2006 (9) TMI 544 - SC - Indian Laws

Court rules on jurisdiction over contract labour abolition

STEEL AUTHORITY OF INDIA LTD. SAIL Versus U.O.I. & ORS.

The Supreme Court held that the Labour Court and the writ court lacked jurisdiction to adjudicate the matter of abolition of contract labour, as it falls ... Whether the 1st party proves that they were employed by the 2nd party Management in the job of permanent and perennial in nature? Whether the 2nd party Management proves that the 1st party workmen were employed under different contractors in the job of permanent and perennial in nature in various departments of the Management? Whether the 2nd party proves that system of contract labour in respect of the nature of the workers involved in this Reference was not abolished in the 2nd party Industry and that this Reference is not sustainable? Issues Involved:1. Jurisdiction of the Labour Court to adjudicate the matter.2. Validity of the reference made by the State Government.3. Application of the Contract Labour (Regulation and Abolition) Act, 1970.4. Determination of the employer-employee relationship.5. Role of the Industrial Disputes Act, 1947 in the context of contract labour.Detailed Analysis:1. Jurisdiction of the Labour Court to Adjudicate the Matter:The appellant contended that the Labour Court had no jurisdiction to adjudicate the dispute as the matter related to the regulation and abolition of contract labour, which is governed by the Contract Labour (Regulation and Abolition) Act, 1970 (the 1970 Act). The Labour Court, in its award dated 13.07.1999, held that it had no jurisdiction to pass an award in favor of the employees as the question of abolition of contract labour fell within the exclusive domain of the Appropriate Government under Section 10 of the 1970 Act.2. Validity of the Reference Made by the State Government:The State Government referred the industrial dispute for adjudication by the Labour Court under Section 10(1)(c) of the Industrial Disputes Act, 1947 (the 1947 Act). The reference questioned whether the contract workers were justified in demanding absorption as regular permanent employees. The Labour Court found the reference invalid, stating that the dispute pertained to the abolition of contract labour, which was not within its jurisdiction. The High Court's order directing the Union of India to make a reference to the appropriate Central Industrial Tribunal or Labour Court was challenged, and the Supreme Court found that the Labour Court and the writ court could not determine the question of abolition of contract labour.3. Application of the Contract Labour (Regulation and Abolition) Act, 1970:The 1970 Act is a complete code governing the regulation and abolition of contract labour. The Supreme Court reiterated that neither Section 10 of the 1970 Act nor any other provision provides for automatic absorption of contract labour upon issuing a prohibition notification. The principal employer cannot be required to order absorption of contract labour. The court emphasized that the decision to abolish contract labour lies exclusively with the Appropriate Government, following the procedure laid down in Section 10(1) of the 1970 Act.4. Determination of the Employer-Employee Relationship:The workmen alleged that the contracts between the appellant and the contractors were sham and bogus, making them direct employees of the appellant. The Labour Court declined to go into the question of who the actual employer was, stating that it was not within its province to decide such matters. The Supreme Court held that an industrial adjudicator could determine whether the contract was a sham and, if so, treat the contract labour as employees of the principal employer. However, the court found that the workmen had taken mutually destructive pleas, first claiming to be contract workers and then asserting they were direct employees, which was impermissible in law.5. Role of the Industrial Disputes Act, 1947 in the Context of Contract Labour:The Supreme Court emphasized that the 1947 Act aims for industrial peace and harmony and provides mechanisms for collective bargaining and settlement of disputes. The court noted that the reference made by the State Government under the 1947 Act was not appropriate for deciding the abolition of contract labour, which falls under the 1970 Act. The court also highlighted that the State must apply its mind before making a reference for industrial adjudication and that such a reference should not contradict a judicially determined fact of employment by a contractor.Conclusion:The Supreme Court set aside the impugned judgment, holding that the Labour Court and the writ court had no jurisdiction to adjudicate the matter of abolition of contract labour, which is within the exclusive domain of the Appropriate Government under the 1970 Act. The court allowed the appeal but stated that the judgment would not prevent the Appropriate Government from issuing a notification under Section 10 of the 1970 Act.