TaxTMI 
TaxTMI 
2004 (2) TMI 688
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....s; whereas traders, commission agents and merchants dealing in the commodities grown by the agriculturists are classified as B-class members. They have no right to vote or participate in the management of the Society. The B-class members only, however, are entitled to take part in auctions held in the marketing yards of the Society. Any dispute between the seller member and the purchaser member is resolved through arbitration in terms of the provisions of the Tamil Nadu Cooperative Societies Act, 1961. The land holdings of the members of the society varies from 1/4th acre to five acres averaging two acres per member. They mainly depend on the rainfall as irrigational facilities are not available. The small farmers are economically weak and have no holding power. Many of them have to take loans for their subsistence, when the weather is not good. Many of them are illiterate. The vegetables produced from their lands being subjected to the vagaries of the weather, the merchants with a view to pressurize them either used to force them to sell that at a very low price or would make them wait for days so that the vegetables become useless. The majority of the members belong to 'Bada....
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....7 persons; of whom 73 are potters and 335 are graders. The job of unloading, unpacking of gunny bags, stitching the gunny bags and putting them into lorries are done by porters whereas gradation of potatoes, weighing the auctioned potatoes in 45 kgs. and packing them into gunny bags are done by graders. Most of them are women. It is stated that the members of the Society or their authorized representatives remain present throughout the auction. The auction is confirmed only with the consent of the members. The member has a right to decline to sell his produce, if he is not satisfied with the highest rate offered by the merchants and is entitled to hold over the same till the next auction takes place. The Society contends that for doing various items of work in the yards, services of certain third parties are made available to the members. They are always available in the yards and any member whether producer or merchant may engage them. The work is done through the workers of the concerned third parties. Payment therefor is to be made by the persons engaging them to the said third parties (contractors). However, sometimes as the producer members may not have enough money with the....
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....aced by the petitioner to establish the master and servant relationship to hold that the persons referred in this dispute are only workmen of the Respondent-Society. 37. Viewed from any angle, either on facts or on law, the petitioner-Union has not substantiated that the persons mentioned in the Annexure are workmen and therefore their non-employment is not justified. Hence this point is found against the Petitioner Union." On the said findings the reference was rejected. PROCEEDINGS BEFORE THE HIGH COURT: Aggrieved thereby the appellant preferred a writ petition before the High Court marked as Writ Petition No.14659 of 1989. During the pendency of the said proceeding, other disputes also ensued resulting in closure of the yards; whereafter, again conciliation proceedings were initiated on or about 3.8.1985. The respondent-Society issued an advertisement in a Tamil newspaper inviting tenders for operations. Questioning the said action on the part of the Society, a writ petition was filed in the Madras High Court which was marked as W.P. No.9333 of 1985 praying therein for issuance of writ of mandamus directing the State to prohibit introduction of contract labour system in the....
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....plication, this Court by an order dated 13.4.1987, observed : "The interim arrangement will continue till disposal of the writ petition in the High Court. Meanwhile the trial of the industrial dispute will be stayed. No order on the application for impleading party. All the CMPs are disposed of accordingly." Another interim order was passed on 29.8.1988 in Writ Petition NO.9334 of 1985 in the following terms : "In the result, the 3rd respondent is directed to give employment directly to all the 407 workers and pay the wages directly to them as per the order of the Supreme Court dated 4.12.1988. This petition is ordered accordingly." On an appeal preferred by the Society before a Division Bench marked as W.A. No.1261 of 1988, it was directed : "To give quietus to the controversy in the writ petition, we direct that W.P. 9334/85 along with the connected writ petition viz. W.P. No.9333/85 be listed for final hearing on 26.10.1988 at the top of the list before the learned Single Judge, who hears the date-fixed writ petitions." JUDGMENT OF THE HIGH COURT: All the three writ petitions came up for hearing before a learned Single Judge of the Madras High Court. The said writ petitio....
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....such supervision and control were not on its own behalf but on behalf of its members; (iii) in arriving at the finding that as the society does not carry out any manufacturing activities; it is not industry, inasmuch as supply of the services by an organisation would also give rise to formation of relationship of an employer and employees. Elaborating his submissions, Mr. Prasad would contend that it is not in dispute that the 407 workmen had been working in the market yard on a daily wage basis and although they are said to have been employed by the third parties but indisputably, the society pays wages to them although the same is said to be reimbursed by the members of the society. It was pointed out that the dispute between the members and members are resolved by the society and furthermore as the concerned persons have been given token and are given gifts during festival season, would lead to an irresistible inference that the concerned workmen are employees of the society. Mr. Prasad would argue that the principal question which was required to be asked was for whom do the workmen work and to whom they look up for their wages. It was submitted that the relationship between....
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....INATION OF RELATIONSHIP: Determination of the vexed questions as to whether a contract is a contract of service or contract for service and whether the concerned employees are employees of the contractors has never been an easy task. No decision of this Court has laid down any hard and fast rule nor it is possible to do so. The question in each case has to be answered having regard to the fact involved therein. No single test - be it control test, be it organisation or any other test - has been held to be the determinative factor for determining the jural relationship of employer and employee. There are cases arising on the borderline between what is clearly an employer-employee relation and what is clearly the independent entrepreneurial dealing. TESTS: This Court beginning from Shivanandan Sharma Vs. Punjab National Bank Ltd. [1955] 1 L.L.J. 688 : AIR 1955 SC 404 and Dharangadhara Chemical Works Ltd. Vs. State of Saurashtra and others [1957] 1 L.L.J. 477 : AIR 1957 SC 264 observed that supervision and control test is the prima facie test for determining the relationship of employment. The nature or extent of control required to establish such relationship would vary from busi....
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....e tests to be applied are vague and may, in a borderline case, be difficult to apply. Historically, the solution lay in applying the 'control' test, i.e., could the employer control not just what the person was to do, but also the manner of this doing it - if so, that person was his employee. In the context in which it mainly arose in the nineteenth century, of domestic, agricultural and manual workers, this test had much to commend it, but with the increase sophistication of industrial processes and the greater numbers of professional and skilled people being in salaried employment, it soon became obvious that the test was insufficient (for example in the case of a doctor, architect, skilled engineer, pilot, etc.) and so, despite certain attempts to modernise it, it is now accepted that in itself control is no longer the sole test, though it does remain a factor and perhaps, in some cases, a decisive one. In the search for a substitute test, ideas have been put forward of an 'integration' test, i.e. whether the person was fully integrated into the employer's concern, or remained apart from and independent of it. Once again, this is not now viewed as a sufficien....
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....hulam Dastagir [(1978) 1 I.L.J. 312 = (1978) 2 SCC 358], Krishna Iyer, J. observed "to crystalise criteria conclusively is baffling but broad indications may be available from decisions". The case at hand, as noticed hereinbefore, poses intricate question having regard to the facts and circumstance of the case. In our endevour to find out an answer, let us at the first instance look at the object of the Society. SOCIETY: The Society had a humble beginning but it had a laudable object, as would appear from its bye-laws. The objects of the Society are stated as under : "a) To encourage self help, thrift and cooperation among members; b) To purchase seeds, manure, implements and other agricultural requirements for sale or distribution to members or members of the affiliated cooperative societies or to other cooperative societies; c) To arrange for sale of potatoes, other vegetables and fruits of the members and the members of affiliated cooperative societies to their best advantage; d) To advance loans to members and members of affiliated cooperative societies on the pledge of their agricultural produce and for the purchase of manure to deserving members of primary societies pr....
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....a case where the proviso appended to bye-law 34 is attracted which is in the following terms : "When the society enters into a contract with the Government of Military Department of cooperative institutes or with any firm which has entered into a contract with the Government or military department for supply of produce, the Board may purchase the produce outright whenever necessary and sell it as owner on behalf of the society." BURDEN OF PROOF: It is a well-settled principle of law that the person who sets up a plea of existence of relationship of employer and employee, the burden would be upon him. In N.C. John Vs. Secretary Thodupuzha Taluk Shop and Commercial Establishment Workers' Union and Others [1973 Lab. I.C. 398], the Kerala High Court held: "The burden of proof being on the workmen to establish the employer- employee relationship an adverse inference cannot be drawn against the employer that if he were to produce books of accounts they would have proved employer-employee relationship." In Swapan das Gupta and Others Vs. The First Labour Court of West Bengal and Others [1975 Lab. I.C. 202] it has been held: "Where a person asserts that he was a workmen of the C....
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.... for the job assigned to their regular staff. The job of the Marketing Supervisor is as under : "7. Marketing supervisor : He should attend to the speedy disposal of the potato stocks of the members to their best advantage. He *should see that all the stocks purchased by the Merchants are taken delivery of without delay. He should control the staff working in the potato godowns and see that no complaints are received from members and merchants etc., regarding purchase or sale of potatoes. He should supervise grading, weighing and packing of potatoes promptly and properly." The job of the Marketing Supervisor, therefore, do not show that complete control and supervision is upon the society. The Marketing Supervisor was allotted the job to see that the work is carried out smoothly so that neither the purchaser members nor the merchant members are put to any disadvantage. Having regard to the interest of the farmers as also the merchants, the Marketing Supervisor was asked to supervise grading, weighing and packing of potatoes promptly and properly. The purported decision of the Society to give certain benefits to the workmen too is not decisive as the same had become a concilia....
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....ents would be less. The Tribunal had further held that the Society acts as a commission agent. The submission of Mr. Prasad to the effect that the Tribunal has ignored the question of employment of contractor, some of whom may be under a legal incapacity to do so but the same again would not be decisive. Furthermore, even in terms of Section 21 of the Contract Labour (Regulation and Abolition) Act, the principal employer has a statutory obligation to see that the concerned employees are paid their wages and deduct the same from the bills of the contractors. It has also come on records that the remuneration paid by the Society on behalf of its members are done through Maistry and not directly to the concerned workers. We have noticed hereinbefore in details the nature of the services rendered by the Society to the different categories of its members, as also the right of the members to approach the third parties to take the services of the workmen working under them for unloading, grading and loading. In nutshell, the following can be deduced : 1. Growers and merchants are free to engage their own porters and graders or can do the work by themselves. There is, thus, no obligation ....
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....h the other which incidentally may have some bearing on the performance of job by the concerned workmen. We may further notice that the learned counsel appearing on behalf of the respondents has drawn our attention to the statements made in the counter affidavit to the effect that the President of Petitioner Association runs the biggest private mundy in Mettupalayam and adopts the same procedure of engaging workers and the job of unloading, cleaning, sorting, grading etc. is done by the Respondent society. It has further been stated that there are about 60 such private mundies at Mettupalayam and although every mundy adopts the same pattern of engaging workers but except in the case of the respondent no industrial dispute had been raised in respect of any other mundy. EMPLOYMENT AND NON-EMPLOYMENT : Employment and non-employment indisputably is a matter which is specified in the Second and the Third Schedules of the Industrial Disputes Act. The concept of employment involves three ingredients, which are : (i) Employer - one who employs, i.e. engages the services of other persons; (ii) Employee - one who works for another for hire; and (iii) Contract of employment - the contrac....
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.... SC 243], this Court observed : "...A jurisdictional fact is one on the existence or otherwise of which depends assumption or refusal to assume jurisdiction by a court, tribunal or the authority. Said fact has to be established and its existence proved before a Court under the Maharashtra Act can assume jurisdiction of a particular case. If the complaint is made prima facie accepting existence of the contractor in such a case what has to be first established is whether the arrangement or agreement between the complainant and the contractor is sham or bogus. There is an inherence admission in such a situation that patently the arrangement is between the complainant and the contractor and the claim for a new and different relationship itself is a disputed fact. To put it differently, the complainant seeks for a declaration that such arrangement is not a real one but something which is a fagade. There is no direct agreement between the complainant and the principal employer and one such is sought to be claimed but not substantiated in accordance with law. The relief in a sense relates to a legal assumption that the hidden agreement or arrangement has to be surfaced..." It was also o....
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.... of them were ex-employees of the appellant. In Silver Jubilee Tailoring House and Others vs. Chief Inspector of Shops and Establishments and Another [(1974) 3 SCC 498], the job required to be performed was skilled and professional in nature. Mathew, J. speaking for the Bench observed that the test of right to control the manner of doing the work as traditionally formulated cannot be treated as an exclusive test. The court applied organization test in the fact situation obtaining therein laying importance on the fact that the employer provides the equipment and stating that where a person hires out a piece of work to an independent contractor, he expects the contractor to provided all the necessary tools and equipments, whereas if he employs a servant he expects to provide the same himself. The supply of machine was highlighted having regard to that fact that the sewing machine on which the workers do the work generally belong to the employer is an important consideration for deciding the relationship of master and servant. Besides the same the right of the employer to reject the end product and directing the worker to restitch it also led this court to conclude that the element o....
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....o are invariably exploited on account of their inability to dictate terms relating to conditions of their service. Neither all the tests nor guidelines indicated as having been followed in the decisions noticed above should be invariably insisted upon in every case, nor the mere absence of any one of such criteria could be held to be decisive of the matter. A cumulative consideration of a few or more of them, by themselves or in combination with any other relevant aspects, may also serve to be a safe and effective method to ultimately decide this often agitated question. Expecting similarity or identity of facts in all such variety or class of cases involving different type of establishments and in dealing with different employers would mean seeking for things, which are only impossible to find." Having regard to the fact that therein a cooperative canteen was promoted with the consent of the management by serving members of the Bank staff, which was running within the bank's premises and with the funds, subsidy and infrastructural facilities provided exclusively by the Bank, it was held that there existed a relationship of master and servant. However, we may notice that almo....
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....ances and other service conditions available to regular clerical employees of those banks is justified ? If not, to what relief are the workmen concerned entitled and from which date ?" Having regard to the evidences both oral and documentary led by the parties, the Tribunal directed : "All those Deposit Collectors and Agents who are below the age of 45 years on 3.10.1980 (the date of the first reference of this industrial dispute) shall be considered for regular absorption for the post of clerks and cashiers if they are matriculates and above including qualified graduates and postgraduates. They may be taken to banks services as regular employees if they pass the qualifying examinations conducted by the banks. Those who are absorbed shall be treated on a par with regular clerical employees of the Bank. Those who have qualified 8th class and below matriculation shall be considered for absorption as sub-staff by conducting qualifications examination. As regards the Deposit Collectors and Agents who are above 45 years of age on the date 3.10.1980 and also those who are unwilling to be absorbed in regular banks service shall be paid the full back wage of Rs. 750.00 per month linked....
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....ween the appellant and Pandurang. What can be said at the most is that whenever Pandurang went to work, the appellant agreed to supply him tobacco for rolling bidis and that Pandurang agreed to roll bidis on being paid at a certain rate for the bidis turned out. The appellant exercised no control and supervision over Pandurang" In Dharangadhara Chemical Works Ltd. Vs. State of Saurashtra & Ors. [AIR 1957 SC 264], this Court upon noticing several authorities held : "The principle which emerges from these authorities is that the prima facie test for the determination of the relationship between master and servant is the existence of the right in the master to supervise and control the work done by the servant not only in the matter of directing what work the servant is to do but also the manner in which he shall do his work, or to borrow the words of Lord Uthwatt at page 23 in Mersey Docks and Harbour Board v. Coggins & Griffith (Liverpool) Ltd., [[1947] 1 A.C. 1, at p. 23.], "The proper test is whether or not the hirer had authority to control the manner of execution of the act in question". The nature or extent of control which is requisite to establish the relationship of emplo....
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....e requirement under the Factories Act of providing a canteen in the industrial establishment, is by itself not decisive of the question or sufficient to determine the status of the persons employed in the canteen. The effect, if any, relating to compliance of the provisions of Factories Act is a different matter which does not arise for consideration in the present case." [See also Bombay Canteen Employees' Association vs. Union of India, [(1997) 6 SCC 723]. On the aforementioned backdrop of legal principles, We may now consider the Constitution Bench judgment of this Court in Steel Authority of India Limited (supra). The principal question which arose for consideration therein was as to whether having regard to the provisions contained in Section 10 of the Contract Labour (Regulation and Abolition) Act, the workmen employed by the contractors in the event of abolition of contract labour were entitled to be automatically absorbed in the services of the principal employer. While answering the question in the negative the court reversed the earlier decision of this Court in Air India Statutory Corporation and Others vs. United Labour Union and Others [(1997) 9 SCC 377]. This Co....
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.... There cannot be any doubt whatsoever that where a person is engaged through an intermediary or otherwise for getting a job done, a question may arise as the appointment of an intermediary was merely sham and nominal and rather than camouflage where a definite plea is raised in Industrial Tribunal or the Labour Court, as the case may be, and in that event, it would be entitled to pierce the veil and arrive at a finding that the justification relating to appointment of a contractor is sham or nominal and in effect and substance there exists a direct relationship of employer and employee between the principal employer and the workman. The decision of this Court in Hussainbhai, Calicut vs. The Allath Factory Thezhilali Union, Kozhikode and Others [(1978) 4 SCC 257] will fall in that category. ANALYSIS: Having regard to the aforementioned findings, we are of the opinion, the High Court has rightly affirmed the award of the Industrial Tribunal. The Tribunal as also the High Court further rightly arrived at a finding to the effect that the concerned workmen were not able to discharge their burden of proof that they were employed by the Society. The decisions referred to hereinbefore a....