PETITIONER:
GODAVARI SUGAR MILLS LTD.

Vs.

RESPONDENT:
KEPARGAON TALUKA SAKHAR KAMGARSABHA, SAKARWADI

DATE OF JUDGMENT:
16/12/1960

BENCH:
WANCHOO, K.N.
BENCH:
WANCHOO, K.N.
GAJENDRAGADKAR, P.B.
GUPTA, K.C. DAS

CITATION:
1961 AIR 1016 1961 SCR (3) 342

ACT:
Industrial Dispute-System of contract labour-Abolitions by
Industrial Court–Jurisdiction-If violative of employer’s
fundamental right to carry on business-Bombay Industrial
Relations Act, 1947(11 of 1947), ss. 3(18), 42(2), 73A, Item
(2) SCh. 11, Item (6) Sch. III–Constitution of India,
Art. 19(1)(g).

HEADNOTE:
A dispute having arisen between the appellant-employer and
its workmen regarding the employment of contract labour in
the appellant’s mills, the union representing the workmen
which is the respondent in the present case after serving
notice on the appellant under s. 42(2) of the Bombay
Industrial Relations Act made reference to the Industrial
Court under S. 73A of the Act demanding the abolition of the
system of employing contractors’ labour and the permanent
increment of employees in the respective departments. The
contention of the appellant, inter alia, was that the
Industrial Court had no jurisdiction to decide the dispute
which was within the exclusive jurisdiction of a Labour
Court under item (6) of Sch. III of the Act, and that any
award directing the abolition of contract labour would
contravene the appellant’s fundamental right to carry on
business under Art. 19(1)(g) of the Constitution. The
Industrial Court decided that the Industrial Court would
have jurisdiction as the matter was covered by item (2) of
Sch. 11 of the Act and that there was no contravention of
the fundamental rights of the appellants. On appeal the
Labour Appellate Tribunal, held, that the Industrial Court
had jurisdiction to decide the matter although it was not
covered by item (2) of Sch. 11 of the Act. As regards the
question of contravention of the fundamental right it held
that the question whether the restriction imposed was
reasonable depended upon the facts of each case and the
matter was outside the powers of a court of appeal.
Eventually it set aside the entire award on the merits. On
appeal ‘by the appellant by special leave,
Held, that the Industrial Court had jurisdiction to deal
with the matter.
Whatever might be the ambit of the word “employment” used in
item (6) of Sch. III, if a matter was covered by Sch. 11
it could only be referred to the Industrial Court under s.
73A. A question relating to the abolition of contract
labour inevitably raised a dispute relating to matters
contained in items (2), (9) and (10) of Sch. 11, namely,
permanent increase in the number of
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persons employed, the employees’ wages, hours of work and
rest intervals and could, therefore, be referred only to an
Industrial Court.
The power given to the Industrial Court which was a quasi-
judicial tribunal to decide whether contract labour should
be abolished or not would not make the definition of
“industrial ” matter” in so far as it referred to the mode
of employment an S. unreasonable restriction on the
fundamental right of the employer to carry on his trade and
as such there was no contravention of his fundamental right
by providing in S. 3(18) that an “industrial matter”
included also the mode of employment of the employees.

JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 352 of 1958.
Appeal by special leave from the judgment and order dated
July 27, 1956, of the Labour Appellate Tribunal of India,
Bombay, in Appeal (Bom.) No. 72 of 1956.
G….S. Pathak, J. B. Dadachanji, S. N. Andley and Rameshwar
Nath, for the appellant.
D….S. Nargoulkar and K. R. Choudhuri, for the respondent
No. 1.
B. P. Maheshwari, for the Interveners.
1960. December 16. The Judgment of the Court was delivered
by
WANCHOO, J.-This is an appeal by special leave in an
industrial matter. The appellant owns two sugar mills.
There was a dispute between the appellant and its workmen
with respect to the employment of contract labour in the two
mills. Consequently, a notice of change under S. 42 (2) of
the Bombay Industrial Relations Act, No. XI of 1947,
(hereinafter called the Act) was given to the appellant by
the union re. presenting the workmen. Thereafter the union,
which is the respondent in the present appeal, made two
references to the industrial court, one with respect to each
mill, under s. 73A of the Act, and the main demand in the
references was that “the system of employing contractors’
labour should be abolished and the strength of the employees
of the respective departments should be permanently
increased sufficiently
344
and accordingly”. The appellant raised two main contentions
before the industrial court, namely, (i) that the industrial
court had no jurisdiction to decide the dispute as the
matter was covered by item (6) of Sch. III of the Act,
which is within the exclusive jurisdiction of a labour
court; and (ii) that any award directing abolition of
contract labour would contravene the fundamental right of
the appellant to carry on business under Art. 19(1)(g) of
the Constitution.
The industrial court decided both the points against the
appellant; on the question of jurisdiction it held that the
matter was covered by item (2) of Sch. 11 of the Act and
therefore the industrial court would have jurisdiction, and
on the second point it held that there was no contravention
of the fundamental right conferred on the appellant under
Art. 19(1)(g). It may be mentioned that the second point
arose on the stand taken by the appellant that the workmen
of the contractors were not the workmen of the appellant.
The industrial court then dealt with the merits of the case
and passed certain orders, with which we are however not
concerned in the present appeal.
It may be mentioned that there were cases relating to a
number of other sugar mills raising the same points, which
were decided at the same time by the industrial court. In
consequence, there were a number of appeals to the Labour
Appellate Tribunal by the mills and one by one of the unions
(though not by the respondent-union). All these appeals
were heard together by the appellate tribunal, where also
the same two points relating to jurisdiction and contra-
vention of the fundamental right guaranteed by Art. 19(1)(g)
were raised. The Appellate Tribunal did not agree with the
industrial court that the references were covered by item
(2) of Sch. 11 to the Act. It, however, held that the word
“employment” in item (6) of Sch. III to the Act had to be
given a restricted meaning. It pointed out that the three
Schedules did not exhaust the comprehensive provisions of s.
42(2) and the subject-matter of dispute, namely, the
abolition of contract labour was a question of far reaching
and important change which could not have
345
been intended to be dealt with in a summary way by a labour
court, which is the lowest in the hierarchy of courts
established under the Act. It therefore held that the
industrial court had jurisdiction to decide the matter. On
the question of contravention of the, fundamental right, the
appellate tribunal took the view that the question whether
the restriction imposed was reasonable depended upon the
facts of each case and therefore was a matter outside its
power as a court of appeal It then considered the merits of
the matter and came to the conclusion that the approach of
the industrial court to the questions raised before it was
not correct and therefore it found it difficult to support
the award. Eventually it set aside the award and remanded
the matter for early hearing in the light of the
observations made by it. Further, it decided that in the
interest of justice the entire award should be set aside,
even though there was no appeal before it by the unions in
most of the cases. The appellant then came to this Court
and was granted special leave; and that is how the matter
has come up before us.
Mr. Pathak on behalf of the appellant has raised the same
two points before us. We shall first deal with the question
of jurisdiction. Reliance in this connection is placed on
item (6) of Sch. III of the Act, which is in these terms:-
“Employment including-
(i) reinstatement and recruitment;
(ii) unemployment of persons previously employed in the
industry concerned.”
It is not in dispute that matters contained in Sch. III are
within the jurisdiction of a labour court and an industrial
court has no jurisdiction to decide any matter in a
reference under s. 73A of the Act which is within the
jurisdiction of a labour court. Mr. Pathak contends that
item (6) of Sch. III speaks of “employment” and includes in
it two matters which might otherwise not have been thought
to be included in it. Therefore, according to him,
employment as used in item (6) is wider than the two matters
included in it
44
346
and the question whether contract labour should be employed
or not would be a matter of employment within the meaning of
that word in item (6) of Sch. 111. We do not think it
necessary for purposes of this appeal to consider what would
be the ambit of employment as used in item (6) of Sch. 111.
The scheme of the Act shows that under ss. 71 and 72 the
jurisdiction of a labour court and an industrial court is
concurrent with respect to any matters which the State
Government may deem fit to refer to them; but under s. 73A
reference by a registered union which is a representative of
employees and which is also an approved union, can only be
made to an industrial court, subject to the proviso that no
such dispute can be referred to an industrial court where
under the provisions of the Act it is required to be
referred to the labour court for its decision. Sec. 78 of
the Act provides for jurisdiction of labour courts and
matters specified in Sch. 11 are not within their ordinary
jurisdiction. Therefore, when a registered union wishes to
refer any matter which is contained in Sch. 11 of the Act
such reference can be made by it only to the industrial
court. It follows in consequence that whatever may be the
ambit of the word “employment” used in item (6) of Sch.
III, if any matter is covered by Sch. 11 it can only be
referred to the industrial court under s. 73A. Now the
question whether contract labour should be abolished (on the
assumption that contract labour is not in the employ of the
mills) immediately raises questions relating to permanent
increase in the number of persons employed, their wages
including the period and mode of payment, hours of work and
rest intervals, which are items (2), (9) and (10) of Sch.
11. Therefore, a question relating to abolition of contract
labour is so inextricably mixed up with the question of
permanent increase in the number of persons employed, their
wages, hours of work and rest intervals that any dispute
relating to contract labour would inevitably raise questions
covered by Sch. 11. Therefore, a dispute relating to
contract labour if it is to be referred under s. 73A by a
registered union can only be referred to an industrial court
as it immediately
347
raises matters contained in items (2), (9) and (10) of Sch.
11. Mr. Pathak urges however that matters relating to
permanent increase in the number of persons employed due to
the abolition of contract labour, their wages, hours of work
and rest intervals were not really disputed at all by the
appellant. It appears that in the written-statements of the
appellant, these points were not raised; but the decision of
the appellate tribunal shows that one of the contentions
raised before it by the sugar-mills was that the workmen
concerned were not employees of the sugar mills. Therefore,
as soon as this contention is raised a dispute as to
permanent increase in the number of persons employed, their
wages, hours of work and rest intervals would immediately
arise. It must therefore be held that a question relating
to the abolition of contract labour inevitably raises a
dispute with respect to these three items contained in Sch.
11. In the circumstances we are of opinion that the
industrial court had jurisdiction to deal with the matter.
In particular, we may point out that in their petitions the
unions had raised at least the question as to the permanent
increase in the number of persons employed and that would
immediately bring in item (2) of Sch. 11. It is true that
the question of permanent increase in the number of persons
employed, their wages, hours of work and rest intervals
would only arise if contract labour is to be abolished; but
in our opinion these are matters so inextricably mixed up
with the question relating to abolition of contract labour
that they must be held to be in dispute as soon as the dis-
pute is raised about the abolition of contract labour,
(assuming always that the employer does not accept contract
labour as part of its labour force). The contention about
jurisdiction must therefore be rejected.
This brings us to the second contention raised by Mr.
Pathak. He bases his argument in this behalf on s. 3(18),
which defines an ” industrial matter ” as meaning any matter
relating to employment, work, wages, hours of work,
privileges, rights or duties of employers or employees, or
the mode, terms and
348
conditions of employment. Mr. Pathak urges that the
definition of ” industrial matter ” contravenes the
fundamental right guaranteed under Art. 19(1)(g), when it
provides that the mode of employment is also included within
it. Reference is also made to s. 3(17) which defines an
“industrial dispute” as any dispute or difference which is
connected with any industrial matter. Mr. Pathak therefore
urges that reading the two definitions together the
industrial court is given the power to decide disputes as to
the mode of employment and that contravenes the fundamental
right guaranteed under Art. 19(1)(g), for it enables an
industrial court to adjudicate on the mode of employment and
thus interfere with the right of the employer to carry on
his trade as he likes subject to reasonable restrictions.
Now assuming that the mode of employment used in s. 3(18)
includes such questions as abolition of contract labour, the
question would still be whether a provision which enables an
industrial court to adjudicate on the question whether con-
tract labour should or should not be abolished is an
unreasonable restriction on the employer’s right to carry on
his trade. We cannot see how the fact that power is given
to the industrial court, which is a quasi-judicial tribunal
to decide whether contract labour should be abolished or not
would make the definition of “industrial matter” in so far
as it refers to the mode of employment, an unreasonable
restriction on the fundamental, right of the employer to
carry on trade. The matter being entrusted to a quasi-
judicial tribunal would be decided after giving both parties
full opportunity of presenting their case and after
considering whether in the circumstances of a particular
case the restriction on the mode of employment is a
reasonable restriction or not. The tribunal would always go
into the reasonableness of the matter and if it comes to the
conclusion that the mode of employment desired by labour is
not reasonable it will not allow it; it is only when it
comes to the conclusion that the mode of employment desired
by labour in a particular case is a reasonable restriction
349
that it will insist on that particular mode of employment
being used. Take, for example, the case of contract labour
itself. The tribunal will have to go into the facts of
each case. If it comes to the conclusion that on the facts
the employment of contract labour is reasonable and thus
doing away with it would be an unreasonable restriction on
the right of the employer to carry on trade, it will permit
contract labour to be carried on. On the other hand if it
comes to the conclusion that employment of contract labour
is unreasonable in the circumstances of the case before it
it will hold that it should be abolished, the reason being
that its abolition would be a reasonable restriction in the
circumstances. Therefore the decision whether the mode of
employment in a particular case is a reasonable restriction
or unreasonable one is in the hands of a quasi-judicial
tribunal. In the circumstances it cannot be said that by
providing in s. 3(18) that an “industrial matter” includes
also the mode of employment, there is any contravention of
the fundamental right of the employer to carry on trade. If
the argument on behalf of the appellant were to be accepted
it would mean that judicial and quasi-judicial decisions
could be unreasonable restrictions on fundamental rights and
this the Constitution does not envisage at all. We are
therefore of opinion that this contention also fails.
Finally, Mr. Pathak draws our attention to ss. 3(13) and
3(14) of the Act and submits that the appellant never said
that contract labour employed in its mills was not in its
employment. Sec. 3(13) defines the word “employee” and
includes in it any person employed by a contractor to do any
work for him in the execution of a contract with an employer
within the meaning of sub-cl. (e) of cl. (14). Sec. 3(14)
defines the word “employer” in an inclusive manner and in-
cludes “where the owner of any undertaking in the course of
or for the purpose of conducting the undertaking contracts
with any person for the execution by or under the contractor
of the whole or any part of any work which is ordinarily
part of the undertaking, the owner of the undertaking”. It
is urged that in view
350
of these definitions, the employees of the contractors are
the employees of the mills and the mills are the employers
of these employees of the contractors. Therefore, Mr.
Pathak urges that there is no necessity of abolishing
contract labour and that the industrial court may, if it so
chooses, give the same wages and hours of work and rest
intervals and other terms and conditions of employment to
the employees of the contractors as are provided for
comparable direct employees of the appellant and in such
circumstances it would not be necessary to abolish the
contract system so long as the employees of contractors are
to be in the same position as the direct employees of the
appellant as to their terms and conditions of service. This
was not however the-manner in which the case was contested
before the industrial court or the appellate tribunal. All
that we need therefore say is that when the matter goes back
before the industrial court as directed by the appellate
tribunal, the industrial court may take this submission of
the appellant into account and may consider whether it is
necessary to abolish the contract system, provided the
appellant is able to assure the industrial court that
employees of the contractors who are deemed to be its
employees within the meaning of s. 3(13) and s. 3(14) would
have the full benefit of the same terms and conditions of
service as its comparable direct employees.
The appeal fails and is hereby dismissed with costs.
Appeal dismissed.
351