Supreme Court settles the validity of Industrial Dispute reference after workers’ admission as contract labourers: Steel Authority of India Ltd. vs. State of West Bengal (2008)

Introduction

Date of the Judgment: September 25, 2008

The Supreme Court of India addressed the question of whether an industrial dispute referred by the Government of West Bengal under Section 7-A of the Industrial Disputes Act, 1947, was valid, especially when the workers had previously acknowledged their status as contract laborers. The core issue revolves around the legality of the reference made by the government and whether the workers could later claim to be direct employees of Steel Authority of India Ltd. (SAIL) after initially admitting to being contract laborers. The judgment was delivered by a two-judge bench comprising Dr. Arijit Pasayat and Dr. Mukundakam Sharma.

Case Background

National Union of Waterfront Workers (the ‘Union’) represented to the Regional Labour Commissioner (Central) on April 21, 1987, seeking conciliation for the regularization of its members working as contract laborers under M/s Bardhan and Co. for Steel Authority of India Ltd. (SAIL). On June 4, 1987, another representation was made to the Labour Commissioner, asserting the workers’ status as contract laborers under the same arrangement and requesting regularization.

The State of West Bengal issued a notification on July 15, 1989, prohibiting the employment of contract laborers in four stockyards. This notification was repeatedly kept in abeyance and ultimately extended until March 1994. Some workers from the Union filed a writ petition before the Calcutta High Court, seeking absorption based on the notification of July 15, 1989, stating they were contract laborers.

On April 25, 1994, a Single Judge of the Calcutta High Court ruled that the petitioners were entitled to absorption and regularization from July 15, 1989, when contract labor was abolished. The court directed SAIL to absorb and regularize the petitioners in any establishment under its control, based on suitability and experience. SAIL filed an appeal, which was dismissed by a Division Bench. Subsequently, Special Leave Petitions Nos. 12657-58 of 1998 were filed before the Supreme Court, and the matter was referred to a Constitution Bench.

Timeline

Course of Proceedings

The Calcutta High Court initially directed the absorption and regularization of the writ petitioners from July 15, 1989, based on the prohibition of contract labor. This decision was appealed by SAIL, but the appeal was dismissed by a Division Bench. Subsequently, SAIL filed Special Leave Petitions before the Supreme Court, which referred the matter to a Constitution Bench.

Legal Framework

The case involves the interpretation and application of Section 7-A and Section 10 of the Industrial Disputes Act, 1947. Section 7-A deals with the constitution of Industrial Tribunals, while Section 10 pertains to the reference of disputes to such tribunals.

Section 7-A of the Industrial Disputes Act, 1947, concerns the appropriate government’s power to constitute Industrial Tribunals for the adjudication of industrial disputes.

Section 10(1) of the Industrial Disputes Act, 1947, empowers the appropriate government to refer an industrial dispute to a Board, Court of Enquiry, Labour Court, Industrial Tribunal, or National Tribunal for adjudication.

Arguments

• Arguments by the Appellants (Steel Authority of India Ltd.):
  • ✓ The Union and the workers had consistently admitted that the workers were contract laborers.
  • ✓ The direction to absorb the workers, as given by the High Court, was not sustainable, and there was no basis for fresh absorption.
  • ✓ There was no plea that the agreement with the contractors was sham or bogus until a belated stage.
  • ✓ Earlier writ petitions and representations did not claim the agreements were sham; the prayer was only for absorption.
• Arguments by the Respondent No. 4 (National Union of Waterfront Workers):
  • ✓ The Union always maintained that the work was of a perennial nature, entitling the workers to equal terms with regular employees, implying the existing arrangement was a sham.
  • ✓ The State of West Bengal’s prohibition of contract labor on July 15, 1989, indicated an implicit acceptance that the use of contract labor was a camouflage.
  • ✓ The grievances of the Union and the workmen were essentially that the agreements were sham and bogus.

Issues Framed by the Supreme Court

1. Whether the reference made by the Government of West Bengal under Section 7-A of the Industrial Disputes Act, 1947, was valid given the workers’ prior admissions as contract laborers.

Treatment of the Issue by the Court

Authorities

• Steel Authority of India Ltd. v. National Union Waterfront Workers (2001 (7) SCC 1) – The Court referred to this case to emphasize that the High Court’s direction to absorb contract labor was not sustainable.
• Air India Statutory Corporation and Ors. v. United Labour Union and Ors. (1997 (9) SCC 377) – The Court noted that prior to the SAIL decision in 2001, this case was in force, which allowed regularization following the notification prohibiting contract labor.
• Steel Authority of India Ltd. v. Union of India and Ors. (2006 (12) SCC 233) – The Court cited this case to reiterate that an industrial adjudicator can determine if a contract is a sham.
• Nitinkumar Nathalal Joshi v. ONGC Ltd. – Referenced to support the view taken in Steel Authority of India Ltd.
• Municipal Corpn. of Greater Mumbai v. K.V. Shramik Sangh – Referenced to support the view taken in Steel Authority of India Ltd.
• Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad – Cited to emphasize that judicial admissions can be the foundation of the rights of the parties.
• Union of India v. Pramod Gupta – Cited to support the principle that admissions in pleadings are admissible against the maker.
• Baldev Singh v. Manohar Singh – Cited regarding the principles for amendment of written statements.
• Modi Spg. & Wvg. Mills Co. – Followed while laying down the principle for amendment of pleadings.
• Heeralal – Distinguished while laying down the principle for amendment of pleadings.
• State of Haryana v. Charanjit Singh (2006 (9) SCC 321) – The Court cited this case to assert that the concept of equal pay for equal work does not apply to contract labor.
• State of Haryana v. Surinder Kumar – Referenced in the context of equal pay for equal work, emphasizing that persons employed on contract basis have no right to regular posts until duly selected and appointed.
• U.P. State Road Transport Corpn. V. Babu Ram (2006 (5) SCC 433) – The Court referred to this case regarding the question of delay in reference.
• Nedungadi Bank Ltd. v. K.P. Madhavankutty – Cited regarding the delay in seeking reference and its impact on relief.
• S.M. Nilajkar v. Telecom District Manager (2003 (4) SCC 27) – The Court observed this case regarding the delay in raising the dispute.
• Shalimar Works Ltd. v. Workmen – Referenced regarding the delay in raising the dispute.
• Ratan Chandra Sammanta v. Union of India – Referenced regarding the impact of delay on remedy and rights.

Judgment

The Supreme Court allowed the appeal, setting aside the decision of the Division Bench of the Calcutta High Court. The proceedings initiated pursuant to the reference made by the State Government in 2003 were quashed.

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Steel Authority of India Ltd. v. National Union Waterfront Workers (2001 (7) SCC 1): The Court reiterated that the High Court’s direction to absorb contract labor was not sustainable.
• State of Haryana v. Charanjit Singh (2006 (9) SCC 321): The Court emphasized that the concept of equal pay for equal work does not apply to contract labor.
• U.P. State Road Transport Corpn. V. Babu Ram (2006 (5) SCC 433): The Court highlighted the importance of timely reference of disputes.
• Nedungadi Bank Ltd. v. K.P. Madhavankutty and Ors. (2000 (2) SCC 455): The Court emphasized that delay in seeking reference can disentitle workmen to any relief.
• Steel Authority of India Ltd. v. Union of India and Ors. (2006 (12) SCC 233): The Court reiterated that an industrial adjudicator can determine if a contract is a sham.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the fact that the workers had consistently admitted to being contract laborers. This admission weighed heavily against their later claim that the agreements with the contractors were sham or bogus. The Court also considered the delay in raising the issue of the agreements being sham, which further weakened the Union’s case.

Fact:Law

Key Takeaways

• ✓ Workers who have consistently admitted to being contract laborers may find it difficult to later claim that their agreements were sham or bogus.
• ✓ Delay in raising disputes can weaken a party’s case.
• ✓ The principle of equal pay for equal work does not apply to contract laborers.

Development of Law

The ratio decidendi of the case is that workers who have consistently admitted to being contract laborers are estopped from later claiming that their agreements were sham or bogus. This decision reinforces the importance of consistency in legal positions and the impact of delay in raising disputes.

Conclusion

The Supreme Court allowed the appeal, quashing the proceedings initiated by the State Government, holding that the reference was invalid due to the workers’ prior admissions as contract laborers and the delay in raising the issue of sham agreements.

Category

• Industrial Disputes Act, 1947
  • Section 7-A, Industrial Disputes Act, 1947
  • Section 10, Industrial Disputes Act, 1947
• Contract Labor
  • Regularization of Contract Labor
  • Sham Agreements
• Labor Law
  • Industrial Disputes
  • Supreme Court Judgments

FAQ

1. What does this judgment mean for contract laborers?

   This judgment implies that contract laborers who have previously acknowledged their status as such may face challenges in later claiming that their employment agreements were a sham to gain the rights of regular employees.

2. Can a company be challenged if it hires contract workers?

   Yes, a company can be challenged if the contract is proven to be a sham or if there is evidence of unfair labor practices. However, this judgment highlights that prior admissions of being a contract laborer can weaken such a challenge.

3. What is the significance of raising a dispute in a timely manner?

   This judgment underscores the importance of raising disputes promptly. Delay in raising a dispute can weaken a party’s case, as it did in this instance.

4. Does this judgment affect the principle of equal pay for equal work?

   No, this judgment reaffirms that the principle of equal pay for equal work does not automatically apply to contract laborers.