Supreme Court Upholds Permanent Status for Tamil Nadu Medical Corporation Employees: Tamil Nadu Medical Services Corporation Limited vs. Tamil Nadu Medical Services Corporation Employees Welfare Union & Anr. (2024) INSC 446 (17 May 2024)

Date of the Judgment: 17 May 2024
Citation: 2024 INSC 446
Judges: Sanjay Karol, J. and Prasanna Bhalachandra Varale, J.
Can a government corporation deny permanent status to employees who have worked for an extended period? The Supreme Court of India recently addressed this question, ruling in favor of the employees of the Tamil Nadu Medical Services Corporation. This judgment clarifies the applicability of the Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981, to the corporation’s employees, ensuring their right to permanent employment. The bench was composed of Justice Sanjay Karol and Justice Prasanna Bhalachandra Varale, with the majority opinion authored by Justice Sanjay Karol.

Case Background

The Tamil Nadu Medical Services Corporation Limited (hereafter referred to as ‘the Corporation’) was established on July 1, 1994, under the Indian Companies Act, 1956, and is managed by the State of Tamil Nadu. The Corporation employed numerous workers in various roles, including those who sought regularization under the Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981 (hereafter referred to as ‘the Act’). After their requests for regularization were denied, the employees filed Writ Petitions Nos. 17263 and 17147 of 1998 in the High Court of Judicature at Madras.

On July 21, 2000, the High Court ruled that the Act was applicable to the Corporation and directed the Inspector of Labour to verify the records and pass appropriate orders. Subsequently, on March 31, 2001, the Inspector of Labour ordered that 53 workmen be granted permanent status, as they had worked continuously for 480 days over a 24-month period. This order was challenged, leading to further legal proceedings.

Timeline:

Course of Proceedings

Initially, the employees filed writ petitions in the High Court of Judicature at Madras, which led to the High Court directing the Inspector of Labour to investigate the matter. The Inspector of Labour then ordered the Corporation to grant permanent status to 53 employees. The Corporation challenged this order, and the matter went through several rounds of appeals and remands. The High Court initially dismissed the writ petitions, but the Supreme Court remanded the matter back to the High Court, directing it to consider whether the Act was applicable to the Corporation. On remand, the High Court upheld the applicability of the Act but suggested that the employees should raise an industrial dispute regarding non-employment. This judgment of the High Court was challenged before the Supreme Court in the present case.

Legal Framework

The core legal issue revolves around the interpretation and application of the Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981. Key provisions include:

• Section 2(3) of the Act: Defines “industrial establishment.” It includes establishments defined under Section 2(6) of the Tamil Nadu Shops and Establishments Act, 1947.
  
  “industrial establishment ” means- (e) an establishment as defined in clause (6) of section of the Tamil Nadu Shops and Establishments Act, 1947 (Tamil Nadu Act XXXVI of 1947)
• Section 2(4) of the Act: Defines “workman” as any person employed in an industrial establishment to do skilled or unskilled work.
  
  “workman’ , means any person employed in any industrial establishment to do any skilled or unskilled, manual supervisory, technical or clerical work for hire or reward, whether the terms of employment be express or implied [and includes a badli workman, but does not include any such person, – (a) who is employed in the police service or as an officer or, other employee of a prison; or (b) who is employed mainly in a managerial or administrative capacity; or (c) who, being employed in a supervisory capacity, [draws wages exceeding three thousand and five hundred rupees per mensem] or exercises either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly o f a managerial nature.
• Section 3 of the Act: Mandates that workmen in continuous service for 480 days in a 24-month period in an industrial establishment must be made permanent.
  
  “Notwithstanding anything contained in any law for the time being in force every workman who is in continuous service for a period of four hundred and eighty days in a period of twenty-four calendar months in an industrial establishment shall be made permanent.”
• Section 2(6) of the Tamil Nadu Shops and Establishments Act, 1947: Defines “establishment” as a shop, commercial establishment, or any place of public amusement.
  
  ‘establishment ’ means a shop. commercial establishment, restaurant, eating -house, residential hotel, theatre or any place of public amusement or entertainment and includes such establishment as the 1 [State] Government may by notification declare to be an establishment f or the purposes of this Act;
• Section 2(3) of the Tamil Nadu Shops and Establishments Act, 1947: Defines “commercial establishment” as an establishment that carries on business, including advertising, commission, or a clerical department of a factory.
  
  ‘commercial establishment´ means an establishment which is not a shop but which carries on the business of advertising, commission, forwarding or commercial agency, or which is a clerical department of a factory or industrial undertaking or which is a n insurance company, joint stock company, bank, broker’s office or exchange and includes such other establishments as the State Government may by notification declare to be a commercial establishment for the purposes of this Act.
• Section 7 of the Act: Exempts workmen employed in construction activities from the Act.
  
  “Nothing contained in this Act shall apply to workmen employed in an industrial establishment engaged in the construction of buildings, bridges, roads, canals, dams or other constru ction work whether structural, mechanical or electrical.”

This legal framework is crucial for determining whether the Corporation and its employees fall under the purview of the Act and are entitled to its benefits.

Arguments

Appellant (Tamil Nadu Medical Services Corporation Limited) Arguments:

• The Corporation argued that the High Court did not comply with the Supreme Court’s order of March 10, 2016, which directed the court to consider whether the Act and the Tamil Nadu Shops and Establishments Act, 1947, applied to the Corporation.
• The Corporation contended that it does not fall under the definition of a ‘commercial establishment’ under Section 2(3) of the 1947 Act.
• It argued that since some of its activities include construction, it is exempt under Section 7 of the Act.
• The Corporation claimed that many of the 53 employees who were to be given permanent status have found other employment, making it unnecessary to grant them permanent status.

Respondent (Tamil Nadu Medical Services Corporation Employees Welfare Union) Arguments:

• The Union argued that the Corporation is trying to deny the employees their rights by applying the ratio of State of Karnataka v. Uma Devi, after exploiting them as temporary employees for years.
• The Union relied on Maharashtra State Road Transport Corporation v. Casteribe Rajya Parivahan Karmachari Sanghathana, asserting that the industrial adjudicator cannot violate Article 14 and that regularization rules apply.
• The Union cited U.P. Power Corporation Limited & Anr. v. Bijli Mazdoor Sangh & Ors., arguing that the industrial adjudicator cannot do anything violative of Article 14.
• The Union also relied on ONGC Limited v. Petroleum Coal Labour Union & Ors. and Ajay Pal Singh v. Haryana Warehousing Corporation, asserting that the powers of Industrial and Labour Courts were not considered in Uma Devi.
• The Union contended that the Inspector of Labour’s order declaring the employees eligible for permanent status negates the need for an industrial dispute regarding non-employment.
• The Union argued that employees who have reached superannuation should receive compensation in lieu of regularization, as recognized in Ranbir Singh v. S.K. Roy, Chairman, Life Insurance Corporation of India & Anr.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether the Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981, applies to the parties involved.
2. Whether the High Court’s suggestion to institute an ‘Industrial Disputes Claim’ questioning non-employment was sustainable, given that the Inspector of Labour had already passed orders in that regard.

Treatment of the Issue by the Court

Authorities

Judgment

How each authority was viewed by the Court?

• The Court distinguished State of Karnataka v. Uma Devi [CITATION], stating that the Corporation was trying to deny the employees their rights by applying the ratio of Uma Devi.
• The Court relied on Maharashtra State Road Transport Corporation v. Casteribe Rajya Parivahan Karmachari Sanghathana [CITATION], asserting that the industrial adjudicator cannot violate Article 14 and that regularization rules apply.
• The Court relied on U.P. Power Corporation Limited & Anr. v. Bijli Mazdoor Sangh & Ors. [CITATION], arguing that the industrial adjudicator cannot do anything violative of Article 14.
• The Court also relied on ONGC Limited v. Petroleum Coal Labour Union & Ors. [CITATION] and Ajay Pal Singh v. Haryana Warehousing Corporation [CITATION], asserting that the powers of Industrial and Labour Courts were not considered in Uma Devi.
• The Court relied on Ranbir Singh v. S.K. Roy, Chairman, Life Insurance Corporation of India & Anr. [CITATION], arguing that employees who have reached superannuation should receive compensation in lieu of regularization.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Establishment Nature: The Court emphasized that the Corporation’s activities, including commercial transactions and construction work, qualified it as a ‘commercial establishment’ under the Tamil Nadu Shops and Establishments Act, 1947, and thus an ‘industrial establishment’ under the 1981 Act.
• Continuous Service: The Court noted that the employees had worked continuously for the required period, meeting the criteria for permanent status under Section 3 of the Act.
• Inspector of Labour’s Order: The Court underscored that the Inspector of Labour had already passed an order granting permanent status to the employees, and the High Court should not have disturbed this order without a valid reason.
• Exploitation of Employees: The Court was critical of the Corporation’s attempt to deny permanent status to employees who had worked for an extended period, viewing it as an attempt to exploit them.

The Court’s reasoning was a blend of factual analysis (regarding the nature of the Corporation’s activities and the employees’ service) and legal interpretation (applying the provisions of the relevant Acts). The higher percentage of law indicates that the legal interpretation of the statute weighed more in the mind of the court.

Logical Reasoning:

The Court considered alternative interpretations, such as the Corporation being exempt due to construction activities, but rejected them because the construction work was not the sole activity of the Corporation, and the employees seeking regularization were not engaged in construction. The Court also rejected the argument that the employees had found other employment, stating that it did not negate the rights of those who had not.

The Court concluded that the Act applied to the Corporation and that the employees were entitled to permanent status. The Court emphasized that the High Court should have upheld the order of the Inspector of Labour and that the employees should not be subjected to further litigation.

The Court stated, “When an issue stands already decided and such decision does not suffer from any vice of authority or jurisdiction then, putting those who enjoy an order in their favour through the wringer once more of having to re-establish their claim, this time before the authority under the Industrial Disputes Act, 1947, would be unjustified.”

The Court further noted, “The language of the provision is clear. It implies that this act shall not apply to those workmen who are engaged in the construction of buildings and the like or other construction work be it structural, mechanical, or electrical.”

The Court also observed, “For any establishment to be commercial, it has to be established that the activities undertaken by it are for making some monetary gain. Commercial in the most rudimentary sense means buying or selling of goods in exchange of money. As the above reproduced, uncontroverted paragraph (also recorded by the High Court) establishes, the commercial element was not absent.”

There were no dissenting opinions in this case.

Key Takeaways

• The Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981, applies to the Tamil Nadu Medical Services Corporation Limited.
• Employees who have worked continuously for 480 days in a 24-month period are entitled to permanent status.
• An order passed by the Inspector of Labour under the Act should not be disturbed by the High Court without valid reasons.
• Corporations cannot deny permanent status to employees who have worked for an extended period, especially when the nature of work is continuous and not of a temporary nature.
• The judgment reinforces the rights of workers in Tamil Nadu to secure permanent employment after meeting the specified criteria.

Directions

The Supreme Court dismissed the appeal filed by the Corporation and allowed the appeal filed by the respondent-Union. The Court directed that the order of the Inspector of Labour, which granted permanent status to the employees, be complied with.

Development of Law

The ratio decidendi of this case is that the Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981, is applicable to the Tamil Nadu Medical Services Corporation, and its employees who have completed 480 days of continuous service within 24 months are entitled to permanent status. This judgment clarifies the definition of ‘industrial establishment’ and ‘workman’ under the Act, and reinforces the importance of the Inspector of Labour’s orders. There is no change in the previous position of the law but it clarifies the applicability of the Act to the Corporation.

Conclusion

In conclusion, the Supreme Court’s judgment in Tamil Nadu Medical Services Corporation Limited vs. Tamil Nadu Medical Services Corporation Employees Welfare Union & Anr. upholds the rights of employees to permanent status under the Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981. The Court’s decision reinforces that the Corporation is an ‘industrial establishment’ and that the employees are ‘workmen’ under the Act. The judgment ensures that the employees who have worked for an extended period are granted permanent employment, and it also emphasizes that the orders of the Inspector of Labour should be respected and upheld by the High Court.

Category:

• Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981
  • Section 2(3), Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981
  • Section 2(4), Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981
  • Section 3, Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981
  • Section 7, Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981
• Tamil Nadu Shops and Establishments Act, 1947
  • Section 2(3), Tamil Nadu Shops and Establishments Act, 1947
  • Section 2(6), Tamil Nadu Shops and Establishments Act, 1947
• Industrial Law
  • Permanent Status
  • Regularization of Employees
  • Industrial Dispute
  • Labour Law

FAQ

Q: What is the main issue in this case?
A: The main issue was whether the Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981, applies to the Tamil Nadu Medical Services Corporation and its employees.

Q: What did the Supreme Court decide?
A: The Supreme Court decided that the Act does apply to the Corporation and that employees who have worked continuously for 480 days in a 24-month period are entitled to permanent status.

Q: What is an ‘industrial establishment’ according to the Act?
A: An ‘industrial establishment’ includes establishments defined under Section 2(6) of the Tamil Nadu Shops and Establishments Act, 1947, which includes commercial establishments.

Q: What does it mean to be a ‘workman’ under the Act?
A: A ‘workman’ is any person employed in an industrial establishment to do skilled or unskilled work, excluding managerial roles.

Q: What is the significance of the Inspector of Labour’s order?
A: The Inspector of Labour’s order is significant because it is an official determination under the Act, and the High Court should not disturb it without valid reasons.

Q: What does this judgment mean for employees of the Tamil Nadu Medical Services Corporation?
A: This judgment means that employees who have worked for 480 days within 24 months are entitled to permanent status, ensuring job security and benefits.

Q: Can the Corporation deny permanent status to employees who have worked for an extended period?
A: No, the Corporation cannot deny permanent status to employees who meet the criteria under the Act, as per the Supreme Court’s decision.