Companies Act Case Law Vst Industries Ltd Vs Vst Industries Workers Union & Anr.

Appeal (civil) 670 1997



DATE OF JUDGMENT: 07/12/2000

S R Babu, S N Variava



Civil Appeal No. 670 OF 1997
The appellant is a company incorporated under the
Companies Act, 1956 with the object of manufacture and sale
of cigarettes
. Members of general public are the
shareholders and the shares of the company are traded in
through various stock exchanges in the country. A petition
was filed under Article 226 of the Constitution by
respondent No.1 seeking for a writ of mandamus to treat the
members of the respondent- union who are employees working
in the canteen of the appellants factory as employees of
the appellant and for grant of monetary and other
consequential benefits. The canteen is provided in the
factory premises of the appellant pursuant to Section 46 of
the Factories Act, 1948 [hereinafter referred to as the
Act], which obliges a factory employing more than 250
workmen to provide such a canteen. On behalf of the
respondents, it is contended that the appellant had been
managing the canteen up to the year 1982 and thereafter
introduced the contract system for maintaining the canteen
so established; that though the management of the canteen
had been entrusted to the contractors from time to time, the
personnel employed in the canteen were retained by all the
contractors and they have been paid salaries through
contractors; that the workmen employed in the canteen have
been provided with ESI benefits under the Code No. VST, the
appellant, and benefits arising under the Employees
Provident Funds Act are also provided similarly; that the
appellant has also provided a building along with furniture,
utensils, cutlery, gas, electricity, water supply and other
facilities; that the contractor is engaged only to prepare
the food and serve it to the employees and that the quality
of the food and the rates are controlled by the management
of the appellant.

On behalf of the appellant, contention was raised that
no writ would lie against the appellant inasmuch as the
appellant is a company, which is not an authority or a
person against whom a writ would lie. It was submitted that
they do not discharge any public duty and hence the writ
cannot be issued. On the merits of the matter, the
appellant disputed various questions of fact and urged that
the decision of this Court in Parimal Chandra Raha vs. Life
Insurance Corporation of India, 1995 Supp. (2) SCC 611,
would not be applicable to the appellant in the facts and
circumstances of the case. The learned Single Judge, who
decided the matter in the first instance, held that a writ
would lie against a company under a private management
following the decision in T. Gattaiah vs. Commissioner of
Labour, 1981 [II ] LLJ 54, in which it was held that
establishment of a canteen and its maintenance is a
statutory requirement; under Section 46 of the Act a public
duty is imposed on the company to establish and maintain the
canteen; inasmuch as members of the respondent-union are
working in the canteen they are entitled to seek a mandamus.
He, therefore, held that when a public duty is called upon
to be discharged by a private management, a writ of mandamus
would lie and could be issued under Article 226 of the
Constitution. He thus rejected the contention.
On the merits of the matter, the learned Single Judge
followed the decision in Parimal Chandra Rahas case holding
that when the duty had been enjoined on the appellant to
provide and maintain a canteen facility under the Factories
Act it becomes the obligation of the appellant to establish
a canteen and that is what the appellant had done.
Therefore, when that work is got done through somebody else
by providing the necessary infrastructure and other
facilities, when the personnel did not change though the
contractors changed from time to time, he held that they
become employees of the appellant. On that basis the
learned Single Judge granted reliefs sought for by the
respondents, however, imposing certain restrictions with
regard to the age, being medically fit, on the date of the
writ petition, had put in a minimum of three years of
continuous service and such service prior to the attainment
of the minimum qualifying age under the company should be

On appeal, the Division Bench of the High Court
affirmed the view taken by the learned Single Judge. The
Division Bench referred to their decision in Rakesh Gupta
vs. Hyderabad Stock Exchange Ltd. Hyderabad & Ors., AIR
1996 AP 430, that a writ in the nature of mandamus,
certiorari and prohibition are recognised as public law
remedies and are not available to enforce private law
rights. However, noticing that the expression any person
or authority used in Article 226 of the Constitution should
not be confined only to statutory authorities and
instrumentalities of State but would cover any other person
or body performing public duty. The form of the body
concerned is not very much relevant. What is relevant is
the nature of the duty imposed on that body. The duty must
be judged in the light of positive obligation owed by the
person or authority to the affected party, no matter by what
means the duty is imposed. On that basis, the Division
Bench of the High Court dismissed the writ appeal. Hence
this appeal.

On behalf of the appellant contention put forth at the
forefront is that a writ would not lie against the appellant
inasmuch as the appellant is engaged in the manufacture and
sale of cigarettes and as an incident thereto has provided a
canteen to its workmen pursuant to an obligation under
Section 46 of the Act. Shri S. Ganesh, learned counsel for
the appellant, pressed into service the decision of this
Court in Anadi Mukta Sadguru Shree Muktajee Vandas Swami
Survarna Jayanti Mahotsav Smarak Trust & Ors. vs.
V.R.Rudani & Ors., 1989 (2) SCC 691, to contend that mere
running of a factory to manufacture and sell of cigarettes
can never be considered to be a public duty much less an
incident thereto such as providing a canteen to its workmen.
On behalf of the respondent, heavy reliance was placed on
this decision and also the decision of the High Court in T.
Gattaiahs case, to contend that in running a canteen under
Section 46 of the Act, the appellant was discharging a
public duty and, therefore, a writ of mandamus would lie
against it.

In Anadi Muktas case, the contention, similar to the
present case, had been raised. Writ petitioners were
seeking for a writ of mandamus to put them back in the
college and they were claiming only a terminal benefit or
arrears of salary payable to them. In that background, it
was observed that if the rights are purely of a private
character no mandamus could be issued and also, if the
management of the college were purely a private body with no
public duty mandamus would not lie. In that case, the
respondent was managing the affiliated college to which
public money is paid as Government aid which played a major
role in the control, maintenance and working of educational
institutions. The aided institutions, it was noticed, like
Government institutions discharge public function by way of
imparting education to students. They were subject to the
rules and regulations of the affiliating University and
their activities were closely supervised by the University
authorities. Employment in such institutions, therefore, is
not devoid of any public character inasmuch as the service
conditions of the academic staff were controlled by the
University particularly in regard to their pay scales and
the protection by University decisions creating a legal
right or duty relationship between the staff and the
management. When there is existence of such relationship
mandamus could not be refused to such an aggrieved party.
It was further explained in that decision that the term
authority used in Article 226 of the Constitution should
receive a liberal meaning unlike the term in Article 12,
which is only for the purpose of enforcement of fundamental
rights under Article 32. The words any person or
authority used in Article 226 are, therefore, not be
confined only to statutory authorities or instrumentalities
of the State but would cover any other person or body
performing public duty. The form of the body concerned is
not very much relevant. What is relevant is the nature of
the duty imposed on that body. The duty must be judged in
the light of positive obligation owed by the person or
authority to the affected party, no matter by what means the
duty is imposed, if a positive obligation exists, mandamus
cannot be denied.

In De Smith, Woolf and Jowells Judicial Review of
Administrative Action, 5th Edn., it is noticed that not all
the activities of the private bodies are subject to private
law, e.g., the activities by private bodies may be governed
by the standards of public law when its decisions are
subject to duties conferred by statute or when, by virtue of
the function it is performing or possibly its dominant
position in the market, it is under an implied duty to act
in the public interest. By way of illustration, it is
noticed that a private company selected to run a prison
although motivated by commercial profit should be regarded,
at least in relation to some of its activities, as subject
to public law because of the nature of the function it is
performing. This is because the prisoners, for whose
custody and care it is responsible, are in the prison in
consequence of an order of the court, and the purpose and
nature of their detention is a matter of public concern and
interest. After detailed discussion, the learned authors
have summarized the position with the following

(1) The test of whether a body is performing a public
function, and is hence amenable to judicial review, may not
depend upon the source of its power or whether the body is
ostensibly a public or a private body. (2) The
principles of judicial review prima facie govern the
activities of bodies performing public functions. (3)
However, not all decisions taken by bodies in the course of
their public functions are the subject matter of judicial
review. In the following two situations judicial review
will not normally be appropriate even though the body may be
performing a public function:

(a) Where some other branch of the law more
appropriately governs the dispute between the parties. In
such a case, that branch of the law and its remedies should
and normally will be applied; and (b) Where there is a
contract between the litigants. In such a case the express
or implied terms of the agreement should normally govern the
matter. This reflects the normal approach of English law,
namely, that the terms of a contract will normally govern
the transaction, or other relationship between the parties,
rather than the general law. Thus, where a special method
of resolving disputes (such as arbitration or resolution by
private or domestic Tribunals) has been agreed by the
parties (expressly or by necessary implication), that
regime, and not judicial review, will normally govern the
The High Court has relied very strongly on the
decision of a learned Single Judge in T. Gattaiahs case
wherein it was stated that a writ may lie under Article 226
of the Constitution against a company incorporated under the
Companies Act, 1956 as it is permissible to issue a writ
against any person. Prima facie, therefore, a private
person or an incorporated company cannot be taken out of the
sweep and the contemplation of Article 226 of the
Constitution. That decision does not take note of the fact
as to the nature of the functions that a person or an
incorporated company should be performing to attract
judicial review under Article 226 of the Constitution. In
Anadi Muktas case this Court examined the various aspects
and the distinction between an authority and a person and
after analysis of the decisions referred in that regard came
to the conclusion that it is only in the circumstances when
the authority or the person performs a public function or
discharges a public duty Article 226 of the Constitution can
be invoked. In the present case, the appellant is engaged
in the manufacture and sale of cigarettes. Manufacture and
sale of cigarettes will not involve any public function.
Incidental to that activity there is an obligation under
Section 46 of the Act to set up a canteen when the
establishment has more than 250 workmen. That means, it is
a condition of service in relation to a workman providing
better facilities to workmen to discharge their duties
properly and maintain their own health or welfare. In other
words, it is only a labour welfare device for the benefit of
its work force unlike a provision where Pollution Control
Act makes it obligatory even on a private company not to
discharge certain effluents. In such cases public duty is
owed to the public in general and not specific to any person
or group of persons. Further the damage that would be
caused in not observing them is immense. If merely what can
be considered a part of the conditions of service of a
workman is violated then we do not think there is any
justification to hold that such activity will amount to
public duty. Thus, we are of the view that the High Court
fell into error that appellant is amenable to writ

This Court in Indian Petrochemicals Corporation Ltd.
& Anr. vs. Shramik Sena & Ors., 1999(6) SCC 439, referred
to the decisions in Parimal Chandra Rahas case, Reserve
Bank of India vs. Workmen, 1996 (3) SCC 267, and M.M.R.Khan
vs. Union of India, 1990 Supp. SCC 191, and held that the
workmen of a statutory canteen, as in the present case,
would be workmen of an establishment for the purposes of the
Act only and not for other purposes. Thereafter, this Court
further examined whether the material on record would show
that the workmen are employees of the management for all
purposes and adopted some of the tests as follows:

1. The canteen has been there since the inception of
the appellants factory. 2. The workmen have been employed
for long years and despite a change of contractors the
workers have continued to be employed in the canteen. 3.
The premises, furniture, fixture, fuel, electricity,
utensils, etc. have been provided for by the appellant. 4.
The wages of the canteen workers have to be reimbursed by
the appellant. 5. The supervision and control on the
canteen is exercised by the appellant through its authorised
officer, as can be seen from the various clauses of the
contract between the appellant and the contractor. 6. The
contractor is nothing but an agent or a manager of the
appellant, who works completely under the supervision,
control and directions of the appellant. 7. The workmen
have the protection of continuous employment in the

In the present case, the findings recorded by the
learned Single Judge on examination of the facts available
is that there had been a canteen within the premises of the
appellant up to the year 1982 and it is only from 1982
onwards the management of the canteen has been entrusted to
a private contractor; that even after change of the
contractor, the canteen workers have continued to be the
same irrespective of the change in the contractors from time
to time; that wages were paid to the workmen in the canteen
by the management through the contractor; that the
appellant has provided the accommodation, furniture, fuel,
electricity, utensils, etc.; that the management exercises
control over the standard in quality, quantity and the rate
of the food items supplied to the workmen for whose benefit
the canteen is established. Thus, these circumstances
clearly indicate that the appellant has a complete control
over the activities in respect of the canteen and the
contractor has absolutely no discretion either in regard to
the menu, quality and quantity of the food items much less
the rate at which the same are supplied to the workmen.
When the management of the appellant exercises such a
complete control, the canteen shall be deemed to be run by
the management itself. The appellant in any manner cannot
controvert these facts.

We do agree that the respondents have a strong case on
merits. Since we have held that the High Court had no
jurisdiction to entertain a petition under Article 226 of
the Constitution, we would have set aside the order made by
the High Court. However, in the special features of the
case, although we do not agree with the High Court on the
first question raised, we feel, after clarifying the legal
position, that we should not disturb the decision given by
the High Court.

The appeal, therefore, stands dismissed subject to
what is stated in regard to writs to be issued by the High
Court in respect of persons or authorities exercising public
duty or otherwise. No costs.


Civil Appeal Nos. 6533/97 & 6534/97

In these appeals, on a reference made on the question
whether certain persons employed in the canteen should be
treated as employees of the appellant and, if so, in what
category they are to be fitted in and to what wages they are
entitled to, the Industrial Tribunal, Hyderabad,
[hereinafter referred to as the Tribunal] inquired into
the matter. The contesting respondents contended that the
workmen in the canteen had been working right from its
inception, that is, since 1967; that from 1976 onwards,
after expiry of the contract with the Industrial Catering
Services, they had been directly working with the appellant
without any contractor; that they sought for regularization
of their services by letter dated 28.2.1978; that the said
letter was corrected and redrafted by the Personnel Manager
to indicate the idea of floating an Association/Society to
run the canteen; that this modified request contained in
Ex.W-49 was stated to be contradictory to the stand taken by
the workmen all through. The Tribunal concluded that there
was no doubt that the Personnel Manager modified Ex.W-50 and
obtained Ex.W-49 in the modified form. The Tribunal held
against them, as there was no material to show that the
management had discussed on each point and thereafter an
agreement had been drafted. The Tribunal recorded the
findings that the canteen had been working for the benefit
of the workmen within the premises provided by and with the
equipment supplied by the appellant; that the appellant
supplies the provisions for the preparation of foodstuffs;
that the appellant issues token to the employees, who on
production of the same obtain foodstuffs from the canteen;
that the Committee appointed by the appellant decides the
menu and as per the directions and supervision of the
Catering Officer, the canteen functions; that the quality
and quantity of the foodstuffs is supervised by him, who
functions under the Committee. The contributions like ESI,
Provident Fund, etc. had also been categorically specified
to be provided by the appellant and ESI code for the
permanent establishment and for the present workmen was the
same; that after the evidence was tendered by the workmen
the appellant got the code changed and the appellant
transferred the workmen from one place to another and that
the amount to be surrendered by way of unpaid salaries had
to be remitted back to the management. Thus the Tribunal
held that these facts clearly indicated that the appellant
exercised administrative, financial and disciplinary control
over the workmen in question. The Tribunal held that no
other material is required to hold them to be employees of
the appellant. In those circumstances, the Tribunal passed
an award that these workmen should be treated as employees
of the appellant and they are entitled to payment of
appropriate scales and designations in terms of Ex.W12 and
W14 from 1.4.1979 with all consequential and attendant
benefits of arrears of pay, etc. together with counting of
entire service for the purpose of terminal benefits.
Against this award, a writ petition was filed before the
High Court. The High Court dismissed the same stating that
it is covered by another matter. It is unnecessary to
examine the contention whether the matter is covered by a
subsequent decision or not as the facts of the present case
stand on its own. The reference had been made to the
Tribunal and adjudication had been made by the Tribunal as
to the status of the workmen, the nature of employment,
control exercised by the appellant, which leave no room for
doubt that they are the employees of the appellant.

A contention is also sought to be made that it is not
possible to run a canteen in the refinery area. It is
contended that under the Petroleum Rules framed under the
Petroleum Act, 1934, there are certain hazardous areas where
there cannot be a canteen as no fire, furnace, source of
heat or light capable of igniting inflammable vapours shall
be allowed except in the firing spaces or stills and
boilers. However, there is no material on record to show
that the canteen is located in such an area where it would
be hazardous to have a fire, furnace, source of heat or
light to cook food. In the absence of such material, we
find no substance in this contention. It is brought to our
notice that a fire had taken place on a tank on 14.9.1997
and that it was extinguished after 14 days, which severely
damaged all the building including the canteen and that food
and beverages being provided to its employees by making an
arrangement to obtain the same from outside the premises of
the appellant. These facts are brought to our notice by an
affidavit filed on 21.11.2000. But these factors do not
come in the way of the award made by the Tribunal, as it is
possible to locate the canteen in an appropriate place where
there is no hazard of the kind envisaged under the Petroleum
Rules. This contention is also rejected.

In the circumstances aforesaid, the contention
vis-à-vis the findings recorded by the Tribunal, we find
absolutely no merit in these appeals and the same shall
stand dismissed. No costs.



Leave a Comment