Supreme Court clarifies regularisation of contract workers: FCI Labour Federation vs. Ravuthar Dawood Naseem (19 May 2020)

Introduction

Date of the Judgment: 19 May 2020

Citation: Not Available

Judges: A.M. Khanwilkar, J., Dinesh Maheshwari, J.

Did the Food Corporation of India (FCI) willfully disobey court orders by not regularizing contract workers under the Departmental Labour System? This question was at the heart of a recent contempt case before the Supreme Court of India. The Court examined whether the FCI’s actions constituted contempt, focusing on the interpretation of previous orders regarding the regularization of contract laborers. The bench, comprising Justices A.M. Khanwilkar and Dinesh Maheshwari, delivered the judgment.

Case Background

The case originated from industrial disputes (I.D. No. 39/1992 and I.D. No. 55/1993) initiated by workers at various FCI depots in South India. These workers, employed as daily-rated or casual labor through contract labor cooperative societies or private contractors, sought regularization and departmentalization. They had been working for extended periods, some for 15 to 20 years, performing similar tasks as regular FCI employees.

In I.D. No. 39/1992, the Industrial Tribunal was asked to decide if the FCI was justified in not regularizing 955 contract laborers at the Avadi godown. I.D. No. 55/1993 concerned whether workers in various FCI depots in South India, where contract labor was prohibited, were entitled to regularization.

During the pendency of these disputes, an understanding was reached on 12 April 1996, where it was decided to bring the workers under the Direct Payment System (DPS) with effect from 1 May 1996, and a proposal for departmentalization was to be sent to the government by 31 July 1996.

Timeline:

Legal Framework

The case involves the interpretation and application of the Industrial Disputes Act, 1947, specifically Section 10(1)(d), which allows for the referral of industrial disputes to a tribunal for adjudication. The disputes were regarding the regularization of contract laborers, which also touches upon the Contract Labour (Regulation and Abolition) Act.

Section 10(1)(d) of the Industrial Disputes Act, 1947 allows the appropriate government to refer an industrial dispute to a Tribunal for adjudication.

The Industrial Tribunal, Tamil Nadu, Chennai was approached under Section 10(1)(d) of the Industrial Disputes Act, 1947.

Arguments

The petitioners argued that the Tribunal’s direction to “regularise and departmentalise” meant that the workers should be absorbed into the Departmental Labour System, as was the practice in other similar cases at the time of the dispute. They contended that the Direct Payment System (DPS), implemented on 1 May 1996, was a separate system and not equivalent to departmentalization. The petitioners asserted that the FCI was obligated to follow the Tribunal’s direction and extend the same benefits to these petitioners and implement the direction given by the Tribunal and upheld by the High Court, as well as, this Court, to regularise and departmentalise the concerned workers under the Departmental Labour system only.

The respondent, FCI, argued that it had complied with the orders by regularizing the eligible workers under the Direct Payment System (DPS). They stated that the term “departmentalise” does not necessarily mean absorption into the Departmental Labour System, and the DPS is also a regular employment system within the FCI. The FCI highlighted that it has four systems of labour engagement: Departmental Labour System, Direct Payment System, No-Work-No-Pay System, and Mate System. The FCI contended that the workers had not sought specific relief for regularization under the Departmental Labour System, and the FCI had regularized the workers as per the extant policy.

The FCI also argued that since 1991, no contract worker has been regularised under the Departmental Labour System, and the recent policy guidelines issued by the Government of India on 11 November 2013, mandate that contract workers be regularized only under the No-Work-No-Pay System. They also pointed out that a large number of workers are employed under the Direct Payment System, and the service benefits under this system are indicative of a regular engagement.

The respondent relied on the decision of this Court in State of Bihar & Ors. vs. Bihar Secondary Teachers Struggle Committee, Munger & Ors. [(2019) 8 SCALE 124], wherein it has been held that when administration adopts an integrated policy and if by process of judicial intervention, any directions are issued, it could create tremendous imbalance and cause great strain on budgetary resources. As a matter of fact, the Constitution Bench of this Court in Steel Authority of India Ltd. & Ors. vs. National Union Waterfront Workers & Ors. [(2001) 7 SCC 1] has held that the contract labour need not be absorbed after abolition of contract labour system.

The respondent also relied on Dinesh Kumar Gupta vs. United India Insurance Company Limited & Ors. [(2010) 12 SCC 770], Bihar State Government Secondary School Teachers Association vs. Ashok Kumar Sinha & Ors. [(2014) 7 SCC 416] and Dineshan K.K. vs. R.K. Singh & Anr. [(2014) 16 SCC 88]

Issues Framed by the Supreme Court

The Supreme Court framed the following issues:

1. Whether the respondent-Corporation has committed contempt of the order passed by this Court by not regularizing the concerned workers in the Departmental Labour System?

Treatment of the Issue by the Court

Authorities

The Court considered the following authorities:

Judgment

Authorities Viewed by the Court:

✓ Workmen of the Food Corporation of India vs. M/s. Food Corporation of India [(1985) 2 SCC 136]:* The Court used this authority to establish that the Direct Payment System (DPS) has been in existence since 1973 and is not a new system created by the Corporation.

✓ ESI Corporation vs. FCI Workers Union & Ors. [Civil Appeal Nos. 8841-8842/2019 decided on 19.11.2019]:* The Court cited this case to further support the fact that the Direct Payment System (DPS) is a recognized system within the FCI.

✓ State of Bihar & Ors. vs. Bihar Secondary Teachers Struggle Committee, Munger & Ors. [(2019) 8 SCALE 124]:* The Court used this authority to emphasize that judicial intervention should not upset the balance of administrative policies and cause strain on budgetary resources.

✓ Steel Authority of India Ltd. & Ors. vs. National Union Waterfront Workers & Ors. [(2001) 7 SCC 1]:* This Constitution Bench judgment was cited to support the point that contract labor need not be absorbed after the abolition of the contract labor system.

✓ Dinesh Kumar Gupta vs. United India Insurance Company Limited & Ors. [(2010) 12 SCC 770], Bihar State Government Secondary School Teachers Association vs. Ashok Kumar Sinha & Ors. [(2014) 7 SCC 416] and Dineshan K.K. vs. R.K. Singh & Anr. [(2014) 16 SCC 88]:* These cases were cited to reiterate the principles of contempt of court, emphasizing that disobedience must be wilful and deliberate.

✓ Food Corporation of India & Ors. vs. West Bengal Food Corporation of India Workmen’s Union [(2018) 9 SCC 469]:* The Court distinguished this case, stating that the directions in that case were different and had no bearing on the present contempt proceedings.

✓ Anil Ratan Sarkar & Ors. vs. Hirak Ghosh & Ors. [(2002) 4 SCC 21]:* The Court distinguished this case, stating that in the present case, there was no clear direction to regularise under the Departmental Labour System, unlike in the cited case.

✓ Ram Kishan vs. Tarun Bajaj & Ors. [(2014) 16 SCC 204]:* The Court referred to this case to delineate the contours for initiating civil contempt action.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the interpretation of the term “departmentalise” and the existing policy of the FCI. The Court emphasized that the direction to “regularise and departmentalise” was not specific to the Departmental Labour System. The Court also took into account that the Direct Payment System (DPS) was a valid system of employment within the FCI and that the Departmental Labour System was a dying cadre. The Court also considered the fact that the workers were regularized under the DPS as per the extant policy of the FCI.

The ratio of fact to law that influenced the court is as follows:

The Court’s reasoning was based on a careful analysis of the orders passed by the Tribunal, the High Court, and the Supreme Court itself. The Court noted that the direction to “regularise and departmentalise” was not specific to the Departmental Labour System. The Court also considered the fact that the Direct Payment System (DPS) was a valid system of employment within the FCI and that the Departmental Labour System was a dying cadre.

The Court considered alternative interpretations but rejected them because the plain text of the orders did not specify the Departmental Labour System. The Court also noted that the FCI had regularized the workers under the DPS as per the extant policy.

The Court concluded that the FCI had not committed contempt of court. The Court reasoned that the direction to “regularise and departmentalise” was not specific to the Departmental Labour System and that the FCI had regularized the workers under the Direct Payment System (DPS) as per the extant policy. The Court also noted that the Departmental Labour System was a dying cadre.

The majority opinion was delivered by Justice A.M. Khanwilkar, with Justice Dinesh Maheshwari concurring. There were no dissenting opinions.

The Court’s decision implies that the term “departmentalise” should be interpreted in the context of the organization’s structure and policies. It also implies that the courts should not interfere with the administrative policies of the organization unless there is a clear violation of law.

The Court also noted that the Departmental Labour System is now a dying cadre.

The Court’s reasoning was based on the following points:

• The direction to “regularise and departmentalise” was not specific to the Departmental Labour System.
• The Direct Payment System (DPS) was a valid system of employment within the FCI.
• The Departmental Labour System was a dying cadre.
• The FCI had regularized the workers under the DPS as per the extant policy.

The Court quoted the following from the judgment:

✓ “The contempt jurisdiction conferred on to the law courts power to punish an offender for his wilful disobedience/contumacious conduct or obstruction to the majesty of law…”

✓ “Thus, in order to punish a contemnor, it has to be established that disobedience of the order is “wilful”.”

✓ “It is well-settled principle of law that if two interpretations are possible, and if the action is not contumacious, a contempt proceeding would not be maintainable.”

Key Takeaways

• The term “departmentalise” does not necessarily mean absorption into the Departmental Labour System; it can include other systems within an organization.
• Court orders must be specific in their directions to be enforceable in contempt proceedings.
• Organizations have the autonomy to implement their policies unless they are in clear violation of law or court orders.
• The Direct Payment System (DPS) is a valid system of employment within the FCI.
• The Departmental Labour System is a dying cadre.

Directions

No specific directions were given by the Supreme Court in this judgment. The Court dismissed the contempt petitions and discharged the show cause notices.

Specific Amendments Analysis

There was no specific amendment discussed in the judgment.

Development of Law

The ratio decidendi of this case is that a general direction to “regularise and departmentalise” does not mandate absorption into a specific system of employment, such as the Departmental Labour System, if the organization has other valid systems of employment, such as the Direct Payment System (DPS). The Court also reiterated that for contempt of court, the disobedience of the court order must be wilful and deliberate. This judgment clarifies the scope of court orders and the autonomy of organizations to implement their policies.

Conclusion

The Supreme Court dismissed the contempt petitions against the Food Corporation of India (FCI), holding that the FCI had not willfully disobeyed court orders. The Court clarified that the direction to “regularise and departmentalise” did not specifically mandate absorption into the Departmental Labour System and that the FCI had the autonomy to regularize workers under the Direct Payment System (DPS) as per its extant policy. The Court emphasized that contempt proceedings require a clear and wilful disobedience of specific court orders.