2002 (4) TMI 1004 - SC - Indian Laws

SC Overturns Ruling on Automatic Absorption of Contract Workers, Directs Union to Seek Proper Legal Channels.

Municipal Corporation of Greater Bombay Versus K.V. Shramik Sangh and Ors.

The SC set aside the HC's judgment, finding error in ordering automatic absorption of contract labourers and adjudicating disputed factual questions under ... - Issues Involved:1. Validity of the contract labour system employed by the Municipal Corporation.2. Compliance with the Contract Labour (Regulation & Abolition) Act, 1970 (CLRA Act).3. The High Court's jurisdiction under Article 226 of the Constitution.4. The automatic absorption of contract labourers.5. The role of the appropriate government in abolishing contract labour.Issue-wise Detailed Analysis:1. Validity of the Contract Labour System:The Municipal Corporation of Greater Bombay challenged the High Court's decision, which mandated the discontinuation of the contract labour system in the Solid Waste Management Department and the absorption of 782 contract labourers as permanent employees. The Union, representing the contract labourers, argued that the nature of their work was perennial and that the contract labour system was a sham arrangement. The High Court supported this view, stating that the work was of a regular and permanent nature, and that the contracts were merely a device to avoid statutory obligations.2. Compliance with the CLRA Act:The Union claimed that the Corporation had been using contract labour for 15 years without registering as a principal employer and that the contractors did not have the necessary licenses under the CLRA Act. The Labour Commissioner's investigation confirmed these violations and recommended the abolition of the contract labour system. The High Court noted that the Corporation and the contractors failed to comply with Sections 7 and 12 of the CLRA Act, which require registration and licensing, respectively.3. High Court's Jurisdiction Under Article 226:The Corporation contended that the High Court should not have adjudicated the disputed questions of fact under Article 226 of the Constitution, suggesting that such matters should be resolved by an industrial adjudicator. The High Court, however, proceeded to grant relief based on the material available, including recommendations from the Labour Commissioner and the Labour Minister, and the failure of the Corporation to comply with the CLRA Act.4. Automatic Absorption of Contract Labourers:The High Court ordered the absorption of identified contract labourers as permanent employees, citing precedents like the Air India case. However, this judgment was later overruled by the Constitution Bench in Steel Authority of India Ltd. (SAIL) v. National Union Waterfront Workers, which clarified that neither Section 10 of the CLRA Act nor any other provision provides for automatic absorption of contract labour. The Constitution Bench emphasized that such determinations should be made by an industrial adjudicator after considering whether the contract was genuine or a camouflage.5. Role of the Appropriate Government:The High Court acknowledged that the power to abolish contract labour lies with the appropriate government, which must consult the State Contract Labour Advisory Board. Despite the High Court's observations and the recommendations from various authorities, it ultimately took upon itself to order the abolition of the contract labour system due to perceived delays by the State Government. The Constitution Bench in SAIL underscored that the appropriate government must issue a prohibition notification under Section 10(1) of the CLRA Act after due consultation.Conclusion:The Supreme Court set aside the High Court's judgment, holding that the High Court erred in ordering the automatic absorption of contract labourers and in adjudicating disputed questions of fact under Article 226. The Court directed that the Union could seek remedies before the appropriate government or an industrial adjudicator as per the guidelines laid down in the SAIL judgment. The status quo regarding the employment of contract labourers was to be maintained for six months, allowing the State Government to proceed in accordance with the law concerning the abolition of the contract labour system.