Week 11 Class 2.pptx FACTORIES ACT 1948 W11C2

Parimal Chandra Raha V. Life Insurance Corporation of India, AIR 1995 SC 1666 (Direct Control & Supervision)

Appellants claimed that they were employed in the canteen for decades but are paid below the canteen employees rate in different governmental departmental canteens. They made a claim for regularization, by stating that the provision of canteen facilities formed a part of conditions of service for employees and staff of the respondent company. Thus the running of the canteen was incidental to the running of the business and they are workmen working under the respondent.

Thus the appellants asked for a writ of mandamus for the government run establishment to follow the principle of equal pay for equal work – the court held implicit in this is the prayer for relief of them being deemed regular employees of the corporation.

The respondent claimed that the canteen was not run by it. The corporation only gave the employees the facilities to run the canteens. The canteens were run by canteen committees of the staff or through the contractors. The appellants were engaged by the contractors. It has no connection with the appellant.

Single judge directed the respondents to pay minimum salary as paid to regular staff, and to treat the appellants like regular staff and give them all service benefits as regular staff. The division bench set aside the decision on appeal. The decision of the division bench was further appealed.

1. FACTORIES ACT 1948 W11C2

2. Parimal Chandra Raha V. Life Insurance Corporation of India, AIR 1995 SC 1666 (Direct Control & Supervision) Appellants claimed that they were employed in the canteen for decades but are paid below the canteen employees rate in different governmental departmental canteens. They made a claim for regularization, by stating that the provision of canteen facilities formed a part of conditions of service for employees and staff of the respondent company. Thus the running of the canteen was incidental to the running of the business and they are workmen working under the respondent. Thus the appellants asked for a writ of mandamus for the government run establishment to follow the principle of equal pay for equal work – the court held implicit in this is the prayer for relief of them being deemed regular employees of the corporation. The respondent claimed that the canteen was not run by it. The corporation only gave the employees the facilities to run the canteens. The canteens were run by canteen committees of the staff or through the contractors. The appellants were engaged by the contractors. It has no connection with the appellant. Single judge directed the respondents to pay minimum salary as paid to regular staff, and to treat the appellants like regular staff and give them all service benefits as regular staff. The division bench set aside the decision on appeal. The decision of the division bench was further appealed.

3. Main question: should the appellants be deemed to be regular employees of the respondent corporation? Held: - Section 46 of the Factories Act 1948 requires a factory with 250 or more workers to have a canteen for its workers The Factories Act is not applicable in the present instance, it is the shops and establishment Act which is applicable. On perusal of various decisions, the court held; When it is statutorily obligatory under the FA or otherwise to provide a canteen, the canteen becomes a part of the establishment and the workers employed in it are employees of the management Where it is not statutorily obligatory to provide a canteen, but it is an obligation on the employer to have a canteen, the canteen becomes a part of the establishment and the workers become employees of the management. The obligation to provide a canteen is different from the obligation to provide facilities to run a canteen. The latter does not make the canteen a part of the establishment Obligation to provide a canteen may be implicit or explicit. It is a question of fact. Where providing a canteen becomes pat of the service conditions of employees, the canteen becomes part of the establishment and the workers become employees of the management. Whether a particular facility or service has become implicitly a part of the service conditions of employees depends on the nature of service/ facility, contribution of service to employee efficiency etc

4. In the current facts scenario, the canteen services had been provided to the employees of the LIC for a long time and it was the LIC which had been from time to time taking steps to provide the said services. The canteen committees, the corporative societies of the employees and the contractors entrusted to manage the canteens had only been acting for and on behalf of the LIC. It was the LIC which had been appointing the contractors and entering into agreements which were in the nature of directions regarding the manner in which the canteens were to be run. Both the appointment of the contractors and the tenure of the contract was as per the stipulations made by the LIC in the agreement. Even the prices of the item served, the place where they should be cooked, the hours during which and the place where they should be served, were dictated by the LIC. Besides, the LIC had also reserved the right to modify the terms of the contract unilaterally and the contractor had no say in the matter. Further, the infrastructure for running the canteen, viz, the premises, furniture, electricity, water etc. was supplied by the LIC. The canteen service was essential for the efficient working of the employees and of the offices of the LIC. Moreover, the employees of the LIC had been making complaints about the poor and inadequate service rendered by the canteen to them, and the LIC had been taking steps to remedy the defects in the canteen service. Additionally, whenever there was a temporary breakdown in the canteen services, due to agitation or strike by the canteen workers, it was the LIC which took an active interest in getting the dispute resolved and canteen workers had also looked upon the LIC as their real employer.

5. Thus, the canteens had become part of the undertaking. The canteen committees, the cooperative societies of the employees and the contractors engaged from time to time were in reality the agencies of the LIC and are only a veil between the LIC and the canteen workers. Therefore, canteen workers are in fact the employees of the LIC . Regarding issue (2), since canteen workers are employees of the LIC, they are certainly entitled minimum salary. However, the canteen workers have claimed wages equal to the minimum salary of the lowest paid Class IV employees (i.e. lowest paid employees of the LIC). However, there is distinction between the present service conditions of the canteen workers and other Class IV employees of the LIC. For example, the canteen workers get free food and free tea. Their hours of service differ. In addition, there are also different categories of canteen workers. It is not possible for the Court to evaluate the work done by each of the categories. Therefore, the LIC themselves will have to prescribe appropriate service conditions for the canteen workers.

6. Indian Petrochemicals Corporation Ltd. V. Shramik Sena, AIR 1999 SC 2577 (Statutory Canteen) Relief claimed: that the workmen be declared regular workmen of the management and they get the same pay scales and service conditions as applicable to regular workmen. Facts: workmen were working in the canteen of a factory where the FA was applicable. They were employed through contractors – M/s Rashmi Caterers. Canteen was a statutory canteen. Workmen claimed that the canteen was maintained for tHe benefit of those employed in the factory, the management had direct control over the workmen and the contractor had no control over the management, functioning and administration of the canteen. They also claimed the work was perennial and incidental to the work of the establishment. Therefore they are regular workmen, but the management was treating them as contract workers. Held: - It is clear from the definition of Section 46 of the Factories Act that a person employed either directly or by or through any contractor in a place where manufacturing process is carried on, is a `workman' for the purpose of this Act.  Section 46 of the Act empowers the State Government to make rules requiring any specified factory wherein more than 250 workers are ordinarily employed to provide and maintain a canteen by the occupier for the use of the workers. Here, it is not disputed that the management is providing canteen facilities wherein the respondent employees are working.

7. The Supreme Court came to the conclusion that workmen of a statutory canteen would be the workmen of the establishment for the purpose of the Factories Act only and not for all other purposes. The FA governs relationship between the employer and employees only for the requirements of the FA. It does not extend to continuity of service, seniority, pension and other benefits of regular employees. But here, the Supreme Court considered it necessary to understand the nature of the employer-employee relationship to answer whether the workmen are permanent employees of the management's canteen for all purposes. It was found that the canteen had been there since the inception of the factory and the workmen had been employed for long years and despite change of contractors the workers have continued to be employed in the canteen. The premises, furniture, fuel, utensils etc are provided by the appellant. Wages are reimbursed by the appellant. Supervision and control according to the terms of contract were by the appellant. The contractor is nothing but an agent or a manager of the appellant, who works completely under the supervision, control and directions of the appellant. Thus, it was finally concluded that workmen are permanent employees of the management's canteen for all purposes On the last issue the Supreme Court considered it is necessary that in this process suitable guidelines or conditions be laid down at the time of Courts issuing directions to regularise the services of the workmen so concerned depending upon the facts of each case

8. The Court relied on the decision of Parimal Chandra Raha & Ors . v. Life Insurance Corporation of India & Ors ., [1995] Supp. 2 SCC 611. The very fact that the management was required to statutorily provide canteen facilities to its factory staff under Section 46 of the Factories Act itself was sufficient to come to the conclusion that the workmen so employed to provide canteen facilities would become the regular employees of the principal employer. Also, under the definition of ‘workman’, It is clear from this definition that a person employed either directly or by or through any contractor in a place where manufacturing process is carried on, is a `workman' for the purpose of this Act. The both the appeals of the Company as well as the workmen were dismissed as discussed above along with necessary costs.

9. H.S. Sharma V. M/s. Artificial Limbs Manufacturing Corpn ., AIR 2002 SC 226 ( Control&Supervision ) Facts: respondent 1 was a government undertaking set up to promote, encourage and develop the availability, use, supply, distribution at reasonable cost of artificial limbs to needy persons, especially disabled defense personnel. So it set up a factory with 700+ persons employed. It also set up a canteen for its employees. Agreements were entered into with different contractors from time to time, to prepare and serve food at the canteen. One contractor was the respondent 2 – Aditya Shuk la. Appellant claimed that they were employed by several contractors and had been serving for several yea rs. during pendency of contract with respondent 2, the appellants raised an industrial dispute claiming to be regular workers of respondent 1. Dispute was referred to the labour court. labour court concluded that they were employees of respondent 2, not 1. appellants filed a writ in th e HC and the HC dismissed the petition, viewing it as pertaining more to abolition of contract labour and absorption. Appealed again.

10. Appellants argued: - They were not asking for abolition of contract labour but for the court to decide whether they should be considered regular employees of R1. - R1 was bound by section 46 of the FA 1948, and was bound to set up a canteen under section 46. thus, R1 was obliged to maintain the canteen under statute and it was part of R1’s establishment. so the appellants were employees of R1. Appellants also claimed that the terms in the contract between contractor and R1 showed that the appellants were under the direct supervision and control of R1. thus the appellants continued to be employes in the canteen despite several changes of contractors and they were R1’s employees. Respondent argued: Appellants had never claimed it was a sham contract between R1 and the contractor. Now they could not bring up that claim. Further, t he LC had already examined evidence and concluded that the appellants were not employees of R1. in any case, the facts showed that R1 had no control over appointment, continuation or dismissal from service of the appellants.

11. SC held: Cannot uphold submission that appellants are employees of R1 just because the canteen was set up under a statutory obligation. It cannot be said that whenever a canteen is set up under a statutory obligation that the employees become employees of the establishment. It would depend on how the obligation is discharged by the establishment. It may be wholly or substantially carried out by the establishment, or through the independent contractor. Nothing in the FA or section 46 points to the mode of setting up a canteen – it is left to the employer’s discretion. Even if FA was applicable to respondent 1 (it was contested here) still, that alone cannot mean the canteen employees because R1’s employees. In the parimal Chandra raha case, and the Indian petrochemicals v shramik sena case, the court considered the provisions of the FA and concluded that the workmen of a statutory canteen would be workmen of an establishment only for the purpose of the FA and not for all other purposes unless proved that the establishment exercised complete administrative control over the employees in the canteen. It has often been found that contractor’s employees are de facto emplyees of the establishment. But here from the agreement it is clear that although R1 agreed to provide the contracto r with basic infrastructure, the running of the canteen was given to the contractor alone. So while the R1 provided furnishings etc , the contractor had to indemnify R1 for damage to these items caused by him or his employees. Repair and maintenance also lay with he contractor. Contractor had to ensure the raw material was free from adulteration, contamination etc

12. The contractor was obliged to provide all facilities to the workers under labour law. The contractor was also liable financially unde r these labour laws, and had to indemnify R1 if R1 suffered a loss due to the contractor’s non-compliance. Under the agreement contractor was responsible for EPF, ESI payment of wages etc. R1 paid the contractor every month for salary, statutory expenses and neutralizing raw material price hike, but this was only to preserve the contractor’s margin. Simply because the employer provided the rate of food, did not mean it was running the canteen. Contractor had discretion under th e agreement to employ workers in the canteen and could take action against them. R1 had no say in employment choice. There was no obligation on the contractors to take employees who had served under old contractors. But even if the agreement had a clause which required that old employees were retained, it would not mean those employees were employees of the establishment. It may be a clause just to protect livelihood. Cannot lead to the presumption of right of regularization. It is a question of fact whether the contract is a mere smokescreen to camouflage the employer employee relationship. Could not hold the findings of the LC perverse because it found: Contractor would supervise and control the employees and pay their salaries R2 bought the raw material R1 had no say in selection of employees or procedure R1 did not record attendance or pay salaries, and did not supervise the workers.