TaxTMI 
TaxTMI 
2009 (4) TMI 1076
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....It established a cargo complex at Madras in the year 1978. Under an agreement dated 30.1.1978, it granted a licence to a private company known as M/s. Airfreight Private Ltd. (referred to as `Airfreight') to be its ground handling agent in respect of export, import and transshipment cargo consignments. Under the said agreement, Airfreight was to receive payment from the owners of the cargo for the work done, had to engage the services of required number of workers for handling the cargo and be responsible for payment of wages to the workers. It was also required to pay a licence fee to IAAI, linked to the total revenue realized by it. (minimum being Rs. 12 lacs, maximum being Rs. 43.50 lacs plus an agreed percentage of the revenue over and above 60 lacs). IAAI had no privity of contract, obligation or responsibility towards the workers employed by the Airfreight. 3. In the year 1985 IAAI decided to take over the ground handling work and entrust it to a new licencee by inviting competitive tenders. Therefore, by letter dated 19.9.1985 IAAI informed Airfreight that the ground handling agency operations should be handed over to its officers on 31.10.1985. Thus from 1.11.1985, A....
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....plex to the society, on terms to be mutually agreed or in the alternative absorb the ex-employees of Airfreight on its permanent rolls and till then maintain status quo. During the pendency of the said writ petition, an agreement was entered on 1.7.1986 under which the society agreed to provide 70 loaders cum packers at the Madras Air Cargo Complex on a consolidated monthly payment of Rs. 45,870. It was further agreed as follows: (i) that the said arrangement would be in force for a period of six months; (ii) that if any additional loaders-cum-packers were required by IAAI, the society will provide them at the rate of Rs. 15 per manshift; (iii) that IAAI would sympathetically consider the society's request for increasing the monthly payment to Rs. 50,000; (iv) that the agreement would be implemented within 10 days; and (v) that W.P. No. 5164 of 1986 would be withdrawn voluntarily. The agreement confirmed that the settlement had been arrived at without any pressure from either side, in mutual interest, for the smooth operation of the cargo complex. In view of it, when W.P. No. 5164 of 1986 came up on 2.7.1986, the learned Counsel submitted that the matter was settled out of cour....
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.... society's bills; and if fines had no effect, IAAI would have the right to terminate the contract by giving a month's notice and forfeit the security deposit (vide Clause 9); (f) that the society would carry out the jobs as per the specifications of IAAI and to its satisfaction, and in case of any complaints by IAAI either as regards the nature of service or as regards the personnel doing the same, the society would attend to the complaints promptly (vide Clause 12); and (g) that the society, apart from being in constant touch with the officers of IAAI, through an authorized representative, would also have a supervisor employed on round-the-clock basis at the cargo complex to supervise, control and ensure proper execution of the work assigned to the loaders-cum-packers and to co-ordinate with IAAI (vide Clause 17). 8. The society entered into a fresh agreement dated 11.12.1987 agreeing to provide loaders-cum-packers at the Madras airport complex, for a period of two years from 1.9.1987. The lump sum payment by IAAI was revised as Rs. 60,000 per month for providing 70 loaders and three supervisors. It was agreed that the said amount had been determined by assuming the min....
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....onal Cooperative Service Society, their Contractor. If not, to what relief the concerned workmen are entitled? Fifth Round 11. In the meanwhile IAAI issued a tender notice dated 19.11.1990 inviting tenders for the cargo handling work at the Air Cargo Complex. The said tender notice was challenged by the first respondent Union in W.P. No. 18560 of 1990. In that petition, the first respondent Union inter alia contended that the IAAI had no valid registration of its establishment under Section 7 of the CLRA Act and therefore the contract labour namely the workers employed by the society should be treated directly employed by IAAI. The said writ petition was dismissed by the High Court by order dated 6.12.1990 holding that in the absence of a notification under Section 10 of the CLRA Act, prohibiting employment of contract labour in regard to the process of cargo handling, and in the absence of any material to show that the workers were deemed to be workmen of IAAI, the appropriate remedy was to agitate the matter before the concerned labour authority instead of filing a writ petition. The said order of the learned Single Judge was challenged by the union by filing a writ appeal ....
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..... No. 11683/1985 filed by the workers' union, amounted to a settlement which was not valid, as IAAI was in a dominant position to dictate terms and compel the workers union to enter into the settlement to circumvent the provisions of law and deprive the legitimate right of the workmen to permanent status. (b) The said memo of IAAI requiring the workers to form a society was a ploy adopted by IAAI to defeat the legitimate claim of the workers to permanent status to which they were entitled as they had worked for 5 to 14 years previously under Airfreight and thereafter under the IAAI who was the principal employer and after the termination of the handling agency of Airfreight, their workers became the direct employees of IAAI. (c) After the termination of the handling agency in favour of Airfreight, its employees were directly engaged by IAAI and received salary from IAAI. Thus they became the direct employees of IAAI from November 1985. Once the workers became its employees, IAAI could not change their status from direct workers to indirect workers. (d) Even when the workmen were working as contract labour through the society, IAAI was exercising direc....
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....001 allowed the appeal and set aside the order of the learned Single Judge and restored the award of the Tribunal. The Division Bench was of the view that when the Tribunal had recorded a finding of fact that the contract labour were under the direct supervision and control of IAAI, that they were paid salary directly by IAAI, that they were subjected to suspension and other disciplinary control by IAAI, that the contract between IAAI and the society was sham and nominal, the consequential finding that they were the direct employees of IAAI ought not to have been disturbed by the learned Single Judge. The Division Bench was of the view that the findings recorded by the tribunal were unexceptionable. The said decision is under challenge in this appeal. The legal background and questions for decision 16. When the learned Single Judge considered the matter, the legal position was governed by the decision in Gujarat Electricity Board v. Hind Mazdoor Sabha (1995) IILLJ 790 SC, partly modified by Air India Statutory Corporation v. United Labour Union (1997) ILLJ 111 3SC . By the time the Division Bench decided the writ appeal, the decision of the Constitution Bench in Steel Authori....
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.... relief to the workmen of the erstwhile contractor even if the labour contract is abolished by the appropriate Government under Section 10 of the Act. In view of the provisions of Section 10 of the Act, it is only the appropriate government which has the authority to abolish genuine labour contract in accordance with the provisions of the said section. No court including industrial adjudicator has jurisdiction to do so. 18. Gujarat Electricity Board was partly overruled in Air India in regard to the question whether on abolition of contract labour system, the contract labour have to be automatically absorbed by the principal employer, this Court held as follows in Air India: The moment the contract labour system stands prohibited under Section 10(1), the embargo to continue as a contract labour is put an end direct relationship has been provided between the workmen and the principal employer. Thereby, the principal employer directly becomes responsible for taking the services of the workmen hitherto regulated through the contractor. The linkage between the contractor and the employee stood snapped and direct relationship stood restored between the principal employer ....
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.... is sham, nominal and merely a camouflage, when there is no prohibition notification under Section 10(1) of CLRA Act. 20. But where there is no abolition of contract labour under Section 10 of CLRA Act, but the contract labour contend that the contract between principal employer and contractor is sham and nominal, the remedy is purely under the ID Act. The principles in Gujarat Electricity Board continue to govern the issue. The remedy of the workmen is to approach the industrial adjudicator for an adjudication of their dispute that they are the direct employees of the principal employer and the agreement is sham, nominal and merely a camouflage, even when there is no order under Section 10(1) of CLRA Act. The industrial adjudicator can grant the relief sought if it finds that contract between principal employer and the contractor is sham, nominal and merely a camouflage to deny employment benefits to the employer and that there is in fact a direct employment, by applying tests like: who pays the salary; who has the power to remove/dismiss from service or initiate disciplinary action; who can tell the employee the way in which the work should be done, in short who has direction ....
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....oyment of contract labour in the process/operation of cargo handling work, whether the workmen employed as contract labour are entitled to claim absorption? 22. In the claim statement filed before the Tribunal, the specific case of the first respondent representing 88 workers was two-fold. The first was that they were employed as direct casual labour in IAAI from November, 1985 and July, 1986; that when the union filed W.P. No. 11683/1995 seeking regularization of the workers, IAAI made the union to agree for the terms of a memorandum filed in the said proceedings, as a result of which their status was changed to that of contract labour through the society which became an intermediary; and that as there was no settlement as defined in ID Act and as there was no notice under Section 9A of the ID Act before effecting change in status of the said workers, the introduction of the contract between IAAI and the society whereby the direct employees were converted into contract labour, was violative of provisions of ID Act. The second was that the cargo handling (loading, unloading and packing operations) was one of the main functions of IAAI, that in Calcutta and Bombay Airports, IAAI ....
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....indings of fact. Reliance is placed on the decisions of this Court in Indian Overseas Bank v. IOB Staff Canteen Workers' Union (2000) ILLJ 1618 SC and R.K. Panda v. Steel Authority of India 1994 (5) SCC 204. It is true that in exercising the writ jurisdiction, the High Court cannot sit in appeal over the findings and award of the Industrial Tribunal and therefore, cannot re-appreciate evidence. The findings of fact recorded by a fact finding authority should ordinarily be considered as final. The findings of the Tribunal should not be interfered in writ jurisdiction merely on the ground that the material on which the tribunal had acted was insufficient or not credible. It is also true that as long as the findings of fact are based on some materials which are relevant, findings may not be interfered with merely because another view is also possible. But where the Tribunal records findings on no evidence or irrelevant evidence, it is certainly open to the High Court to interfere with the award of the Industrial Tribunal. In this case, the grounds on which the union sought relief of absorption and the grounds on which the Tribunal ultimately granted relief are completely different....
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.... someone else, or enter into a contract labour agreement, or get the work done directly. But before IAAI could choose or finalize an alternative arrangement, ex- employees of Airfreight, through the Airfreight workers' Union which subsequently became the International Air Cargo Workers' Union (first respondent herein) approached the Madras High Court in Writ Petition No. 11683 of 1985 with a prayer that IAAI should employ the workers employed by Airfreight in regard to ground handling operations and should not recruit any other person. 25.2 IAAI being a statutory authority, being under an obligation to act fairly, wanted to mitigate the hardship to the workers of Airfreight (loaders and packers), as a consequence of terminating the cargo ground handling contract of Airfreight. After considering the matter, it therefore, filed a memo before the court unilaterally indicating certain steps. It proposed to mitigate the hardship of such workers. The steps indicated were: (a) Workers of Airfreight who were engaged in the cargo handling operation could form a cooperative society; (b) Till it made its own arrangements, IAAI would consider accommodating the ex-l....
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....as contract labour, effected by IAAI. 26.1 As notice above, these workers were the permanent employees of Airfreight. When Airfreight ceased to be the ground handling agent, it was Airfreight's responsibility to deploy its workers elsewhere. But knowing that Airfreight may not continue them in service in view of termination of the licence, these workers requested IAAI to offer them employment. Though there was no obligation to offer them employment or give any other relief, on humanitarian grounds and to mitigate the hardship of these workers, IAAI proposed that if the workers formed a co-operative society, it may consider giving the cargo handling work to such society so that the workers of Airfreight can earn their livelihood. It also agreed purely as an interim measure to employ them as casual labourers till the formalities of formation of the society and the society entering into a contract with IAAI were completed. Therefore the direct casual employment given to the workers was purely an interim or ad hoc measure as a part of the package proposal made by IAAI in its memorandum filed before the High Court, duly recorded by the High Court in W.P. No. 11683 of 1985, and ac....
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....his was recorded by the court while dismissing the writ petition filed by the workers' union. The workers are not entitled to put forth a contention contrary to the proposal/scheme of IAAI recorded by the High Court in the order dated 12.12.1985 passed in W.P. No. 11683 of 1985. Therefore, the question of violation of Section 9A of ID Act does not arise. 27. The third finding is that the contracts dated 1.7.1986, 14.7.1986 and 11.12.1987 between society and IAAI for supply of contract labour was sham and nominal. 27.1 We have already referred to the circumstances in which the said contract labour agreement was executed. To repeat, the workers were the regular and permanent employees of Airfreight till 31.10.1985. When Airfreight ceased to be the ground handling agent, apprehending retrenchment by Airfreight, the workers appealed to the IAAI to provide them some employment. They also approached the High Court in a writ petition. IAAI categorically stated that it cannot absorb them. Purely as a humanitarian measure and to mitigate their hardship, the IAAI offered to entrust the work of handling of cargo to a society formed by these workers and the workers through their unio....
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....of IAAI : direct payment of wages, direct penal action by IAAI against the contract labour, and direct control and supervision of contract labour by IAAI. Therefore, the contracts for supply of contract labour were `paper' contracts and a camouflage to deny benefits of labour laws to the members of first respondent Union. 28.1 We will first examine whether there was any material at all to hold that the wages were being directly paid by IAAI to the contract labour. The contracts between IAAI and the society make it crystal clear that a lump sum consideration was to be paid by the IAAI to the society and the society was responsible for payment to its members who were send as contract labour. The workers did not produce any document to show that the payment was made by IAAI directly to the workers. But The Tribunal wrongly held that Ex. W-1 to W-6 showed that the payment was directly made. Ex. W-1 is an appointment letter dated 31.1.1978 issued to one Godaraman by Airfreight. Ex.W-2 dated 31.10.1983 is a pay-slip of one D. Natarajan issued by Airfreight. Both these documents relate to the period prior to 31.10.1985 when the workers were the permanent employees of Airfreight, an....
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....at IAAI was directly taking action against the contract labour. None of them is relevant. Ex.W-10 is a letter dated 7.3.1990 from IAAI to the society, stating that one Ram Chander, loader-cum-packer had given an assurance to work in a disciplined manner and therefore it was decided to allow him to work. This is not a communication addressed to the contract labour but to the society informing the society that Ram Chander may be permitted to work in view of his assurance to behalf properly. M-15 to M-17 are 3 letters dated 9.3.1987, 16.6.1988 and 11.6.1990 addressed by IAAI to the society regarding the allotment of contract labour and their identification. Ex.M-21 is a letter dated 20/22.2.1991 from IAAI to the society for supply of contract labour. Ex.M-23 is a letter dated 14.5.1991 from IAAI to the society regarding duty roster. Ex.M24 is a letter dated 2.12.1987 from IAAI to the society informing that there is no improvement in the attendance of the contract labour, and requesting the society to take necessary action to improve their attendance. Ex.M25 to 31 and 34 to 40 are letters complaining about pilferage and other irregularities committed by the contract labour noticed by s....
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.... In the light of our findings on the two questions the order of the Division Bench cannot be sustained and is liable to be set aside and the order of the learned Single Judge has to be restored. We may however note that the last direction given by the learned Single Judge that in the event of the Central Government issuing a notification under Section 10 of CLRA Act, all those who had worked as contract labour under the contract between IAAI and society should be absorbed in the same manner as was directed by this Court in Air India is a direction which is bad in law, as subsequent to the said decision of the learned Single Judge, this Court in SAIL, reversed the decision in Air India. IAAI did not challenge the said direction. SAIL has also made it clear that the decision in Air India is overruled prospectively and any declaration or direction issued by industrial adjudicator or High Court for absorption of contract labour following the judgment in Air India shall hold good and shall not be set aside, altered or modified on the basis of the decision in SAIL. Therefore, the said direction of the learned single Judge which has attained finality, as IAAI did not challenge the same, i....