THE DIRECTOR STEEL AUTHORITY OF INDIA LTD.V. ISPAT KHADAN JANTA MAZDOOR UNION versus ISPAT KHADAN JANTA MAZDOOR UNION

Citation: [2019] 9 S.C.R. 123 · Decided: 05-07-2019 · Supreme Court of India · Bench: A.M. KHANWILKAR · Disposal: Disposed off

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Judgment (excerpt)

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THE DIRECTOR STEEL AUTHORITY OF INDIA LTD.
v.
              ISPAT KHADAN JANTA MAZDOOR UNION
(Civil Appeal Nos. 8081-8082 of 2011)
 JULY 05, 2019
[A. M. KHANWILKAR AND AJAY RASTOGI, JJ.]
Contract Labour (Regulation & Abolition) Act, 1970 – ss.7,
10(1), 12, 23 and 25 – Tripartite agreement entered between the
appellant, contractors and contract labour (working in the captive
mines of the appellant) as per which the contract labours were paid
due wages, not less than the rates prescribed under the 1948 Act –
Prohibition notification dated 17th March, 1993 issued by the
appropriate Government u/s.10(1) of the CLRA Act – No fresh
agreement, in the interregnum period, was executed – Existing
agreement was extended from time to time and the contract labour
was allowed to continue on the same terms and conditions, till their
services were terminated by the contractor in April, 1996 – Matter
eventually referred to the Central Government Industrial Tribunal
(CGIT) – CGIT inter alia held that the contract between the appellant
and the contractors was genuine and not sham and bogus – High
Court reversed the finding and held the contract to be sham and
bogus – On appeal, held: Supreme Court in the Constitution Bench
judgment in Steel Authority of India Ltd. made it clear that neither
s.10 nor any other provision in the CLRA Act provides for automatic
absorption of contract labour on issuance of prohibition notification
u/s.10(1) of the CLRA Act, and consequently the principal employer
is not under legal obligation to absorb the contract labour working
in the establishment – Tribunal rightly concluded that the contract
was not sham and bogus and there shall be no automatic absorption
of contract labour on issuance of prohibition notification under
the CLRA Act – However, the finding of the CGIT that after the
issuance of prohibition notification, the contract became sham and
bogus is not sustainable – Mere issuance of the prohibition
notification under CLRA Act will not make the contract/agreement
void ab initio or bad in law – If the employees are allowed to continue
in terms of the earlier agreement after the prohibition notification
[2019]  9 S.C.R. 123
               123
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SUPREME COURT REPORTS
[2019] 9 S.C.R.
came into force, it may be illegal and continuance of service in the
absence of any contract has to face the penal consequences under
the CLRA Act – Impugned judgment set aside – Minimum Wages
Act, 1948 – Industrial Disputes Act, 1947 – s.10(1), 25(H)–
Constitution of India – Arts. 12, 226 and 227 – Indian Contract
Act, 1872 – s.23.
Contract Labour (Regulation & Abolition) Act, 1970 – Scheme
of – Discussed.
Disposing of the appeals, the Court
HELD: 1.1 The exposition of the judgment of the
Constitution Bench of Supreme Court in Steel Authority of India
Ltd. and Others vs. National Union Waterfront Workers and Others
made it clear that neither Section 10 nor any other provision in
the CLRA Act provides for automatic absorption of contract labour
on issuing a notification by the appropriate Government under
Section 10(1) of the CLRA Act, and consequently the principal
employer is not required or is under legal obligation by operation
of law to absorb the contract labour working in the establishment.
It was further held that on a issuance of notification under Section
10(1) of the CLRA Act, prohibiting employment of contract labour
in any process, operation or other work, if an industrial dispute
is raised by any contract labour in regard to condition of service,
it is for the industrial adjudicator to consider 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 as a mere ruse/camouflage to evade
compliance with various beneficial legislations so as to deprive
the workers of statutory benefits.  If the contract is found to be
sham, nominal or camouflage, then the so-called labour will have
to be treated as direct employee of the principal employer and
the industrial adjudicator should direct the principal employer to
regularise their services in the establishment subject to such
conditions as it may specify for that purpose in the facts and
circumstances of the case. On the other hand, if the contract is
found to be genuine and a prohibition notification has been issued
under Section 10(1) of the CLRA Act, in resp

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