1978 (7) TMI 238 - SC - Indian Laws

Supreme Court: Factory owner directly employs workmen, emphasizing control and economic reality

Hussainbhai, Calicut Versus Alath Factory Thozhilali.

The Supreme Court held that the factory owner was the direct employer of the workmen hired through contractors in an industrial setting. Emphasizing the ... - Issues involved: Determination of employer-employee relationship in the context of workmen hired through contractors in an industrial setting.The judgment dealt with the issue of whether the factory owner was the direct employer of the workmen or if they were considered employees of the contractors who had agreements with the factory owner. The industrial award made on a reference by the State Government was challenged based on this premise. The High Court and a division Bench upheld that the factory owner was indeed the employer of the workmen, leading to the special leave petition to the Supreme Court.The Supreme Court analyzed the circumstances surrounding the work done by the 29 denied workmen, emphasizing that the work was integral to the factory's operations, with raw materials supplied by the Management, factory premises owned by the Management, and finished products taken by the Management for trade. The Court noted that the workmen were under the control of the Management, which was indicative of an employer-employee relationship. The Court highlighted that even without all these factors, the economic reality of the relationship should lead to the application of industrial law.The Court delved into the concept of an employee in Labor Law, emphasizing that the mere existence of contracts with intermediate contractors does not negate the direct employer-employee relationship between the Management and the workmen. The judgment underscored the importance of social justice in industrial jurisprudence, moving beyond strict contractual doctrines to protect the livelihood of working-class sectors.The Court reiterated that the true test lies in determining who has economic control over the workers' subsistence, skill, and continued employment. It emphasized that the presence of intermediate contractors does not diminish the real employer's responsibility when considering the economic realities of the situation. The judgment emphasized that the court must look beyond legal formalities to discern the true employer and uphold the purpose of labor laws.In conclusion, the Court affirmed that if the workmen's livelihood substantially depends on labor rendered for the benefit of an enterprise, the presence of intermediaries or contractual arrangements cannot sever the real-life bond between the workmen and the Management. The judgment highlighted that the liability of the real employer cannot be evaded through superficial arrangements or dissociation in fact. Ultimately, the Court dismissed the petition, affirming the correctness of the conclusion that the factory owner was the employer of the workmen.