of a worker under Article 21, read with
Articles 39(e), 41,43,48 – A and all related constitutional
provisions and fundamental human rights to make the life of
the workman meaningful and purposeful with dignity of
person. The right to health of a worker is an integral facet
of meaningful right to life, to have not only a meaningful
existence but also robust health and vigour without which
the worker would lead a life of misery. Lack of health
denudes him of his livelihood. Compelling economic necessity
to work in an industry exposed to health hazards, due to
indigence for bread-winning for himself and his dependents,
should not be at the cost of the health and vigour of the
workman.
The Preamble and Article 38 of the Constitution
envision social justice as the arch to ensure life to be
meaningful and livable with human dignity. Jurisprudence is
the eye of law giving an insight into the environment of
which it is the expression. It relates the law to the spirit
of the time and kames it richer. Law is the ultimate aim of
every civilised society, as a key system in a given era, to
meet the needs and demands of its time. Justice, according
to law, comprehends social urge and commitment. The
Constitution commands justice, liberty, equality and
fraternity as supreme values to usher the egalitarian
social, economic and political democracy. Social justice,
equality and dignity of persons are cornerstones of social
democracy. The concept of “social justice” which the
Constitution of India engrafted, consists of diverse
principles essential for the orderly growth and development
of personality of every citizen. “Social justice” is thus an
integral part of justice in the generic sense. Justice is
the genus, of which social justice is one of its species.
Social justice is a dynamic device to mitigate the
sufferings of the poor, weak, dalits, tribals and deprived
sections of the society and to elevate them to the level of
equality to live a life with dignity of person. Social
justice is not a simple or single idea of a society but is
an essential part of complex social change to relive the
poor etc. From handicaps, penury to ward off distress and to
make their life livable, for greater good of the society at
large. In other words, the aim of social justice is to
attain substantial degree of social, economic and political
equality, which is the legitimate expectation and
constitutional goal. Social security, just and humane
conditions of work and leisure to workman are part of his
meaningful right to life and to achieve self-expression of
his personality and to enjoy the life with dignity. The
State should provide facility and opportunities to enable
them to reach at least minimum standard of health, economic
security and civilised living while sharing according to
their capacity, social and cultural heritage.
In a developing society like ours, steeped with
unbridgeable and ever-widening gaps of inequality in status
and of opportunity, law is a catalyst, rubicon to the poor
etc, to reach the ladder of social justice. What is due
cannot be ascertained by an absolute standard which keeps
changing, depending upon the time, place and circumstance.
The constitutional concern of social justice as an elastic
continuous process is to accord justice to all sections of
the society by providing facilities and opportunities to
remove handicaps and disabilities with which the poor, the
workmen etc, are languishing and to secure dignity of their
person. The Constitution, therefore, mandates the State to
accord justice to all members of the society in all facets
of human activity. The concept of social justice embads
equality to flavour and enliven the practical content of
life. Social justice and equality are complementary to each
other so that both should maintain their vitality. Rule of
law, therefore, is a potent instrument of social justice to
bring about equality in results. it was accordingly held
that right to social justice and right to health were held
to be Fundamental Rights. The management was directed to
provide health insurance during service and at least 15
years after retirement and periodical tests protecting the
health of the workmen.
In LIC of India & Anr. v. Consumer Education & Research
Centre & Ors. [(1995) 5 SCC 482], considering the Life
Insurance Corporation’s right to fix the rates of premium,
this court had held that the authorities or private persons
or industry are bound by the directives contained in Part IV
and the Fundamental Rights in Part III and the Preamble of
the Constitution. The right to carry on trade is subject to
the directives contained in the Constitution, the Universal
Declaration of Human Rights, European Convention of Social,
Economic and Cultural Rights and the Convention on Right to
Development for Social Economic Justice. Social security is
a facet of socio-economic justice to the people and a means
to livelihood. In Murlidhar Dayandeo Kesekar V. Vishwanath
Pandu Barde & Anr.[1995 supp (2) SCC 549] (to which two of
us, K. Ramasway, and B.L. Hansaria JJ., were members), the
question arose; whether the alienation of the lands assigned
to Scheduled Tribes was valid in law ? In that context
considering the Preamble, the Directive Principles and the
Fundamental Rights including the right to life, this court
had held that economic empowerment and social justice are
Fundamental Rights to the tribes. The basic aim to the
welfare State is the attainment of substantial degree of
social, economic and political equalities and to achieve
self-expression in his work as a citizen, leisure and social
justice. The distinguishing characteristic of the welfare
State is the assumption by community acting through the
State and as its responsibilities to provide the means,
whereby all its members can reach minimum standard of
economic security, civilised living, capacity to secure
social status and culture to keep good health. The welfare
State, therefore, should take positive measure to assist the
community at large to act in collective responsibility
towards its member and should take positive measure to
assist them to achieve the above. It was, therefore, held
thus:
“Article 21 of the Constitution
assures right to life. To make
right to life meaningful and
effective, this court put up
expansive interpretation and
brought within its ambit right to
education, health, speedy trial,
equal wages for equal work as
fundamental rights. Articles 14, 15
and 16 prohibit discrimination and
accord equality. The Preamble to
the Constitution as a socialist
republic visualises to remove
economic inequalities and to
provide facilities and
opportunities for decent standard
of living and to protect the
economic interest of the weaker
segments of the society, in
particular, Scheduled Castes i.e.
Dalits and the Scheduled Tries i.e.
Tribes and to protect them from
“all forms of exploitations”. Many
a day have come and gone after
26.1.1950 but no leaf is turned in
the lives of the poor and the gap
between the rich and the poor is
gradually widening on the brink of
being unbridgeable.
Providing adequate means of
livelihood for all the citizens and
distribution of the material
resources of the community for
common welfare, enable the poor,
the Dalits and Tribes to fulfill
the basic needs to bring about a
fundamental change in the structure
of the Indian society which was
divided by erecting impregnable
walls of separation between the
people on grounds of caste, sub-
caste, creed, religion, race,
language and sex. Equality of
opportunity and State thereby would
become the bedrocks for social
integration. Economic empowerment
thereby is the foundation of make
equality of status, dignity to
person and equal opportunity a
truism. The core of the commitment
of the Constitution of the social
revolution through rule of law lies
in effectuation of the fundamental
right directive principles as
supplementary and complementary to
each other. The Preamble,
fundamental rights and directive
principles – the trinity – are the
conscience of the Constitution.
Political democracy has to be
stable. Socio-economic democracy
must take strong roots and should
become a way of life. The State,
therefore, is enjoined to provide
adequate means of livelihood to the
poor, weaker sections of the
society, the Dalits and Tribes and
to distribute material resources of
the community to them for common
welfare etc”.
It was accordingly held that right to economic
empowerment is a fundamental right. The alienation of
assigned land without permission of competent authority was
held void.
In R. Chandevarappa and Ors. v. State of Karnataka and
Ors. [(1995) 6 SCC 309] (to which two of us, K. Ramaswamy
and B.L. Hansaria, JJ., were members) this Court was to
consider whether the alienation of Government lands allotted
to the Scheduled Castes was in violation of the
Constitutional objectives under Article 39(b) and 46. It
was held that economic empowerment to the Dalits, Tribes and
the poor as a part of distributive justice is a Fundamental
Right; assignment of the land to them under Article 39(b)
was to provide socio-economic justice to the Scheduled
Castes. The alienation of the land, therefore, was held to
be in violation of the Constitutional objectives. It was
held thus:
“In fact, the cumulative effect of
social and economic legislation is
to specify the basic structure.
Moreover, the social system shapes
the wants and aspirations and its
citizens come to have. It
determines in part the sort of
persons they want to be as well as
the sort of persons they are. Thus
an economic system is not only an
institutional device for satisfying
existing wants and needs but a way
of creating and fashioning wants in
the future. The economic
empowerment, therefore, to the
poor, dalits and tribes as an
integral constitutional scheme of
socio-economic democracy is a way
of life of political democracy.
Economic empowerment is, therefore,
a basic human right and a
fundamental right as part of right
to live, equality and of status and
dignity to the poor, weaker
sections, dalits and tribes.
The prohibition from alienation is
to effectuate the constitutional
policy of economic empowerment
under Article 14, 21, 38, 39 and 46
read with the Preamble of the
Constitution. Accordingly refusal
to permit alienation is to
effectuate the constitutional
policy. the alienation was declared
to be void under sections 23 of the
Contract Act being violative of the
constitutional scheme of economic
empowerment of accord equality of
status, dignity of persons and
economic empowerment.”
It was further held that providing adequate means of
livelihood for all the citizens and the distribution of the
material resources of the community for common welfare,
enable the poor, the dalits and the tribes, to fulfill the
basic needs to bring about the fundamental change in the
structure of the Indian society. Equality of opportunity and
status would thereby become the bedrocks for social
integration. Economic empowerment is, therefore, a basic
human right and fundamental right as apart of right to life
to make political democracy stable. Socio-economic democracy
must take strong route and become a way of life. The state,
therefore, is enjoined to provide adequate means of
livelihood to the poor, weaker sections of the society, the
dalits and the tribes and distribute material resources of
the community to them for common welfare. Justice is an
attribute of human conduct and rule of law is indispensable
foundation to establish socio-economic justice. The doctrine
of political economy must include interpretation for the
public good which is based on justice that would guide the
people when questions of economic and social policy are
under consideration. In Peerless General Finance and
Investment Co. Ltd. & Anr. v. Reserve Bank of India [(1992)
2 SCC 343 at 389 para 55], this court had held that
stability of the political democracy hinges upon socio-
economic democracy. Right to development is one of the
important facets of basic human rights. Right to self-
interest is inherent in right to life. Mahatma Gandhiji, the
Father of Nation said that “every human being has a right to
live and, therefore, to find the wherewithal to feed himself
and where necessary to clothe and house himself”. In D.K.
Yadav v. J.M.A. Industries Ltd. [(1993) 3 SCC 259], the
question was whether the workman for absence in service for
7 days can be removed without an enquiry. In that context a
bench of three judges had held thus:
“Article 21 clubs life with
liberty, dignity of person with
means of livelihood without which
the glorious contents of dignity of
person would be reduced to animal
existence. When right to life is
interpreted in the light of the
colour and content of procedure
established by law must be in
conformity with the minimum
fairness and processual justice, it
would relieve legislative
callousness despising opportunity
of being heard and fair
opportunities of defence. Article
14 has pervasive processual potency
and versatile quality, equalitarian
in its soul and allergic to
discriminatory dictates. Equality
is the antithesis of
arbitrariness”.
In Dalmia Cement (Bharat) Ltd. & Anr. vs. Union of
India & Ors. etc. [JT 1996 (4) SC 555], a Bench of three
judges (to which one of us, K. Ramaswamy, J., was a member)
was to consider the constitutionality of Jute Packing
Material Act, 1987. The law was made to protect the
agriculturists cultivating jute and jute products. In that
context if was held thus:
“thus agriculturists have
fundamental rights to social
justice and economic empowerment.
The Preamble of the Constitution is
the epitome of the basic structure
built in the Constitution
guaranteeing justice – social,
economic and political – equality
of status and of opportunity with
dignity of person and fraternity.
To establish an egalitarian social
order, the trinity, the Preamble,
the Fundamental Rights in Part III
and Directive Principles of State
Policy (for short, ‘Directives’) in
Chapter IV of the Constitution
delineated the socio-economic
justice. The word justice envision
in the Preamble is used in broad
spectrum to harmonise individual
right with the general welfare of
the society. The Constitution is
the supreme law. The purpose of law
is realisation of justice whose
content and scope vary depending
upon the prevailing social
environment. Every social and
economic change causes change in
the law. In a democracy governed by
rule of law, it is not possible to
change the legal basis of socio-
economic life of the community
without bringing about
corresponding change in the law. In
interpretation of the Constitution
and the law, endeavour needs to be
made to harmonise the individual
interest with the paramount
interest of the community keeping
pace with the realities of every
changing social and economic life
of the community envisaged in the
Constitution. Justice in the
Preamble implies equality
consistent with the competing
demands between distributive
justice with those of cumulative
justice. Justice aims to promote
the general well-being of the
community as well as individual’s
excellence. The principal end of
society is to protect the enjoyment
of the rights of the individuals
subject to social order, well-
being and morality. Establishment
of priorities of liberties is a
political judgment.
Law is the foundation on which the
potential of the society stands.
Law is an instrument for society
stands. Law is an instrument for
social change as also defender for
social change.
Social justice is the comprehensive
form to remove social imbalances by
law harmonising the rival claims or
the interests of different groups
and/or sections in the social
structure or individuals by means
of which alone it would be possible
to build up a welfare State. The
idea of economic justice is to make
equality of status meaningful and
the life worth living at its best
removing inequality of opportunity
and of status – social, economic
and political.
Law is the ultimate aim of every
civilised society, as a key system
in a given era, to meet the needs
and demands of its time. Justice,
according to law, comprehends
social urge and commitment.
Justice, liberty, equality and
fraternity are supreme
constitutional values to establish
the egalitarian social, economic
and political democracy, Social
justice, equality and dignity of
person are cornerstones of social
democracy. Social justice consist
of diverse principles essential for
the orderly growth and development
of personality of every citizen.
Justice is its facet, a dynamic
device to mitigate the sufferings
of the disadvantaged and to
eliminate handicaps so as to
elevate them to the level of
equality to live life with dignity
of person. Social justice is not a
simple or single idea of a society
but it an essential part of complex
social change to relieve the poor
etc. From handicaps, penury, to
ward the off from distress and to
make their lives livable for
greater good of the society at
large. Social justice, therefore,
gives substantial degree of social,
economic and political equality,
which is the constitutional right
of every citizen. In para 19, it
was further elaborated that social
justice is one of the disciplines
of justice which relates to the
society. What is due cannot be
ascertained by absolute standard
which keeps changing depending upon
the time, place and circumstances.
The constitutional concern of
social justice, as an elastic
continuous process, is to transform
and accord justice to all sections
of the society by providing
facilities and opportunities to
remove handicaps and disabilities
with which the poor etc, are
languishing. It aims to secure
dignity of their person. It is the
duty of the State of accord justice
to all members of the society in
all facts of human activity. The
concept of social justice embeds
equality to flavour and enlivens
practical content of life. Social
justice and equality are
complementary to each other so that
both should maintain their
vitality. Rule of law, therefore,
is a potent instrument of social
justice to bring about equality in
result.
Social and economic justice in the
context of our Indian Constitution
must, therefore, be understood in a
comprehensive sense go remove every
inequality to all citizens in
social as well as economic
activities and in every part of
life. Economic justice means the
abolition of those economic
conditions which ultimately result
in the inequality of economic
values between men. It means to
establish a democratic way of life
built upon socio-economic structure
of the society to make the rule of
law dynamic.
The Fundamental Rights and the
Directive are, therefore,
harmoniously be interpreted to make
the law a social engineer to
provide flesh and blood to the dry
bones of law. The Directives would
serve the Court as a beacon light
to interpretation. Fundamental
Rights are rightful means to the
end, viz., Social and economic
justices provided in the Directives
and the Preamble. The Fundamental
Rights and the Directives establish
the trinity of equality, liberty
and fraternity in an egalitarian
social order and prevent
exploitation.
Social justice, therefore, forms
the basis of progressive stability
in the society and human progress.
Economic justice means abolishing
such economic conditions which
remove the inequality of economic
value between man and man,
concentration of wealth and means
of production in the hands of a few
and are detrimental to the vast.
Law, therefore, must seek to serve
as a flexible instrument of socio-
economic adjustment to bring about
peaceful socio-economic revolution
under rule of law. The
Constitution, the fundamental
supreme lex distributes the
sovereign power between the
Executive, the Legislature and the
Judiciary. The Court, therefore,
must strive to give harmonious
interpretation to propel forward
march and progress towards
establishing an egalitarian social
order.”
The validity of the Act was accordingly upheld.
It is already seen that in D.T.C’s case (supra), this
Court had held that right to life to a workman would include
right to continue in permanent employment which is not a
bounty of the employer nor can its survival be at the
volition and mercy of the employer. Income is the foundation
to enjoy many Fundamental right and when work is the source
of income, the right to work would become as such a
fundamental right. Fundamental Right can ill-afford to be
consigned to the limbo of undefined premises and uncertain
application. In Bandhu Mukti Morcha vs. Union of India
[(1984) 3 SCC 161], this Court had held that the right to
life with human dignity enshrined in Article 21 derives its
life breath from the Directive Principles of State Policy
and that opportunities and facilities should be provided to
the people. In Olga Tellis’s case, this court had held that
the right to livelihood is an important facet of the right
to life . Deprivation of the means of livelihood would
denude the life itself. In C.E.S.C Ltd. & Ors. vs. S.C. Bose
& Ors. [(1992) 1 SCC 441], it was held that the right to
social and economic justice is a fundamental right. Right to
health of a worker is a fundamental right. The right to live
with human dignity at least with minimum sustenance and
shelter and all those rights and aspects of life which would
o to make a man’s life complete and worth living, would
form part of the right to life. Enjoyment of life and its
attainment – social, cultural and intellectual – without
which life cannot be meaningful, would embrace the
protection and preservation of life guaranteed by
Article 21. In life Insurances Corporation case, a Bench of
two Judge had held that right to economic equality is a
fundamental right. In Dalmia Cement Bharat Ltd. case, right
to economic justice was held to be a fundamental right.
Right to shelter was held to be a fundamental right in Olga
Tellis’s case; P.G. Gupta vs. State of Gujarat & ors,
[(1995) Supp.(2) SCC 182]; M/s. Shantisar Builders vs.
Narayan Khimlal Totame & Ors. [(1990) 1 SCC 520]; Chameli
Singh & ors. vs. State of U.P. & Anr. [(1996) 2 SCC 549]
etc.
It would, thus, be seen that all essential facilities
and opportunities to the poor people are fundamental means
to development, to live with minimum comforts, food,
shelter, clothing and health. Due to economic constraints,
though right to work was not declared as a fundamental
right, right to work of workman, lower class, middle class
and poor people is means to development and source to earn
livelihood. thought, right to employment cannot, as a right,
be claimed but after the appointment to a post or an office,
be it under the State, its agency instrumentality, jurisdic
person or private interpreneur it is required to be dealt
with as per public element and to act in public interest
assuring equality, which is a genus of Article 14 and all
other concomitant rights emanating therefrom are species to
make their right to life and dignity of person real and
meaningful. The democracy offers to everyone as doer, an
exerter and developer and enjoyer of his human capacities,
as stated by Justice K.K. Mathew, in his “The Right to
Equality and Property under the Indian Constitution” at page
47-48. These exercises of human capacity require access to
the material resources and also continuous and sufficient
intake of material means to maintain human energy. Lack of
access to the material resources is an impediment to the
development of human personality. This impediment, as a lack
of access to means of labour, if we take labour i its
broadest sense of human resources, requires removal only
under the rule of law. To the workmen, right to employment
is the property, source of livelihood and dignity of person
an means of enjoy life, health and leisure. Equality, as a
principle of justice, governs leisure, the distribution of
material resources including right to employment. Private
property ownership has always required special
justifications and qualifications to reconcile the
institution with the public interest. It requires to thrive
and, at the same time, be responsive to social weal and
welfare. St. Thomas Acquinas, in his “Selected Political
Writings” (1948 Edn.) at page 169, has stated that the
private rights and public needs are to be balanced to meet
the public interest “the common possession of things is to
be attributed to natural law, not in the sense that natural
law decrees that all things are to be held in common and
that there is to be no private possession, but in the sense
that there is no distinction of property on the grounds of
natural law, but only by human agreement, and this pertains
to positive law, as we have already shown. Thus, private
property is not opposed to natural law, but is an addition
to it, devised by human reasons. If, however, there is such
urgent and evident necessity that there is clearly an
immediate need to necessary sustenance, if, for example, a
person is in immediate danger of physical privation, and
there is no other way of satisfying his need, then he may
take what is necessary from another person’s goods, either
openly or by stealth. Nor is this strictly speaking fraud or
robbery.” Property is a social institution based upon an
economic need in a society organised through division of
labour, as propounded by Dean Rosco Pound in his “An
Introduction to Philosophy of law” (1954 Edn.) page 125, at
129. M.R. Cohen in his “Property and Sovereignty” [13
Cornell Law Quarterly page 8 at 12 had stated that ” the
principle of freedom of personality certainly cannot justify
a legal order wherein a few can, by virtue of their legal
monopoly over necessities, compel others to work under
degrading and brutalizing condition.” If there is no
property or of one does not derive fruits and means of one’s
labour, no one would have any incentive to labour in the
broader sense, Social progress receives set back without
equality of status, fraternity would not be maximised.
Edward Kent in his “Property, Power and Authority”, Prof.
Herald Laski in his “Congress Socialist” dated April 11,
1936, had stated that “those who know the normal life of the
poor will realise enough that without economic security,
liberty is not worth living”. Brooklyn Law Review page 541
at 547 has stated that “In modern translation, public
officers and others who promulgate polices designed to
increase unemployment or to deny or diminish benefits to the
poor are accountable for the consequences to free human
personality.” It would, thus, be clear that in a socialist
democracy governed by the rule of law, private property,
right of the citizen for development and his right to
employment and his entitlement for employment to the labour,
would all harmoneously be blended to serve larger social
interest and public purpose.
Mahatma Gandhiji, the Father of the Nation, in his book
“Socialism of my concept”, has said thus:
“To a people famishing and idle,
the only acceptable form in which
God can dare appear is work and
promise of food as wages. God
created man to work for his food,
and said that those who ate without
work were thieves. Eighty per cent
of India are compulsory thieves
half the year. Is it any wonder if
India has become one vast prison?”
Again, he stressed:
No one has ever suggested that
grinding pauperism can lead to
anything else than moral
degradation. Every human being has
a right to live and, therefore, to
find the wherewithal to feed
himself and, where necessary, to
clothe and society the securing of
one’s livelihood should be, and is
found to be the easiest thing in
the world. Indeed, the test of
orderliness in a country is not the
number of millionaires it owns, but
the absence of starvation among its
masses.
Working for economic equality means
abolishing the eternal conflict
between capital and labour. it
means the levelling down of the few
rich in whose hands is concentrated
the bulk of the nations’s wealth on
the one hand, and the levelling up
of the semi-staved, naked millions
of the other. A non-violent system
of Government is clearly an
impossibility so long as the wide
gulf between the rich and the
hungry millions persists. The
contrast between the palaces of new
Delhi and the miserable hovels of
the poor labouring class nearby,
cannot last tone day in free India
in which the poor will enjoy the
same power as the richest in the
land. A violent and bloody
revolution is a certainty one day,
unless there is voluntary
abdication of riches and the power
that riches give a sharing them for
the common good”.
Pandit Jawahar Lal Nehru, the architect of social and
economic planned democracy, in this “Independence and After
That” (Collection of Speeches 1946-49) Publication Division,
Government of India 1949 Edn, at page 28, had stated that
social equality in the widest sense and equality of
opportunity for every one, every man and woman must have the
opportunity to develop to the best of his or her ability.
However, Merit must come from ability and hard work and not
because of cast of birth or riches. Social equality would
develop the sense of fraternity among the members of a
social groups where each would consider the other as his
equal, no higher or lower. A society, which does not treat
each of its members as equals, forfeits its right to being
called a democracy. All are equal partners in the freedom.
Every one of our ninety four hundred million people must
have equal right to opportunities and blessings that freedom
of India has to offer. To bring freedom in a comprehensive
sense to the common man, material resources and opportunity
for appointment be made available to secure socio-economic
empowerment which would ensure justice and fullness of life
to workmen, i.e., every man and woman. In “Beyond Justice”
by Agnes Heller at page 80, the distribution of material
goods, he had stated on distributive justice thus:
“The distribution of material goods
had always been of concern in
images and theories of justice,
but, even when the issue was given
the highest importances, it was
subjected to and understood within
a general theory of justice, and
addressed within the framework of a
complete socio-political concept of
justice. As we have seen, in the
prophetic concept of justice the
misery of the poor called for
dividne retribution, since
alleviating misery was believed to
be a matter not of optional charity
but of moral duty, To neglect this
duty was to sin, to breach the
divine laws. Plato proposed the
abolition of private property for
the caste of guardians in order to
make the Republic as a whole just.
Aristotle, who coined the term
‘distributive justice’, recommended
a relative equality of wealth –
neither too much nor too little,
but ‘medium wealth’ – as a
condition of the good life of the
good citizen and the good city.
Even Roussseau., the most
egalitarian philosopher in respect
of distribution, subjected the
solution of this problems to the
general patterns of an socio-
political concept of justice.
Locke did not completely break with
this longstanding tradition either.
As we have seen, he contributed to
the emergence of the concept’
retributive justice’ rather than
‘distributive justice. However, he
had already presented a
sophisticated theory legitimizing
inequality in property owner ship,
a theory deriving property from
work. I have mentioned that Locke
did not support the idea ‘to each
according to his entitlement’, for
he but ‘entitlement’ into the ‘to
each category, whereas the
‘according to category was defined
by ‘work’ (mixing work and nature).
But Locke never claimed that
entitlement was the main issue, let
alone the only issue of justice.
Humane is undoubtedly the founding
father of that branch of socio –
political justice now called
‘distributive’. He even claimed
that property and property alone is
the subject matter of justice. He
asserted too that retribution
(negative sanctions) in the
suspension of justice for the sake
of social utility: ‘When any man,
vein in political society, renders
himself by his crimes, obnoxious of
the public, he is punished by the
law in his goods and person; that
is, the ordinary rules of justice
are, with regard to him suspended
for a moment.
Humane also deduced justice from
‘public utility’. Inequality in
property ownership is just because
it is useful. We can imagine two
cases – and extreme cases- where
property (inequality in property
ownership) qua justice loses its
social usefulness: the situation of
absolute abundance and the
situation of absolute scarcity. In
the former, property is useless,
redundant because, if all needs can
be satisfied, we are beyond
justice. In the latter situation
property rules are violable, thus
justice must be be suspended. Yet
we live in a situation of limited
abundance (or limited scarcity).
This is Humane the concept
‘justice’ reduces to the idea ‘to
reach according to his property
entitlement’; all other uses of the
notion ‘justice’ are seen as
relating to the ‘suspension of
justice’ ) although the term
‘equity’ can remain relevant in
these other contexts). Humane, an
extremely sincere man, did not
shirk from facing proposal alien to
his own. He stated, nature is so
liberal to mankind, that. were all
her presents equally divided among
the species, and improved by art
and industry, every individual
would enjoy all the necessaries,
and even most of the comforts of
life. It must also be confessed,
that, wherever we depart from this
equality, we rob the poor of more
satisfaction than we add to the
rich.”
Justice K.K. Mathew in his “Democracy Equality and
Freedom” at page 55 has, therefore, stated that the
singlemost important problem in constitutional law for years
to come in this court will be how to implement the Directive
Principles and at the same time give full play to the
Fundamental Right. It is only by implementing the Directive
Principle that distributive justice will be achieved in the
society. Justice, as Aristotle said, “is the bond of men in
society” and “States without justice” are, as St. Augustine
said, “robber-bands”.
In Keshvanand Bharti’s case, Jaganmohan Reddy, J. had
held that “what is emplicit in the Constitution is that
there is a duty one the courts to interpret the Constitution
and the laws to further the Directive Principles which under
Article 37 are fundamental in the governance of the
country”. The majority had held in favour of the way for the
implementation of the Directive Principles under rule of
law. Justice Palekar, in particular had laid emphasis on
social and economic justice to make fundamental Rights a
reality.
Coming to the meaning of “regulation” under the Act, in
Blacks law Dictionary (sixth edition) at page 1286 the word
“regulation” is defined as “the act of regulating; a rule or
order prescribed for management or government; a regulating
principle; a precept. Rule or order prescribed by superior
or competent authority relating to action of those under its
control”. In Corpus Juris Secunderon (Vol.76) at page 612,
the power to regulate carries with it full power or the
thing subject to regulation and in the absence of
restrictive words, the power must be regarded as plenary or
the interest of public. it has been held to contemplate or
employ the continued existence of the subject matter. In
“Craise on Statute Law” (7th Edition) at page 258, it is
stated that if the legislation enables something to be done,
it gives power at the same time “by necessary implication,
to do everything which is indispensable for the purpose of
carrying out the purposes in view”. In D.K.V. Prasada Rao &
Ors. vs. The Government of Andhra Pradesh represented by its
secretary, Home Department Secretariat Buildings, Andhra
Pradesh Hyderabad & Anr. [(1983) 2 AWR 344 – AIR 1984 AP], a
Division Bench of the Andhra Pradesh High Court, (to which
one of us, K. Ramaswamy, J., was a member) had to consider
the question elaborately whether the power to regulate
cinematograph Act and Andhra Pradesh Cinematograph
Regulation would include power to fix rates of admission
under the cinema/theaters. Though there was no specific
power under the Act or the Regulation to fix rates of
admission, it was held at page 360 that “power to regulate
would include power to fix the rate of admission into the
cinema/theaters”. Lord Justice hale of England about three
centuries ago in his treatise “De Portibus Moris” reported
in Harg law tracts 78 had stated that “when the private
property is affected with a public interest, it ceases to be
“juris privati” only and it becomes clothed with a public
interest when used in a manner to make it of public
consequence and affect the community at large; and so using
it, the owner grants to the public an interest in that use,
and must submit to be controlled by the public for common
good”. This Statement was quoted with approval by the
Supreme court of United States of America in 1876 in leading
judgment, munn vs the people of Illinois [94 US 115].
Justice whaite dealing with question whether the
legislature can fix the rates for storage of grains in
private warehouses by a statue of 1871 when its
interpretation had come up for consideration of right to
property and its enjoyment and of the public interest, it
was held that “under such circumstances it is difficult to
see why, if the common carrier or the miller, or the
ferrymen or the innkeeper or the wharfinger or the baker, or
the cartmen, or the chakney-coachman, pursues a public
employment and exercise “a sort of public office,” these
plaintiffs in error do not. They stand, to use again the
language of their counsel, in the very “gateway of
commerce,” and take toll from all who pass. Their business
“most certainly tends to be a common charge and has become a
thing of public interest and use.” Therein, there is a
specific observation which is apposite to the facts in this
case. It was held that the statute simply extends the law so
as to meet this new development of commercial progress.
There is no attempt to compel the owners to grant the public
an interest in their property, but the Act declares their
obligations, if they use it in the particular manner. It is
immaterial whether the plaintiffs therein had built their
warehouses and established their business before the
regulation was made. It was held that after, the regulation
has come into force, they are enjoined to abide by the
regulation to carry on the business. This Court had approved
the ratio in Prasadrao’s case; when it was followed by
Karnataka High Court against which an appeal came to be
filed and the power to regulate rates of admission into
cinema/theaters was upheld by this court.
In Horatio J. Olcott vs. County Board of Supervisors of
Fond Du Lac County [21 L. Ed. 382 at 388], the Supreme Court
of united states of America had held that whether the
railroad is a private or a public one, the ownership
thereof is not material that the owners may be private
company but they are compellable to permit the public to use
their works in the manner in which such work can be used. In
John D. Graham, Commissioner, Department of Public Welfare,
State of Arizona vs. Carmen Richardson etc. [29 L.Ed. 2nd
534], the question was whether the respondent alien in
Arizona will be denied of welfare benefits offending 14th
Amendment to the American Constitution. Interpreting 14th
Amendment, the Supreme court of united states of America had
held that the word “person” in the context of welfare
measures encompasses lawfully resident aliens as well as
citizen of the United States and both citizen and alien are
entitled to the equal protection of the laws of the state in
which they reside. The power to deny the welfare benefit was
negated by judicial pronouncement. In Grace Marsh vs. State
of Alabama [90 L.Ed. 265], when the appellant was
distributing pamphlets in privately owned colony, be was
convicted of the offence of trespass on albama Statute. On
writ of certiorary, the Supreme Court of United States of
America deciding the right to pass and repass and the right
of freedom of expression and equality under 14th amendment,
had held by majority that the corporate’s right to control
the inhabitants of the colony is subject to regulation but
the ownership does not always mean absolute denomination.
The more an owner, for his advantage, opens up his property
in use by public in general, the more do his right become
circumscribed by statutory and constitutional rights of
those who use it. The conviction was in violation of Ist and
14th Amendment. In Republic Aviation Corporation vs.
National Labour Relations Board [324 US 793 = 89 L.Ed.
1372], the owner of privately held bridges, ferries,
turnpikes and railroads etc. may operate them as freely as a
farmer does his farm, but when it operated privately to
benefit the public, their operation is essentially a public
function. It was subject to State regulation. The Supreme
court, therefore, had held that when the rights of the
private owners and the constitutional rights requires
interpretation, the balance has to be struck and the court
would, mindful of the Fact that the right to exercise
liberties safeguarded by the Constitution lies at the
foundation of free government by free men, in all cases
weigh the circumstances and appraise the reasons in support
of the regulations of the rights etc. It was accordingly
held that for interpretation of the rights, it is but the
duty of the Court to weigh the balance and to consider the
case in the dropback. In Georgia Railroad & Banking Co. vs.
James M. Smith [128 US 377 = 32 L.Ed. 174],
it was held that in the absence of any provision in the
charter, legislature has power to prescribe rates when the
property is put to public use and the statue was held to be
constitutional. German Aliance Insurance Co. vs. IKL Lews
[58 L.Ed. 1011 = 233 US 387], per majority it was held that
a business may be as far as affected with a public interest
as to permit legislative regulation of its rates and
charges, although no public trust is imposed upon the
property and although public way not have a legal right to
demand and receive service.
It is true that in Dena Nath’s case, a Bench of two
judges was to consider the question whether or not the
persons appointed as contract labour in violation of
section 7 and 12 of the Act should be deemed to be direct
employees of the principal employer. The Bench on literal
consideration of the provisions, had concluded that the act
merely regulates condition s of service of the workmen
employed by a contractor and engaged by the principal
employer. On abolition of such contract labour altogether by
the appropriate Government nether the Act nor the rules
provide that labour should be directly absorbed by the
principal employer. It was, therefore, concluded that the
High Court exercising the power under Article 226 of the
Constitution cannot give direction for absorption. True,
Court cannot enquire into and decide the question whether
employment of contract labour in any process operation or
any other work in establishment should be abolished or not
and it is for the appropriate Government to decide it. The
Act does not provide total abolition of the contract labour
system under the Act. The Act regulates contract labour
system to prevent exploitation of the contract labour. The
Preamble of the Act furnishes the key to its scope and
operation. The Act regulates not only employment of contract
labour in the establishment covered under the act and its
abolition in certain circumstances covered under section 10
(2) but also “matters connection therewith”. The phrase
“matters connected therewith” gives clue to the intention of
the Act. WE have already examined in detain the operation of
the provisions of the Act obviating the need to reiterate
the same once over. The enforcement of the provisions to
establish canteen in every establishment under Section 16 is
to supply food to the workmen at the subsidised rates as it
is a right to food, a basic human right. Similarly, the
provision in Section 17 to provide rest rooms to the workmen
is a right to leisure enshrined in Article 43 of the
Constitution. Supply of wholesome drinking water,
establishment of latrine and urinals as enjoined under
Section 18 are part of basic human right to health assured
under Article 39 and right to just and human conditions of
work assured under Article 42. All of them are fundamental
human rights to the workmen and are facets of right to life
guaranteed under Article 21. When the principal employer is
enjoined to ensure those rights and payment of wages while
the contract labour system is under regulation, the question
arises whether after abolition of the contract labour system
that workmen should be left in a lurch denuding them of the
means of livelihood and the enjoyment of the basic
fundamental rights provided while the contract labour system
is regulated under the Act? The Advisory Committee
constituted under section 10(1) requires to consider whether
the process, operation and other work is incidental to or
necessary for the industry,, trade, business, manufacture or
occupation that is carried on in the establishment, whether
it is of perennial nature, that is to say, whether it is
substantive duration having regard to the nature of
industry, trade, business, manufacture or occupation carried
on in that establishment, whether it is done ordinarily
through regular workmen in the establishment or an
establishment similar thereto, whether it is sufficient to
employ considerable number of whole time workmen. Upon
consideration of these facts and recommendation for
abolition was made by the advisory Board, the appropriate
Government examines the question and takes a decision in
that behalf. The explanation to Section 10 (2) provides that
when any process or operation or other work is of perennial
nature, the decision of the appropriate Government thereon
shall be final. It would thus give indication that on the
abolition of the contract labour system by publication of
the notification in the official Gazette, the necessary
concomitant is that the whole time workmen are required for
carrying on the process, operation or other work being done
in the industry, trade, business, manufacture or occupation
in that establishment. When the condition of the work which
is of perennial nature etc., as envisaged in sub-section (2)
of Section 10, thus are satisfied, the continuance of
contract labour stands prohibited and abolished. The
concomitant result would be that source of regular
employment became open.
What would be the consequence that ensure from
abolition is the question? It is true that we find no
express provision in the Act declaring the contract labour
working in the establishment of the principal employer in
the particular service to be the direct employees of the
principal employer. Does the Act intend to deny the workmen
to continue to work under the Act or does it intend to
denude him of the benefit or permanent employment and if so,
what would be the remedy available to him. The phrase
“matters connected therewith” in the Preamble would furnish
the consequence of abolition of contract labour. In this
behalf, the Gujarat Electricity Board case, attempted, by
interpretation, to fill in the gap but it also fell shout of
full play and got beset with insurmountable difficulties in
its working which were not brought to the attention of the
Bench. With due respect, such scheme is not within the
spirit of the Act. As seen, the object is to regulate the
contract labour so long as the contract labour is not
perennial. The labour is required to be paid the prescribed
wages and are provided with other welfare benefits envisaged
under the Act under direct supervision of the principal
employer. The violation visits with penal consequences.
Similarly, when the appropriate Government finds that the
employment is of perennial nature etc, contract system
stand abolished, thereby, it intended that if the workmen
were performing the duties of the post which were found to
be of perennial nature on par with regular service, they
also require to be regularised. The Act did not intend to
denude them of their sources of livelihood and means of
development, throwing them out from employment. as held
earlier, it is a socio-economic welfare legislation. Right
to socio-economic justice and empowerment are constitutional
rights. right to means of livelihood is also constitutional
right. Right to facilities and opportunities are only part
of and means of livelihood and resultant right to life,
leaving them in the lurch since prior to abolition, they
had the work and thereby earned livelihood. The Division
Bench in Dena Nath’s case has taken too narrow a view on
technical consideration without keeping at the back of the
mind the constitutional animations and the spirit of the
provisions and the object which the Act seeks to achieve.
The operation so the Act is structured on an unbuilt
procedure leaving no escape route. Abolition of contract
labour system ensures right to the workmen for
regularisation of them as employees in the establishment in
which they were hitherto working as contract labour through
the contractor. The contractor stands removed from the
regulation under the Act and direct relationship of
“employer and employee” is created between the principal
employer and workmen. Gujarat Electricity’s case, being of
the co-ordinate Bench, appears to have softened the rough
edges of Dena Nath’s radio. The object of the Act is to
prevent exploitation of labour. Section 7 and section 12
enjoin the principal employer and the contractor to register
under the Act, to supply the number of labour required by
the principal employer through the contractor; to regulate
their payment of wages and conditions of serve and to
provide welfare amenities, during subsistance of the
contract labour. The failure to get the principal employer
and the contractor registered under the Act visits with
penal consequences under the Act. The object, thereby, is to
ensure continuity of work to the workmen in strict
compliance of law. The conditions of the labour are not left
at the whim and fancy of the principal employer. He is bound
under the Act to regulate and ensure payment of the full
wages, and also to provide all the amenities enjoined under
Section 16 to 19 of the Act and the rules made thereunder.
On abolition of contract labour, the intermediary, i.e.,
contractor, is removed from the field and direct linkage
between labour and principal employer is established.
Thereby, the principal employer’s obligation to absorb them
arises. The right of the employee for absorption gets
ripened and fructified. If the interpretation in Dena Nath’s
case is given acceptance, it would be an open field for the
principal employer to freely flout the provisions of the Act
and engage workmen in defiance of the Act and adopt the
principle of hire and fire making it possible to exploit the
appalling conditions in which the workmen are placed. The
object of the Act, thereby gets rudely shattered and the
object of the Act easily defeated. Statutory obligations of
holding valid licence by the principal employer under
Section 7 and by the contract under Section 12 is to ensure
compliance of the law. Dena Nath’s ratio falls foul of the
constitutional goals of the trinity; they are free launchers
to exploit the workmen. The contractor is an intermediary
between the workmen and the principal employer. The moment
the contract labour system stands prohibited under Section
10(1), the embargo to continue as a contract labour is put
an end to and direct relationship has been provided between
the workmen and the principal employer. Thereby, the
principal employer directly becomes responsible for taking
the services of the workmen hitherto regulated through the
contractor. The object of the penal provisions was to
prevent the prohibition of the employer to commit breach of
the provisions of the act and to put an end to exploitation
of the labour and to deter him from acting in violation of
constitutional right of the workmen to his decent standard
of life, living, wages, right to health etc.
The founding fathers placed no limitation or fetters on
the power of the High Court under Article 226 of the
Constitution except self-imposed limitations. The arm of the
Court is long enough to reach injustice wherever it is
found. The Court as reach injustice wherever it is found.
The court as sentinal in the qui vive is to mete out
justice in given facts. On finding that either the workmen
were engaged in violation of the provisions of the Act or
were continued as contract labour, despite prohibition of
the contract labour under Section 10(1), the High Court has,
by judicial review as the basic structure, constitutional
duty to enforce the law by appropriate directions. The right
to judicial review is no a basic structure of the
Constitution by catena of decisions of this Court starting
from Indira Gandhi vs. Raj Narayan [AIR 1975 SC 2299] and
Bommai’s case. It would, therefore, be necessary that
instead of leaving the workmen in the lurch, the Court would
properly mould the relief and grant the same in accordance
with law.
The public law remedy given by ‘Article 226 of the
Constitution is to issue not only the prerogative writs
provided therein but also any order or direction to enforce
any of the fundamental rights and “for any other purpose”.
The distinction between public law and private law remedy by
judicial adjudication gradually marginalished and became
obliterated. In L.I.C. v. Escort Ltd. & Ors. [(1986) 1 SCC
264 at 344]. this Court in paragraph 102 and pointed out
that the difficulty will lie in demarcating the frontier
between the public law domain and the private law field. The
question must be decided in each case with reference to the
particular action, the activity in which the State or the
instrumentality of the State is engaged when performing the
action, the public law or private law character of the
question and the host of other relevant circumstances.
Therein, the question was whether the management of LIC
should record reasons for accepting the purchase of the
shares? It was in that fact situation that his court held
that there was no need to state reasons when the management
of the shareholders buy resolution reached the decision.
This court equally pointed out in other cases that when the
State’s power as economic power and economic entrepreneur
and allocator of economic benefits is subject to the
limitations of fundamental rights, a private Corporation
under the functional control of the State engaged in an
activity hazardous to the health and safety of the
community, is imbued with public interest which the State
ultimately proposes to regulate exclusively on its
industrial policy. It would also be subject to the same
limitation as held in M.C. Mehta & Ors. v. Union of India &
Ors.[(1987) 1 SCC 395].
The legal right of an individual may be founded upon a
contract or a statue or an instrument having the force of
law. For a public law remedy enforceable under Article 226
of the Constitution, the action of the authority need to
fall in the realm of public law-be it a legislative act of
the State, an executive act of the State or an
instrumentality or a person or authority imbued with public
law element. The question requires to be determined in each
case. However, it may not be possible to generalise the
nature of the action which would come either under public
law remedy or private law field nor is it desirable to give
exhaustive list of such actions. As held by this Court in
Calcutta Gas Co. Ltd. v. State of West Bengal [Air 1961 SC
1044, para 5] that if the legal right of a Manager of
company is denuded on the basis of recommendation by the
Board of Management of the company, it would give him right
to enforce his right by filling a writ petition under
Article 226 of the Constitution. In Mulchand v. State of
M.P. [AIR 1968 SC 1218], this court had held that even
though the contract was void due to non-compliance of
Article 229, still direction could be given for payment of
the amount on the doctrine of restitution under Section 70
of the Act, since the had derived benefit under the void
contract. The same view was reiterated in State of West
Bengal v. V.K. Mandal & SOrs. [AIR 1962 SC 779 of 789] and
in New Marine Coal Co. Ltd, v. Union of India [(1964) 2 SCR
859]. In Gujarat State Financial Corporation. v. Lotus Hotel
[(1983) 3 SCC 370], a direction was issued a to release loan
to the respondent to comply with the contractual obligation
by applying the doctrine of promissory estoppel. In Mahabir
Auto Store v. Indian Oil Corporation. [(1990) 3 SCC 752],
contractual obligation were enforced under public law remedy
of Article 226 against the instrumentality of the State. In
Shreelekha Vidyarthi v. State of U.P. [(1991) 1 SCC 212]
contractual obligations were enforced when public law
element was involved, Same Judicial approach is adopted in
other jurisdictions, namely, the House of Lords in Gillic v.
West Norfolk and Wisbech Area health Authority [(1986) AC
112] wherein the House of Lords held that though the claim
of the plaintiff was negatived but on the anvil of power of
judicial review, it was held that the public law content of
the claim was so great as to make her case an exception to
the general rule. Similarly in Dr. Roy v. Kensinstone and
Chelsea Family Practioners Committee [(1992) IAC 624], the
House of Lords reiterated that though a matter of private
law is enforceable by ordinary actions, a court also is free
from the constraints of judicial review and that public law
remedy is available when the remuneration of Dr. Roy was
sought to be curtailed. In L.I.C. v. Consumer Education and
Research Centre & Ors. [(1995) 5 SCC 482], this court held
that each case may be examined on its facts and
circumstances to find out the nature and scope of the
controversy. The distinction between public law and private
law remedy has now become thin and practically obliterated.
In write petitions filed under Article 32 of the
Constitution of India, the petitioners, in R.K. Panda vs.
Steel Authority of India & Ors. [(1994) 5 SCC 304],
contended that they had been working in Rourkela plant of
the Steel authority of India for period ranging between 10
and 20 years as contract labour. The employment was of
perennial nature. The non-regularisation defeated their
right to a job. The change of contractors under the terms of
the agreement will not have any effect o their continuing
as a contract labour of the predecessor contractors. The
respondent contended that due to modernisation of the
industry, the contract labour are likely to be retrenched.
The were prepared to allow the contract labour to retire on
voluntary basis or to be absorbed for local employment. A
Bench of three judges of this court had held that the
contract labour were continuing the employment of the
respondent for last 10 years, in spite of change of
contractors, and hence they were directed to b e absorbed as
regular employees. On such absorption, their inter se
seniority be determined, department or job-wise, on the
basis of continuous employment; regular wags will be payable
only for the period subsequent to absorption and not for the
period prior thereto. Such of those contract labour is
respect of whom the rate of wages have not been fixed, the
minimum, rate of wages would be payable to such workmen of
the wages of the regular employees. The establishment was
further directed to pay the wages. If the staff is found in
excess of the requirement, the direction for regularisation
would not stand in their way to reached the workmen in
accordance with law. If there arises any dispute as regards
the identification of the contract labour to be absorbed,
the Chief Labour Commissioner, Central Government, on
evidence, would go into that question. The retrenched
employees shall also be entitled to the benefit of the
decision. The 10 years period mentioned by the Court would
count to calculate retrenchment benefits. This also of there
being no report by the Advisory Board under section 10(2)
and no prohibition under section 10(1), the Act was enforced
and this Court directed to absorb them within the guidelines
laid down in the judgment. This ratio also is an authority
for the proposition that the jurisdiction of the court under
Article 32, pari materia with Article 226 which is much a
wider than Article 32 ” for any other purpose” under which
suitable directions are required to have given based on
factual background. Therein the need to examine the
correctness of Dena Nath’s radio did not arise nor is it a
case of abolition of contract labour. So, its reference
appears to be as a statement if laying the law in Dena
Nath’s case.
Prior to the Act came into force, in The standard-
Vacuum Refining Co. of India vs. Its Workmen & Ors. [(1960 3
SCR 466], a Bench of three judges of this court had held
that the contract labour, on reference under section 10 of
the ID Act was required to be regularised, after the
industrial disputes was adjudicated, under section 2(k) of
the ID Act. Since workmen had substantial interest in the
dispute, it was held that the direction issued b the
Tribunal that the contract labour should be abolished was
held just in the circumstances of the case and should be
abolished was held just in the circumstances of the case\and
should to be interfered with. In other words, this court
upheld the jurisdiction of Tribunal after deciding the
dispute as an industrial dispute and gage direction to
abolish the contract labour. The Power of the Court is not
fettered by the absence of any statutory prohibition.
In Security Guards Board for Greater Bombay and Thane
District vs. Security & Personnel Service Pvt. Ltd. & Ors.
[(1987) 3 SCC 413], the question as regards absorption of
security guards employed in any factory or establishment
etc. under Maharashtra Private Security Guards (Regulation
of Employment and welfare) Act, 1981 had come up for
consideration. It was held that the exemption under Section
23 is in regard to the security guards employed in the
factory or establishment or in any class or classes of
fabricating factory’s establishment. The co-relationship of
the security guards of classes of security guards who may be
exempted for the operation of the Act is with the factory or
establishment sin which they work and not with agency or
agent through and by whom they were employed. In other
words., the ratio of that case is that it is not material as
to through which contractor the employee came to be
appointed or such labour came to be engaged in the
establishment concerned. The direct relationship would
emerge after the abolition of the contract labour. In Sankar
Mukherjee & Ors. vs. Union of India & Ors. [ AIR 1990 SC
532], the State Government exercising the power under
Section 10 of the Act prohibited employment of contract
labour in cleaning and stacking and other allied jobs in the
brick department. Loading and unloading of bricks from
wagons and trucks was not abolished. Writ petition under
Article 32 of the Constitution of India was filed. A Bench
of three judges of this court had held that the act requires
to be construed liberally so as to effectuate the object of
the act. The bricks transportation to the factory, loading
and unloading are continuous process; therefore, all the
jobs are incidental to or allied to each other. All the
workmen performing these jobs were to be treated alike.
Loading and unlading job and the other jobs were of
perennial nature. There fore, there was no justification to
exclude the job of loading and unloading of bricks from
wagons and trucks from the purview of the notification dated
February 9, 1980. Thus, this Court had given direction to
abolish the contract labour system and to absorb the
employees working in loading and unloading the bricks which
is of perennial nature. In National Federation of Railway
Porters, Vendors & Bearers vs. Union of India & Ors. [(1995)
3 SCC 152], a Bench of two judges to which one of us (K.
Ramaswamy, J.) was a member, was to consider whether the
Railway Parcel Porters working in the different railway
stations were contract labour for several years, when they
filed write petition, the Central Assistant Labour
commissioner was directed to enquire and find out whether
the job is of a permanent and perennial nature and whether
the petitioners were working for a long period. On receipt
of the report, with findings in favour of favour of workers,
the Bench had directed the Railway Administration to
Regularise them into the service. This case also is an
authority for the proposition that in an appropriate case
the Court can give suitable directions to the competent
authority, namely, central labour Commissioner to enquire
and submit a report. The perennial nature of the work and
other related aspect are required to be complied with before
directions are given under of Section 10(1) and 10(2) of the
Act. On receipt of the report, the Court could mould the
relief in an appropriate manner to meet the given situation.
In Praga Tools case, this Court held that mandamus may be
issued to enforce duties and positive obligation of a public
nature even though the persons or the authorities are not
public officials or authorities. The same view was laid in
Anadi Mukta v. V.R. Rudani [(1989) 2 SCC 691] and Unni
Krishna v. State of A.P. [(1993) 1 SCC 645]. In Comptroller
& Auditor General of India v. K.S. Jagannathan [(1986) 2 SCC
679], this court held that a mandamus would be issued to
implement Directive Principles when Government have adopted
them. They are under public obligations to give preferential
treatment implementing the rule of reservation under
Articles 14 and 16 (1) and (4) of the Constitution. In
L.I.C. case, directions were issued to frame policies
accessible to common man.
Thus, we hold that though there is no express provision
in the Act for absorption of the employees whose contract
labour system stood abolished by publication of the
notification under section 10 (1) of the Act, in a proper
case, the court as sentinal in the qui vive is required to
direct the appropriate authority to act in accordance with
law and submit a report to the court and based thereon
proper relief should be granted.
It is true that learned counsel for the appellant had
given alternative proposal, but after going through its
contents, were are of the view that the proposal would
defeat, more often than not, the purpose of the Act and keep
the workmen at the whim of the establishment. The request of
the learned Solicitor General that the management may be
left with that discretion so as to absorb the workmen cannot
be accepted. In this behalf, it is necessary to recapitulate
that on abolition of the contract labour system, by
necessary implication, the principal employer is under
statutory obligation to absorb the contract labour. The
linkage between the contractor and the employee stood
snapped and direct relationship stood restored between
principal employer and the contract labour as its employees.
Considered from this perspective, all the workmen in the
respective services working on contract labour are required
to be absorbed in the establishment of the appellant. Though
there exists no specific scale of pay to be paid as regular
employees, it is for the establishment to take such steps as
are necessary to prescribe scale of pay like class ‘D’
employees. There is no impediment in the way of the
appellants to absorb them in the last grade, namely, grade
IV employees on regular basis. It is seen that the criteria
to abolish the contract labour system is the duration of the
work, the number of employees working on the job etc. That
would be the indicia to absorb the employees on regular
basis. It is seen that the criteria to abolish the contract
labour system is the duration of the work, the number of
employes working on the job etc. That would be the indicia
to absorb the employees on regular basis in the respective
services in the establishment. Therefore, the date of
engagement will be the criteria to determine their inter se
seniority. In case, there would be any need for retrenchment
of any excess staff, necessarily, the principle of “last
come, first go” should be applied subject to his
reappointment as and when the vacancy arises. Therefore,
there is no impediment in the way of the appellants to adopt
the above procedure. The award proceedings as suggested in
Gujarat Electricity Board case are beset with several
incongruities and obstacles in the way of the contract
labour for immediate absorption. Since, the contract labour
gets into the service of the principal employer, the Union
of the existing employees may not espouse their cause for
reference under section 10 of the ID Act. The workmen, who
no abolition of contract labour system have no right to seek
reference under section of 10 of ID Act. Moreover, the
workmen immediately are kept out of job to endlessly keep
waiting for award and thereafter resulting in further
litigation and delay in enforcement. The management would
always keep them at by for absorption. it would be difficult
for them to work out their right. Moreover, it is a trade
and time-consuming process and years would role by. Without
wages, they cannot keep fighting the litigation endlessly.
The right and remedy would be a teasing illusion and would
be rendered otiose and practically compelling the workman at
the mercy of the principal employer. Considered from this
pragmatic perspective, with due respect to the learned
judges, the remedy valuable assistance given by all the
learned counsel in the appeals.
The appeals are accordingly dismissed, but in the
circumstances, without costs.

 

 

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