1. Heard.
2. In W.P. No. 4804 of 2020, the School Management challenges the Award dated 10.07.2019 passed by the I Additional Labour Court in I.D. No. 254 of 2017. By the impugned Award, the Labour Court has directed as follows:—
“This court holds that the claim of the petitioner’s union to regularize the employment of all employees from the category of contract workers to the regular workers from the date of their employment with the scale of pay, pay arrears, leave salary and all other benefits claimed by the petitioner union is lawful, and justified. The respondents 1 and 2 are directed to extend the said benefits within one month from the date of this order. No costs.”
3. The writ petition was admitted on 26.02.2020, and an interim stay was granted. Upon notice, the contesting first respondent entered appearance, and this Court passed the following interim order:—
“In that view of the matter, the interim order earlier granted on 26.02.2020 is extended till the next hearing on condition that the Petitioners shall deposit the entire monetary benefits due as per the impugned order from the date of termination till the date of filing of the Writ Petition in an interest fetching fixed deposit in the name of the Presiding Officer, I Additional Labour Court, Chennai in any Nationalized Bank in Chennai initially for a period of one year and renewable automatically for the same period from time to time and hand over the original Fixed Deposit receipt to the I Additional Labour Court, Chennai along with a working-sheet showing calculation of the amount deposited, under written acknowledgment and file proof of such compliance before the Registrar (Judicial) of this Court by 02.11.2020 without fail.”
4. By an affidavit dated 25.02.2020, the writ petitioner informed this Court that the workmen, who continued to be in employment, had filed claim petitions before the Labour Court in C.P. Nos. 168 and 169 of 2019, seeking wages totaling Rs.6,62,09,053/- against the School Management. In the meantime, during the Covid-19 lockdown, while the School Management continued to pay wages to other teachers and employees, it failed to pay lockdown wages to the workers covered by the Award. Consequently, two applications, W.M.P. Nos. 22191 and 22192 of 2021, were filed seeking (i) to vacate the interim stay granted on 22.09.2020 and (ii) to restrain the School Management from altering the service conditions of the workers covered by I.D. No. 254 of 2017. However, no orders were passed on these applications. The first respondent Trade Union also filed a counter affidavit dated Nil of January 2021.
5. In the meantime, when the matter was taken up on 07.02.2025, this Court directed the parties to appear before the Tamil Nadu Mediation and Conciliation Centre attached to the High Court for an attempt at settlement. However, the Centre, by a report dated Nil, informed that no settlement was arrived at, and accordingly, the matter was posted for final disposal.
6. From the records, it is seen that the first respondent Union raised an industrial dispute under Section 2(k) of the Industrial Disputes Act, 1947, before the Government Labour Officer, Circle III, Chennai, by letter dated 04.09.2024, seeking a declaration that the workers represented by the Union, though engaged as contract workers, should be deemed to be employees of the petitioner School and be paid time-scale wages, along with arrears, on par with Government School teachers. The School Management, in its counter, contended that the workers represented by the first respondent Union were outsourced employees engaged through two contractors, namely, the second and third respondents, who are independent legal entities, and that the School had no direct relationship with the said workers. It was further asserted that there was no system of direct employment under the guise of contract labour and that the contractors, being the employers, had covered the workers under various labour legislations. The allegation that the contractors were mere benami entities of the petitioner School was specifically denied. Although notices were issued to the second and third respondents by the Labour Officer, they did not submit any remarks.
7. As the Conciliation Officer was unable to bring about a settlement, he submitted a failure report to the State Government under Section 12(4) of the Industrial Disputes Act, 1947, by his report dated 17.07.2015. Upon receipt of the report, the Government of Tamil Nadu declined to refer the dispute for adjudication before the Labour Court, vide G.O.(D) No. 600, Labour and Employment Department, dated 03.11.2015. In its order, the Government stated that, since the employees represented by the Union were contract employees, they were required to seek remedies under the provisions of the Contract Labour (Regulation and Abolition) Act, 1970.
8. Aggrieved by the refusal of reference by the Government, the first respondent Trade Union filed a writ petition before this Court in W.P. No. 7499 of 2016, challenging the order declining to make a reference. After issuing notice to the parties, this Court allowed the writ petition and passed the following order:—
“2, A perusal of the impugned order would show that absolutely no reason has been assigned on receipt of the failure report from the Conciliation Officer. The role of the first respondent is rather limited. It cannot go into the merits of the case as sought to be canvassed by the learned counsel for the sixth respondent. The question as to whether the members of the petitioner are working under the sixth respondent or respondents 4 and 5 is a matter to be decided by the Labour Court.
3.In such view of the matter, the impugned order is set aside. Consequently, a direction is issued to the first respondent to refer the dispute to the jurisdictional Labour Court within a period of eight weeks from the date of receipt of a copy of this order. Accordingly, the writ petition stands allowed.”
9. Pursuant to the order passed by this Court, the Government issued G.O.(D) No. 328, Labour and Employment Department, dated 02.06.2017, thereby referring the dispute for adjudication before the Labour Court, Chennai, as set out in the Annexure to the Government Order. The terms of reference read as follows:—
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10. Upon receipt of the order of reference, the I Additional Labour Court took up the dispute as I.D. No. 254 of 2017 and issued notice to the parties. The first respondent Trade Union filed a claim statement dated 27.06.2017. In the claim statement, the case put forth by the Union, as set out in paragraphs 5, 7, and 8, as well as the reliefs sought in paragraph 11, are as follows:—
“5, …..The Regular employees on the rolls of the 1 st and 2 nd Respondent get salary as per Government time scale of pay in accordance with the Bye Law of the CBSE, but, the employees under the cover of ‘Contract workers” are paid less than 50% of their legitimate dues, since they are falsely termed as ‘Contract Worker’ to avoid liabilities under various Labour Laws.”
“7. …..The Labour Commissioner Officer, after verifying with the Respondents, through the Inspector of Labour-2, Chennai wrote to the Petitioner / Union vide his letter No.A/4087/2014 dated 22-12-2015 informing that there are two contractors by name M/s.Citadale Enterprises Pvt. Ltd and M/s. Service Care Pvt. Ltd under the 1 st and 2 nd Respondents supplying labours for doing sanitary jobs but they are not licensed contractors as required under law.”
“8. ...as already stated the 1 st and 2 nd Respondents are covered by the Bye-laws of CBSE and as per the said Bye-laws the employees working under the 1 st and 2nd Respondents are entitled to salary, leave and all other benefits on par with the government employees working in the similar categories and which is being granted to the employees on the rolls of the 1 st and 2 nd Respondent; the services of all the 46 workers mentioned in para2 above should be regularized as employees of Padma Seshadri Bala Bhavan Senior School herein, from the first date of their joining. They are entitled to receive time scale of pay as fixed by the Government and paid to the regular employees of the 1 st and 2 nd Respondents, from their first day of joining the service. These employees should be granted annual increments and arrears of salary also from that date.”
“11. … the Petitioner/Union humbly prays that this Hon’ble Court may be pleased to pass an award directing the 1 st and 2 nd Respondents to regularize all the employees now working under the cover of “Contract Labours” as employees of the Management of M/s. Padma Seshadri Bala Bhavan Senior Secondary School, Chennai, from the first date of their joining the services, fit them in proper time scale of pay from the first date of their joining the services and grant all leave and other facilities that are being granted to the employees on the rolls of the 1 st and 2 nd Respondents, and also to pay the arrears arising out of the difference of salary due as per Government scale of pay and the salary actually paid from their first joining the service and pass such other order or orders as this Hon’ble Court may deem fit and proper in the circumstances of the case and thus render justice.”
11. Curiously, while the first respondent Union sought regularization of the workers as against the writ petitioners, it also impleaded the second and third respondents—being the contractors who had entered into agreements for supply of labour with the petitioner School—as parties to the industrial dispute. The petitioner School filed a counter statement dated Nil of January 2019, wherein it specifically denied any employer-employee relationship with the workers represented by the first respondent Union. It was further contended that the workers supplied by the second and third respondents could not claim any rights under the CBSE Affiliation Bye-laws and would be governed solely by the terms and conditions of employment prescribed by their respective contractors.
12. The 2 nd Respondent filed a counter statement dt. Nil, February 2018. In that counter statement, they admitted the recruitment of 20 workers represented by the 1 st Respondent Union and also claimed that the relevant labour legislations such as PF and ESI were also extended to those employees. In para 3 of the counter statement it was stated as follows:-
“The said 20 Employees are the employees of the Third Respondent herein. Therefore, there is no question arises whether they are employees of Respondents 1 & 2 or not All the Interviews are conducted and Appointments are made by this Respondent for the above employees. All their Salaries are paid / transferred every month to the respective bank accounts through this Respondent’s Bank Account only. The provident fund, Employees Provident Fund / Employees State Insurance Corporation, are being paid through this Respondent accounts viz., TN/MAS/49456 and 51000758060001011 respectively. All the Pay Slips and Sign Slips are being provided by this Respondent to all the above employees. The employees are carrying / wearing / holding the Identity Cards of this Respondent only from the date of appointment till date. All the salaries are fixed based on the Tamilnadu Minimum Wages Act for Shops and Commercial Establishments for all the above employees where basic salary and dearness allowance are paid as per the Act.”
13. In support of their stand, the second respondent filed several documents, which were subsequently marked during the trial, including the agreement dated 01.07.2016 between the second respondent and the petitioner Management (Exhibit M3), the EPF Annual Statement (Exhibit M5), the ESI e-Pehchan Card (Exhibit M7), and the License for supply of contract labour dated 28.07.2017 (Exhibit M8). The third respondent also filed a written statement dated Nil, January 2018, wherein they admitted to having supplied 18 workers to the petitioner Management, three of whom had subsequently left their employment. It was further stated in paragraph 9 that, since the number of employees supplied by them was less than 20, the requirement of obtaining a licence under the Contract Labour (Regulation and Abolition) Act, 1970, did not arise.
14. In support of their written statement, the third respondent also filed several documents, which were subsequently marked as exhibits during the trial. These included the agreements entered into between the third respondent and the petitioner Management dated 01.06.2009, 01.07.2011, 01.07.2014, and 01.07.2016 (marked as Exhibits M9, M10, M12, and M13 respectively). The EPF Annual Statement was marked as Exhibit M16, and the ESI e-Pehchan Card was marked as Exhibit M18.
15. Before the Labour Court, the President of the first respondent Union was examined as WW1. On behalf of the workmen, 35 documents were filed and marked as Exhibits W1 to W35. In addition, three other witnesses were examined: Shanthi (WW2) and M. Vela (WW3), who were allegedly contract labourers supplied by the second and third respondents, and R. Murugan (WW4), who was a regular employee. During crossexamination, WW1 made the following admissions:—
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16. Shanthi, who was examined as WW2 and was one of the workers supplied by the third respondent, made the following admissions:—
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17. M. Vela, who was examined as WW3, made the following admissions during his cross-examination:—
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18. One Murugan was examined as WW4, who was a direct employee of the Petitioner School and who was examined to show the difference in his wages paid to the employees under Labour supply contract. The admissions made by him were as follows:-
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19. On behalf of the petitioner Management, no witnesses were examined. However, on behalf of the second respondent (cited as the third respondent before the Labour Court), one Anuroop was examined as MW1. Similarly, on behalf of the third respondent (cited as the 4th respondent before the Labour Court), one Shenbagarajan was examined as MW2. On their side, 33 documents were filed and marked as Exhibits M1 to M33. Upon analysing the materials placed on record and examining both the oral and documentary evidence, the Labour Court passed its final Award dated 10.07.2019. In paragraph 29 of the Award, it was held that the 1 st respondent Union had proved that the petitioner Management, along with the 2 nd and 3 rd respondents, had engaged in unfair labour practices with the object of depriving the employees and members of the first respondent Union of their rightful entitlements.
20. Therefore, it passed the following Award: -
“This court holds that the claim of the petitioner’s union to regularize the employment of all employees from the category of contract workers to the regular workers from the date of their employment with the time scale of pay, pay arrears, leave salary and all other benefits claimed by the petitioner union is lawful, and justified. The respondents 1 and 2 are directed to extend the said benefits within one month from the date of this order. No costs.”
1. In its Award, the Labour Court recorded its findings in paragraphs 8, 9, 10, 11, 13, 14, 16, 17, 19, 20, 21, 22, 23, 24, 27, and 28 as follows: —
2.
"Para 8:
Therefore the rival contentions with evidences adduced by them have to be analysed to ascertain whether the alleged contractual employment of the employees mentioned in para 2 of the claim petition by the respondents 1 and 2 through the respondents 3 and 4 is sham and nominal.
Para 9:
As far as the payment of salary and the granting of leave by the respondents 3 and 4 respectively with the identity cards of these respondents are all not disputed by the petitioner’s union who examined W.W.1 to W.W.4. Among these witnesses W.W.2 and W.W.3 are the employees who claimed regularization by the respondents 1 and 2 and they have categorically admitted that the payment of salary is made by these respondents.
Para 10:
Therefore these facts were pleaded and evidences were adduced to substantiate the contention of the respondents 3 and 4 that the employees mentioned in their written statement are their employees.
Para 11:
Therefore from these pleading and evidences, this court is able to find that the employees of the petitioner union are employed in the premises of the respondents 1 and 2 as stated by the petitioner union for the years, ranging from 2 to 18 years continuously but with the claim of the respondents that they are the contract employees of the respondents 3 and 4 respectively.
Para 13.
When the respondents 3 and 4 claimed to have control over these employees for payment of ESI and PF to their labourers, the petitioner union claimed that it is nothing but payment routed through R3 and R4 with a commission of 15% and nothing more than that. The petitioner union further referred the Clause 7 which provides for the deduction of salary even for the absence of ½ day or one day which retains control over the employees by the school.
Para 14:
Further referred Clause 10 which also provides for work under the school which is clear violation of the provisions of the Industrial Disputes Act. This would also amount to unfair labour practice u/s 2(ra) r/w 1(1) of the V Schedule in Industrial Disputes Act 1947. Therefore by referring these classes, it is contended by the petitioner union that there is no actual control by the contractor and these employees are controlled by the school management and that the alleged contract is sham.
Para 16:
Therefore the contention of the petitioner union that these petitioners are employed in the school premises of the respondents 1 and 2 and they are controlled by the respondent management applying the rules applicable for other regular employees by themselves are not decisive to decide whether the contract is sham and nominal or whether these members of the petitioner union are employees of the school management namely respondents 1 and 2.
Para 17:
In this case, there is a claim by the petitioner’s union that the employees were initially employed by the school and were later informed that they are the contractual employees of the respondents 3 and 4. Further the respondents 3 and 4 have not filed any documents to show their appointment order and the commencement of employment with them. At the same time, the evidences would substantiate the payment of salary by the respondents 3 and 4 to the accounts of the petitioner employees directly and not by the school. But at the same time, a contention is also advanced by the petitioner’s union that this payment is not made by the respondents 3 and 4 from their pocket and the payment is received from the school and paid to the employees after making a deduction of 15% commission. Therefore this claim of payment of salary by the respondents is also shown to be not genuine.
Para 19:
The first point is who is the appointing authority When it is claimed by the respondents 3 and 4 that they are the actual appointing authorities, the employees of the petitioner union have claimed that the respondents 1 and 2 alone have appointed them and categorize them as contractual employees of the respondents 3 and 4. The employment of these employees ranging from 2 to 18 years is evident from these pleadings and evidences and the respondents 1 to 4 have not filed any documents showing that the respondents 3 and 4 have conducted interview and selected these persons for the employment in the school premises.
Para 20:
The provision of the said agreement also speaks about the right of the school management in withholding these salaries and in fixing the amount at particular time intervals. In the same way, the extent of control and supervision also is made by the respondents 1 and 2 though not directly on records but by having an agent outside in the name of contractors as respondents 3 and 4.
Para 21:
Hence the actual organization control and administrative control as claimed by the respondents 3 and 4 over these employee is not sustainable to these facts and circumstances and it is seen from these available facts established before this court, these employees were employed by the school management under the pretext of contractual employees for using regular work. This can be seen even from the document marked by the petitioner union as Ex.W10 and Ex.W11. Certificate of appreciation to Shanthi and Manjula.
Para 22:
Hence it is clear admission which would show that its recitals have been cleverly inserted in the agreement to hide the real facts of the employment of these employees for the regular employment of the school management under the guise of contractual employment. Thereforethe claim that they have been engaged for other works is not true.
Para 23:
It is further clear from the pleadings and evidences of the respondents that the respondents 3 & 4 were engaged only for supply of manpower to the respondents 1 &2. Further it is a clear evidence that the work is a perennial one, the ultimate control of work is vested with the school management, the economic control is with the school and it is a clear form of violation of the provisions of the Industrial Disputes Act to avoid the benefits ensuring to the labours if they are shown as the regular employees of the respondents 1 and 2.
Para 24:
As far as the terms of employments and their regulations are purely governed by the provisions of the Industrial Disputes Act and further by the provisions of the Abolition of Contract Labour Act and the relevant citations thereto. Therefore this contention does not in anyway improve the case of the respondents either factualy or legally.
Para 27:
The actual dispute required to be answered by the Government in this case is the so-called employment of contractual workers by the respondents 1 and 2 through the respondents 3 and 4. These 19 employees are also employed through the respondents 3 and 4 and this reference is indicated as a whole, holding that the respondents 1 and 2 have engaged the workers under the guise of contractual employees through the respondents 3 and 4. Normally even for any monetary benefits of increase in wages or other benefits granted in a collective dispute will enure to the benefit to all the workers. So also in this case, this finding of this court about the contractual employment of the respondents 1 and 2 through the respondents 3 and 4 will ensure to all the employees employed with the respondents 1 and 2 through the respondents 3 and 4. Therefore this objection of the respondents is rejected.
Para 28:
These details of payment of salaries are available with the respondents. The burden of showing the fairness lies upon the respondents. Further it is also claimed that one of the worker died and some of them left the charge. These circumstances have clearly given an inference of some force exercised by the respondents 1 to 4 as against its workers."
22. Before the Labour Court, on behalf of the Petitioner School reliance was placed upon the following judgments of the Supreme Court: -
"a. Bharat Heavy Electricals Vs. Mahendra Prasad Jakhmola reported in 2019 (13) SCC 82.
b. General Manager (OSD), Bengal Nagpur Cotton Mills Vs. Bharat Lal reported in 2011 (1) SCC 635.
c. International Airport Authority of India Vs. International Air Cargo Workers’ Union reported in 2009 (13) SCC 374.
d. Balwant Rai Saluja Vs. Air India Ltd reported in 2014 (9) SCC 407.
e. Workmen of NilgiriCoop.Mkt. Society Ltd Vs. State of T.N. reported in 2004 (3) SCC 514."
23. A reading of the Award clearly reveals that the Labour Court failed to keep in mind either the terms of reference sent for adjudication or the ratio of the judgments brought to its notice. A perusal of the reference would show that the issue for consideration was whether the demand of the first respondent Union for converting 27 existing workers from their status as contract workers to employees of the petitioner School, and for extending to them time-scale pay from the date of their initial appointment along with arrears of pay, leave benefits, and other concessions, was justified, and if so, to pass appropriate orders to that effect.
24. The terms of reference made to the Labour Court consist of two parts. Firstly, the Government itself had proceeded on the basis that the workers were contract employees, and therefore the primary issue was whether they should be converted from contract employees to direct employees of the principal employer, namely, the petitioner School. It is only upon such conversion that the secondary issue — relating to their entitlement to time-scale pay from the date of joining, regularization, arrears of pay, and other service concessions — would arise for consideration.
25. It is not the case of the first respondent Union that the employment in which its members were engaged by the petitioner School was one where the engagement of contract labour had been abolished. On the contrary, the second respondent produced a valid licence for engaging contract labour (Exhibit M8). As for the third respondent, their stand was that, since they had engaged only 18 workers, the requirement of obtaining a licence under the Contract Labour (Regulation and Abolition) Act, 1970, did not arise — a position that was also accepted by WW1 during crossexamination.
26. In this context, it is necessary to note that, following the enactment of the Contract Labour (Regulation and Abolition) Act, 1970, Labour Courts exercising jurisdiction under the Industrial Disputes Act, 1947, no longer possess the authority to adjudicate disputes relating to the abolition of contract labour. Such power is now vested exclusively with the appropriate Government under Section 10(1) of the Contract Labour Act. The Supreme Court, in Vegoils (P) Ltd. v. Workmen, reported in (1971) 2 SCC 724, held as follows:—
“Under s. 10 of the said Act tin jurisdiction to decide matters connected with prohibition of contract labour is now vested in the appropriate Government. Therefore, with effect from February 10, 1971, it is only the appropriate Government that can prohibit contract labour by following the procedure and in accordance with the provisions of the Central Act. The Industrial Tribunal, in the circumstances, will have no Jurisdiction”.
27. This position of law was further affirmed by a Constitution Bench of the Supreme Court in Steel Authority of India Ltd. v. National Union Waterfront Workers, reported in (2001) 7 SCC 1. In paragraph 93 of the judgment, the Supreme Court explained as follows:—
“In Vegoilss case (supra), the question before this Court was: had the Industrial Tribunal jurisdiction to issue direction to the establishment to abolish contract labour with effect from the date after coming into force of the CLRA Act The appellantcompany had engaged contract labour in seeds godown and solvent extraction plants in its factory. The appellant took the plea that the type of work was intermittent and sporadic for which the contract labour was both efficient and economic. On the other hand, the union of the workmen submitted that the work was continuous and perennial in nature and that in similar companies the practice was to have permanent workmen; it claimed that the contract labour system be abolished and the contract labour be absorbed as regular employees in the concerned establishment of the appellant. The Tribunal having found that the work for which the contract labour was engaged was closely connected with the main industry carried on by the appellant and that the work was also of perennial character, directed abolition of contract labour system from a date after coming into force of the CLRA Act but rejected the claim for absorption of contract labour in the establishment of the appellant. On appeal to this Court, after pointing out the scheme of Section 10 of the Act, it was held that under the CLRA Act, the jurisdiction to decide about the abolition of contract labour had to be in accordance with Section 10, therefore, it would be proper that the question, whether the contract labour in the appellant industry was to be abolished or not, be left to be dealt with by the appropriate Government under the Act, if it became necessary. From this judgment, no support can be drawn for the proposition that absorption of the contract labour is a concomitant of the abolition notification under Section 10(1) of the Act.”
28. It is an admitted position that the Labour Court failed to address the specific aspect of the reference concerning whether the demand raised by the 1 st Respondent union — seeking absorption of contract employees as direct employees of the Petitioner Management — was justified. It is wellsettled that such an issue can be examined by an industrial adjudicator only under limited circumstances, namely where the engagement of contract labour has been abolished through a notification issued under Section 10(1) of the Contract Labour (Regulation and Abolition) Act, 1970, and a further dispute arises regarding the conditions of service of such labour under the Industrial Disputes Act, 1947. This principle has been authoritatively laid down by the Supreme Court in Steel Authority of India Ltd. v. National Union Waterfront Workers, wherein, at paragraph 125(5), it was held as follows:–
“On issuance of prohibition notification under Section 10(1) of the CLRA Act prohibiting employment of contract labour or otherwise, in an industrial dispute brought before it by any contract labour in regard to conditions of service, the industrial adjudicator will have to consider the question whether the contractor has been interposed either on the ground of having undertaken to produce any given result for the establishment or for supply of contract labour for work of the establishment under a genuine contract or is a mere ruse/camouflage to evade compliance of various beneficial legislations so as to deprive the workers of the benefit thereunder. If the contract is found to be not genuine but a mere camouflage, the so-called contract labour will have to be treated as employees of the principal employer who shall be directed to regularise the services of the contract labour in the concerned establishment subject to the conditions as may be specified by it for that purpose in the light of para 6 hereunder”
29. On the other hand, the Labour Court, instead of confining itself to the terms of the reference and, if necessary, holding that the reference itself was invalid, exceeded its jurisdiction by passing the impugned award beyond the scope of the reference. The learned counsel for the petitioners rightly contended that the Labour Court derives its jurisdiction strictly from the terms of the reference. In support of this proposition, reliance was placed on the judgment of the Supreme Court in Bhogpur Cooperative Sugar Mills Ltd. v. Harmesh Kumar, reported in 2006 (13) SCC 28, drawing attention to the following passage in paragraph 7:
“The Labour Court derived its jurisdiction from the terms in reference. It ought to have exercised its jurisdiction within the four corners thereof.”
30. Further reference was also made to the decision of the Supreme Court in Tata Iron and Steel Company Ltd. v. State of Jharkhand, reported in (2014) 1 SCC 536, wherein the following passage from paragraph 16 of the judgment was relied upon:—
“The Industrial Tribunal/ Labour Court constituted under the Industrial Disputes Act is a creature of that statute. It acquires jurisdiction on the basis of reference made to it. The Tribunal has to confine itself within the scope of the subject matter of reference and cannot travel beyond the same. This is the view taken by this Court in number of cases including in the case of National Engineering Industries Limited v. State of Rajasthan & Ors. (2000 (1) SCC 371). It is for this reason that it becomes the bounden duty of the appropriate Government to make the reference appropriately which is reflective of the real/ exact nature of “dispute” between the parties.”
31. Instead of addressing the legal issue regarding the validity of the reference and deciding it against the first respondent Union, the Labour Court took a shortcut by holding that the contracts between the petitioner Management and the second and third respondents were sham and nominal. Applying the "control test," the Labour Court concluded that the actual control over the workers vested with the petitioner Management. It further held that the claim made by the second and third respondents that they had independently recruited the employees was not believable, as no material had been produced to show that applications were called for or that interviews were conducted.
32. If the workers represented by the first respondent Union were initially engaged directly by the petitioner School and were subsequently sought to be routed through the second and third respondents, then the questions as to when the initial direct link was severed and when the purported contractual arrangement was established are matters to be proved through both oral and documentary evidence. The burden of proof lies upon the party alleging such facts. This principle was affirmed by the Supreme Court in R.K. Panda v. Steel Authority of India Ltd., reported in (1994) 5 SCC 304, wherein, at paragraph 7, it was held as follows:—
“7. It is true that with the passage of time and purely with a view to safeguard the interests of workers, many principal employers while renewing the contracts have been insisting that the contractor or the new contractor retains the old employees. In fact such a condition is incorporated in the contract itself. However, such a clause in the contract which is benevolently inserted in the contract to protect the continuance of the source of livelihood of the contract labour cannot by itself give rise to a right to regularisation in the employment of the principal employer. Whether the contract labourers have become the employees of the principal employer in course of time and whether the engagement and employment of labourers through a contractor is a mere camouflage and a smokescreen, as has been urged in this case, is a question of fact and has to be established by the contract labourers on the basis of the requisite material. It is not possible for the High Court or this Court, while exercising writ jurisdiction or jurisdiction under Article 136 to decide such questions, only on the basis of the affidavits. It need not be pointed out that in all such cases, the labourers are initially employed and engaged by the contractors. As such at what point of time a direct link is established between the contract labourers and the principal employer, eliminating the contractor from the scene, is a matter which has to be established on material produced before the court. Normally, the Labour Court and the Industrial Tribunal, under the Industrial Disputes Act are the competent fora to adjudicate such disputes on the basis of the oral and documentary evidence produced before them.”
33. The Supreme Court also held that it is for the person who sets up a plea of existence of relationship of employer-employee, the burden is upon him to prove the same vide its decision in Workmen of Nilgiri Coop. Mkt. Society Ltd Vs. State of T.N. reported in 2004 (3) SCC 514 and in paras 47 to 50 it was held as follows:-
“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 Company, and it is denied by the Company, it is for him to prove the fact. It is not for the Company to prove that he was not an employee of the Company but of some other person."
The question whether the relationship between the parties is one of the employer and employee is a pure question of fact and ordinarily the High Court while exercising its power of judicial review shall not interfere therewith unless the finding is manifestly or obviously erroneous or perverse.”
34. The counsel also referred to another judgment of the Supreme Court in General Manager (OSD), Bengal Nagpur Cotton Mills, Rajnandgaon Vs. Bharat Lal reported in 2011 (1) SCC 635 and referred to the passage found in para 11 which is as follows:-
“On a careful consideration, we are of the view that the Industrial Court committed a serious error in arriving at those findings. In regard to the first test as to who pays the salary, it placed the onus wrongly upon the appellant. It is for the employee to aver and prove that he was paid salary directly by the principal employer and not the contractor. The first respondent did not discharge this onus. Even in regard tosecond test, the employee did not establish that he was working under the direct control and supervision of the principal employer. The Industrial Court misconstrued the meaning of the terms `control and supervision' and held that as the officers of appellant were giving some instructions to the first respondent working as a guard, he was deemed to be working under the control and supervision of the appellant.”
35. The concepts of "control" and "supervision" exercised by an employer in the context of contract labour were considered by the Supreme Court in International Airport Authority of India v. International Air Cargo Workers’ Union, reported in (2009) 13 SCC 374, wherein, at paragraphs 38 and 39, the Court held as follows:—
"If the contract is for supply of labour, necessarily, the labour supplied by the contractor will work under the directions, supervision and control of the principal employer but that would not make the worker a direct employee of the principal employer, if the salary is paid by contractor, if the right to regulate employment is with the contractor, and the ultimate supervision and control lies with the contractor.
The principal employer only controls and directs the work to be done by a contractlabour, when such labour is assigned/allotted/sent to him. But it is the contractor as employer, who chooses whether the worker is to be assigned/allotted to the principal employer or used otherwise. In short, worker being the employee of the contractor, the ultimate supervision and control lies with the contractor as he decides where the employee will work and how long he will work and subject to what conditions. Only when the contractor assigns/sends the worker to work under the principal employer, the worker works under the supervision and control of the principal employer but that is secondary control. The primary control is with the contractor."
36. The two contract employees and members of the first respondent Union, who were examined as WW2 and WW3, categorically admitted that they were drawing their salaries only from the second or third respondent, as the case may be, and that they were covered under labour welfare legislations such as the Employees’ Provident Fund (EPF) and Employees’ State Insurance (ESI) schemes, with the relevant registers and contributions being maintained and paid by the respective labour supply contractors. Even the President of the first respondent Union, who was examined as WW1, admitted to these facts, though he attempted to contend that the arrangements were merely paper transactions. The petitioners established that both the second and third respondents are registered companies, that they had entered into agreements with the petitioner School for the supply of labour, that such agreements were renewed from time to time, and that the petitioner School did not exercise direct control over the employees. In such circumstances, it was erroneous on the part of the Labour Court to disregard the material evidence and conclude that the contracts were sham and nominal.
37. The finding of the Labour Court that the second and third respondents failed to prove that they had called for applications and conducted interviews before supplying labour to the petitioner Management, and that this indicated a lack of control over the workers, was erroneous. The mere fact that a principal employer does or does not conduct interviews or tests does not, by itself, satisfy the "control test" applied for determining the existence of an employer-employee relationship. In this context, learned counsel for the petitioner relied upon the judgment of the Supreme Court in Haldia Refinery Canteen Employees Union v. Indian Oil Corporation Ltd., reported in (2005) 5 SCC 51, particularly upon paragraph 16 of the judgment, which reads as follows:—
“The management has kept with it the right to test, interview or otherwise assess or determine the quality of the employees/workers with regard to their level of skills, knowledge, proficiency, capability etc. so as to ensure that the employees/workers are competent and qualified and suitable for efficient performance of the work covered under the contract. This control has been kept by the management to keep a check over the quality of service provided to its employees. It has nothing to do with either the appointment or taking disciplinary action or dismissal or removal from service of the workmen working in the canteen. Only because the management exercises such control does not mean that the employees working in the canteen are the employee of the management. Such supervisory control is being exercised by the management to ensure that the workers employed are well qualified and capable of rendering the proper service to the employees of the management.”
38. The demand of the 1 st Respondent Union was that their members who are engaged by the Petitioner Management must be paid same wages as that of government school employees as per the affiliation bye-laws of the Central Board of Secondary Education (CBSE). That even a regularly employed teachers and non-teaching staff cannot claim such pay parity was held to be so by the Supreme Court vide its judgment in Satimbla Sharma & Ors vs St.Paul Sr.Secondary School reported in 2011 (13) SCC 760 has held as follows:-
“We cannot also issue a mandamus to respondent nos.1 and 2 on the ground that the conditions of provisional affiliation of schools prescribed by the Council for the Indian School Certificate Examinations stipulate in clause (5)(b) that the salary and allowances and other benefits of the staff of the affiliated school must be comparable to that prescribed by the State Department of Education because such conditions for provisional affiliation are not statutory provisions or executive instructions, which are enforceable in law.
Similarly, we cannot issue a mandamus to give effect to the recommendations of the report of Education Commission 1964- 66 that the scales of pay of school teachers belonging to the same category but working under different managements such as government, local bodies or private managements should be the same, unless the recommendations are incorporated in an executive instruction or a statutory provision. We, therefore, affirm the impugned judgment of the Division Bench of the High Court.”
39. Even a Full Bench of this Court, while considering a similar provision contained in the Matriculation Code regarding pay parity with Government teachers, has held that teachers employed in unaided private schools cannot seek any such direction for pay parity from this Court. This was laid down in The Correspondent/Principal, Arokiamada Matriculation Higher Secondary School, Pollachi v. Tmt. Sorubarani, reported in (2015) 5 Law Weekly 544 (FB), wherein it was held as follows:
“In view of the clear and unambiguous legal proposition set out by the Hon'ble Supreme Court in its various decisions and the fact that the Code is only an enabling provision and not statutory, there can be no manner of doubt that the private institutions are at liberty to fix their own norms in administration with reasonable restrictions. As such, no direction can be issued against an unaided private institution to enforce the policy of the Government in its administration.”
40. Accordingly, it is evident that the Labour Court has travelled beyond the scope of the reference and has failed to properly address both the legal issues and the factual matrix of the case. The impugned Award, therefore, suffers from legal infirmities and is liable to be quashed.
41. Insofar as W.P. No. 12476 of 2020 is concerned, the petitioner therein is a labour supply contractor, who was the third respondent in the earlier writ petition. The challenge in this case is to the Award passed by the I Additional Labour Court in Complaint No. 1 of 2018, dated 10.07.2019. The first respondent in the writ petition, who was employed by the said contractor in the second and third respondent School Managements (the petitioners in the earlier writ petition), filed a complaint under Section 33A of the Industrial Disputes Act, 1947, before the I Additional Labour Court, where the dispute raised by the Union in I.D. No. 254 of 2017 was pending. While the main dispute regarding absorption and regularization by the School Management was still pending, the first respondent (Annapoorani) was terminated from service while she was on leave due to health issues.
42. After undergoing treatment, when she reported for duty on 22.01.2018, she was directed to contact the fourth respondent, who informed her that they were not interested in continuing her employment and that no work was available for her. Consequently, she was terminated from service with effect from 22.01.2018. Despite the termination, which undoubtedly amounted to one for misconduct, the employer did not file any petition seeking approval under Section 33(2)(b) of the Industrial Disputes Act, 1947, before the same Labour Court. It was in these circumstances that she filed the complaint before the Labour Court.
43. The complaint was taken on file as Complaint No. 1 of 2018, and notice was issued to all concerned. On behalf of the fourth respondent, a counter affidavit dated Nil, April 2018, was filed. Similarly, on behalf of the second and third respondents, a counter statement dated Nil, January 2019, was filed. Before the Labour Court, the first respondent, S. Annapoorani, examined herself as PW1 and filed eight documents, which were marked as Exhibits P1 to P8. On the side of the writ petitioner, K. Shenbagarajan was examined as RW1, but no documents were filed on their behalf.
44. The Labour Court held that the termination of the 1 st respondent was not valid. The plea taken by the employer that she had not reported for work, and therefore there was no question of termination warranting compliance with statutory requirements, was rejected by the Labour Court. It found that the workman, Annapoorani (R1), had been unwell and that her complaint was both fair and genuine. Accordingly, by its Award dated 10.07.2019, the Labour Court held as follows:—
“In the result, the termination of service of the petitioner is set aside. The respondents are directed to reinstate the petitioner with continuity of service and to pay back wages and all other attendant benefits from the date of termination of service to the date of reinstatement.”
45. A perusal of the above direction reveals that it was issued against all the respondents in the complaint, including the writ petitioner contractor, the 2 nd and 3 rd respondent School Managements, as well as another contractor who was the fourth respondent. However, the present writ petition has been filed only by the writ petitioner contractor challenging the Award. In paragraph 2 of the affidavit, the petitioner acknowledged that the first respondent workman, Annapoorani, was their employee and that her Provident Fund and ESI contributions were paid by them. However, the grounds raised in the affidavit filed in support of the writ petition are directed only against the Award passed in I.D. No. 254 of 2017 dated 10.07.2019, and not against the merits of the order passed in the complaint.
46. When the matter was taken up on 22.09.2020, this Court, while ordering notice, also directed that security be provided. In paragraph 4 of the order, it was observed as follows:—
“In that view of the matter, having regard to the contentions raised in the writ petition, there shall be an order of interim stay of the impugned order till the next hearing on condition that the petitioner shall deposit the entire monetary benefits due as per the impugned order from the date of termination till the date of filing of the Writ Petition in an interest fetching fixed deposit in the name of the Presiding Officer, I Additional Labour Court, Chennai in any Nationalized Bank in Chennai initially for a period of one year and renewable automatically for the same period from time to time and hand over the original Fixed Deposit receipt to the I Additional Labour Court, Chennai along with a working sheet showing calculation of the amount deposited, under written acknowledgement and file proof of such compliance before the Registrar (Judicial) of this Court by 02.11.2020 without fail.”
47. It is not clear whether the writ petitioner complied with the order regarding security. However, when the matter was taken up for hearing along with the connected case, both matters were referred to mediation for an attempt at settlement. As no settlement could be arrived at, the Mediation Centre submitted a report dated 04.03.2025, stating that no agreement had been reached. Consequently, the matter was directed to be listed for final hearing along with the other connected cases.
48. Similarly, W.P. No. 12581 of 2020 was filed by the Management of Service Care Pvt. Ltd., challenging the Award passed by the I Additional Labour Court in Complaint No. 3 of 2018, dated 10.07.2019. The Labour Court, after holding that the termination of the 1 st respondent, S. Manjula, was illegal, directed her reinstatement with continuity of service, back wages, and other attendant benefits from the date of termination. When the writ petition was taken up on 22.09.2020, this Court, while ordering notice, also passed an interim order, which reads as follows:-
“In that view of the matter, having regard to the contentions raised in the writ petition, there shall be an order of interim stay of the impugned order till the next hearing on condition that the petitioner shall deposit the entire monetary benefits due as per the impugned order from the date of termination till the date of filing of the Writ Petition in an interest fetching fixed deposit in the name of the Presiding Officer, I Additional Labour Court, Chennai in any Nationalized Bank in Chennai initially for a period of one year and renewable automatically for the same period from time to time and hand over the original Fixed Deposit receipt to the I Additional Labour Court, Chennai along with a working sheet showing calculation of the amount deposited, under written acknowledgement and file proof of such compliance before the Registrar (Judicial) of this Court by 02.11.2020 without fail.”
49. It is not clear whether the said order has been complied with or not. However, the matter was also sent for settlement by mediation and came back unsettled. Before the Labour Court, the 1 st respondent as a complainant examined herself as PW1 and marked 8 documents as Ex.P1 to Ex.P8. On the side of the Respondent, one Anuroop was examined as RW1 and 3 documents were filed and marked as Ex.R1 to Ex.R3.
50. The case of the first respondent complainant, as set out in her complaint dated 25.07.2018 before the Labour Court, was that her services were terminated without the issuance of any charge memo, by a letter dated 23.07.2018, with effect from 20.07.2018. The complaint was taken on file as Complaint No. 3 of 2018, and notice was issued to the petitioner, the School Management, and another contractor. The writ petitioner filed a counter statement in November 2018, while the 2 nd and 3 rd third respondents, being the School Management, filed their counter statement in January 2019.
51. It was alleged that the first respondent had slept during duty hours and had pinched a UKG student during lunch time. However, no written complaint was produced, and she was terminated from service without any domestic enquiry. The Labour Court found the termination to be illegal and, accordingly, directed her reinstatement. Although the Labour Court did not specifically indicate which of the respondents was responsible for reinstating her and extending the benefits under the Award, it is the present writ petitioner, being the labour contractor, who has filed the writ petition claiming that the first respondent was their employee.
52. It must be noted that in Mahendra Singh Dantwal v. Hindustan Motors Ltd., reported in (1976) 4 SCC 606, the Supreme Court held that the employer does not have the final word on the question of termination. The Labour Court, while dealing with a complaint under Section 33A of the Industrial Disputes Act, 1947, is empowered to examine whether the termination was effected in compliance with the requirements of Section 33(2)(b) of the Act.
53. The Supreme Court, in its judgment in Jaipur Zila Sahakari Bhoomi Vikas Bank Ltd. v. Ram Gopal Sharma, reported in (2002) 2 SCC 244, held that non-compliance with the provisions of Section 33(2)(b) of the Industrial Disputes Act renders the action of the employer invalid. In such cases, it is not even necessary for the aggrieved workman to file a complaint under Section 33A.
54. In the present case, it is admitted that a collective dispute was pending before the I Additional Labour Court, and that the two complainants, who are the first respondents in W.P. No. 12576 of 2020 and W.P. No. 12581 of 2020, are workmen covered by the said dispute. Although the Labour Court did not specifically indicate which of the respondents was responsible for reinstating the workmen, the writ petitioners in W.P. No. 12576 of 2020 and W.P. No. 12581 of 2020 have voluntarily claimed themselves to be the employers and have challenged the respective awards. Notwithstanding the quashing of the Award in I.D. No. 254 of 2017 dated 10.07.2019 in W.P. No. 4804 of 2020, the awards passed in Complaint No. 1 of 2018 and Complaint No. 3 of 2018 do not warrant any interference.
55. In the result,
(i)W.P.No.4804 of 2020 will stand allowed and the Award in I.D.No.254 / 2017 dt. 10.7.2019 will stand set aside.
(ii)Consequently, all the connected WMPs will stand dismissed.
(iii)W.P.No.12576 of 2020 and W.P.No.12581 of 2020 will stand dismissed. Consequently all connected WMPs will also stand dismissed.
(iv) There will be no order as to costs.
(v)In view of the dismissal of W.P.No. 12756 of 2020 and W.P.No.12581 of 2020, the contesting 1 st Respondents can seek for withdrawal of the amount from the labour court and in case of non-deposit they can execute the award in the manner known to law.
