Statutory canteen workers are deemed employees only for Factories Act purposes; contractor remained the true employer.

Workers engaged through a contractor to run a statutory canteen under the Factories Act, 1948 are deemed employees of the factory only to the extent needed to enforce the statutory canteen obligation, and that status does not extend automatically to all service rights or benefits. The Court also held that lifting the corporate veil requires evidence of misuse or sham arrangement; mere supervision over canteen standards, subsidy or management under the statutory scheme is insufficient. As the contractor retained power over appointment, dismissal, pay and discipline, the contractor was not a camouflage and the principal employer could not be treated as the real employer for all purposes.

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Issues: (i) Whether workers engaged by a contractor to operate and run a statutory canteen under the Factories Act, 1948 on the premises of a factory are employees of the factory only for the purposes of that Act or for all purposes; and (ii) whether the corporate veil could be lifted and the contractor treated as a mere camouflage so as to hold the principal employer liable as the real employer.

Issue (i): Whether workers engaged by a contractor to operate and run a statutory canteen under the Factories Act, 1948 on the premises of a factory are employees of the factory only for the purposes of that Act or for all purposes.

Analysis: Section 46 of the Factories Act, 1948 obliges the occupier of a factory to provide and maintain a canteen where the prescribed threshold of workers is crossed, but it does not itself regulate recruitment, seniority, promotion, dismissal or other service incidents. The prior decisions on statutory canteens were examined and the controlling principle was taken from the line of authority holding that such workmen are treated as workmen of the establishment only to the extent necessary to give effect to the statutory obligation under the Factories Act. That deemed status does not automatically extend to all employment rights and benefits.

Conclusion: The workers of a statutory canteen are employees of the factory only for the purposes of the Factories Act, 1948 and not for all other purposes.

Issue (ii): Whether the corporate veil could be lifted and the contractor treated as a mere camouflage so as to hold the principal employer liable as the real employer.

Analysis: Lifting the corporate veil is permissible only in limited situations where ownership or control is coupled with impropriety or misuse of the corporate form to evade liability. On the facts, the contractor and the principal employer remained distinct legal entities, and the principal employer's role was confined to supervision over standards, subsidies and canteen management matters arising from the statutory scheme. The power to appoint, dismiss, pay and discipline the canteen staff remained with the contractor, so the requisite complete and effective control was not established.

Conclusion: The contractor was not a sham or camouflage, and the principal employer could not be treated as the real employer for all purposes.

Final Conclusion: The appeals fail because the statutory canteen workers could claim deemed employment only within the limited sphere of the Factories Act, 1948, and no basis was shown to treat them as employees of the principal employer for all service purposes.

Ratio Decidendi: Workers engaged in a statutory canteen are deemed employees of the establishment only to the extent necessary to enforce the statutory obligation under the Factories Act, 1948; for broader employment rights, an independent employer-employee relationship with complete and effective control must be proved.

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