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The Indian Contract Act, 1872
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Supreme Court of India
Hussainbhai, Calicut vs Alath Factory Thozhilali ... on 28 July, 1978
Equivalent citations: 1978 AIR 1410, 1978 SCR (3)1073
Author: V Krishnaiyer
Bench: Krishnaiyer, V.R.
           PETITIONER:
HUSSAINBHAI, CALICUT

	Vs.

RESPONDENT:
ALATH FACTORY THOZHILALI UNION,KOZHIKODE AND ORS.

DATE OF JUDGMENT28/07/1978

BENCH:
KRISHNAIYER, V.R.
BENCH:
KRISHNAIYER, V.R.
DESAI, D.A.
REDDY, O. CHINNAPPA (J)

CITATION:
 1978 AIR 1410		  1978 SCR  (3)1073
 1978 SCC  (4) 257


ACT:
Employee in labour law, concept of-Whether includes a person
hired  by  an  independent labour  contractor  for  creating
vinculum juris.



HEADNOTE:
The  petitioner	 a factory owner,  manufacturing  ropes	 had
entered	 into agreements with intermediate  contractors	 who
had hired the respondent union's workmen.  In an  industrial
dispute	 raised	 by  the  respondent  union  the  petitioner
contended  that no direct employer-employee  vinculum  juris
existed between him and the workmen.  However, the  Tribunal
gave an award in favour of the workmen which was affirmed by
both  the  single Judge as well as a Division Bench  of	 the
Kerala High Court.
Dismissing the special leave the Court,
HELD  :	 1. Where a worker or a group of workers  labour  to
produce	 goods or services and these goods or  services	 are
for  the  business  of another, that other is  in  fact	 the
employer.   He has economic control over the  workers'	sub-
sistence,  skill, and continued employment.  If he, for	 any
reason, chokes off the worker is, virtually, laid off.	 The
presence  of  intermediate contractors with whom  alone	 the
workers	 have immediate or direct relationship	ex-contractu
is  of no consequence when, on lifting the veil	 or  looking
;it  the conspectus of factors governing employment,  Courts
discern the naked truth, though draped in different  perfect
paper arrangement, that the real employer is the management,
not the immediate contractor. [1075 C-D]
If  the	 livelihood of the workmen substantialy	 depends  on
labour	rendered  to  produce goods  and  services  for	 the
benefit	 and satisfaction of an enterprise, the	 absence  of
direct	  relationship	 or   the   presence   of    dubious
intermediaries	or the make-believe trappings of  detachment
from  the  Management cannot snap the real-life	 bond.	 The
story  may  vary but the inference  defies  ingenuity.	 The
liability  cannot  be shaken off.  Of course,  if  there  is
total dissociation in fact between the disowning  management
and  the aggrieved workmen, the employment is, in  substance
and  in	 real-life  terms,  by	another.   The	Management's
adventitious connections cannot ripen into real	 employment.
[1075 E-F-G]
2.The source and strength of the industrial branch of  Third
World  Jurisprudence  is social justice	 proclaimed  in	 the
Preamble  to the Constitution.	The Court must be astute  to
avoid  the mischief and achieve the purpose of the  law	 and
not  be misled by the maya of legal appearance	when  myriad
devices	  are	resorted   to	when   labour	 legislation
casts'welfare  obligations  on the real	 employer  based  on
Articles  38, 39, 42, 43 and 43A of the	 Constitution.	 The
contention of the_ petitioner as to the non-existence of the
vinculum  juris between the respondent and himself is if  at
all impeccable only in laissez faire economics red in  tooth
and  claw'  and	 under the Contract Act	 rooted	 in  English
common law as the human gap of a century yawns between	this
strict	doctrine and the industrial Jurisprudence of  today.
[1074.	G-H, 1075 -D-E]



JUDGMENT:

CIVIL APPELLATE JURISDICTION :Special Leave petition (Civil) No. 1853 of 1978.

From the Judgment and Order dated 30-6-1977 of the Kerala High Court in Writ Appeal No. 142/77.

1074

N. Sudhakaran for the Petitioner.

The Order of the Court was delivered by KRISHNA IYER, J.-The petitioner before us in this special leave petition is a factory owner manufacturing ropes. A number of workmen were engaged to make ropes from within the factory, but those workmen, according to the petitioner, were hired by contractors who had executed agreements with the petitioner to get such,, work done. Therefore, the petitioner contended that the workmen were not his workmen but the contractors' workmen. The industrial award, made on a reference by the State Government, was attacked on this round. The l earned single Judge of the High Court, in 'an elaborate judgment, rightly held that the petitioner was the employer and the members of the respondent-Union were employees under the, petitioner. A division Bench upheld this stand and the petitioner has sought special leave from this Court.

It is not in dispute that 29 workmen were denied employment which led to the reference. It is not in dispute that the work done by these workmen was an integral part of the industry concerned; that the raw material was supplied by the Management; that the factory premises belonged to the Management; that the equipment used also belonged to the Management and that the finished product was taken by the Management for its own trade. The workmen were broadly under the control of the Management and defective articles were directed to be rectified by the Management. This con- catenation of circumstances is conclusive of the question. Nevertheless, this issue is being raised time and again and so we proceed to pass a speaking order. We should have thought that even cases where this impressive array of factors were not present, would have persuaded an industrial court to the conclusion that the economic reality was employer-employee relationship and, therefore, the in- dustrial law was compulsively applicable. Even so, let us look at the issue afresh.

Who is an employee, in Labour Law? That is the short, die- hard question raised here but covered by this Court's earlier decisions. Like the High Court, we give short shift to the contention that the petitioner had entered into agreements with intermediate contractors who bad hired the respondent-Union's workmen and so no direct employer- employee vinculum juris existed between the petitioner and the workmen.

This argument is impeccable in laissez faire economics 'red in tooth and claw' and under the Contract Act rooted in English Common Law. But the human gap of a century yawns between this strict doctrine and industrial jurisprudence. The source and strength of the industrial branch of Third World Jurisprudence is social justice proclaimed in the Preamble to the Constitution. This Court in Ganesh Beedi's case 1974 (1)LLJ 367 has raised on British and American rulings to hold that mere contracts are not decisive and the complex of 1075 considerations relevant to the relationship is different. Indian Justice, beyond Atlantic liberalism, has a rule of law which runs to the aid of the rule of life. And life, in conditions of poverty aplenty, is livelihood and livelihood is work with wages. Raw societal realities, not fine-spun legal niceties, not competitive market economics but complex protective principles, shape the law when the weaker, working class sector needs succour for livelihood through labour. The conceptual confusion between the classical law of contracts and the special branch of law sensitive to exploitative situations accounts for the submission that the High Court is in error in its holding against the petitioner.

The true test may, with brevity, be indicated once again. Where a worker or group of workers labours to produce goods or services and these goods or services are for the business of another, that other is, in fact, the employer. He has economic control over the workers' subsistence, skill, and continued employment. If he, for any reason, chokes off, the worker is, virtually, laid off. The presence of intermediate contractors with whom alone the workers have immediate or direct relationship ex contractu is of no consequence when, on lifting the veil or looking at the conspectus of factors governing employment, we discern the naked truth, though draped in different perfect paper arrangement, that the real employer is the Management, not the immediate contractor. Myriad devices, half-hidden in fold after fold of legal form depending on the degree of concealment needed, the type of industry, the local conditions and the like, may be resorted to when labour legislation casts welfare obligations on the real employer, based on Articles 38, 39, 42, 43 and 43-A of the Constitution. The court must be astute to avoid mischief and achieve the purpose of the law and not be misled by the maya of legal appearances.

If the livelihood of the workmen substantially depends on labour rendered to produce goods and services for the benefits and satisfaction of an enterprise, the absence of direct relationship or the presence of dubious intermediaries or the make-believe trappings of detachment from the Management cannot snap the real-life bond. The story may vary but the inference defies ingenuity. The lia- bility cannot be shaken off.

Of course, if there is total dissociation in fact between the disowning management and the aggrieved workmen, the employment is, in substance and in real-life terms, by another. The Management's adventitious connections cannot ripen into real employment.

Here, on the facts, the conclusion is correct and leave must be refused.

S.R.

Petition dismissed.

329SCI/78