Article (March-2020)

Articles

Statutory Canteen: Liability of Principal Employer

Deepanjan Dey

Designation : -   General Manager-HRM

Organization : -  Tata Steel BSL Ltd., Angul, Odisha

01-Mar-2020

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While dealing with the question of automatic absorption of contract labour the constitution bench in Steel Authority of India Ltd. v. National Union Waterfront Workers, (2001) 7 SCC 1has 
explicitly stated that cases pertaining to statutory canteen fall under a different category altogether and stand in a different footing. The Court in this case has inter-alia opined that where the question arose in regard todischarge of a statutory obligation of maintaining Canteen in an establishment and the employer has availed the services of a contractor, the Courts have held that the contract labour would indeed be the employees of the principal employer. While coming to such conclusions the Apex Court, in the SAIL case, referred to many previous of its judgements. In this article we shall therefore deal with thoseand other judgements of the Supreme Court available in this field to comprehend the liabilities of a principal employer in case its canteen is run through a contractor.

In Sarsapur Mills Co. Ltd. vs. Ramanlal Chimanlal (1974 (3) SCC 66) the question for determination was whether the workers employed by co-operative society in running the canteen of the appellant Mill were the employees of the appellant. It was held that as part of statutory liability "under the Factories Act it was duty of the appellant to run and maintain the canteen for the use of its employees" and therefore the employees of the co-operative are the employees of the appellant Mills. In G.B. Pant University of Agriculture & Technology, Pant Nagar, Nanital vs. State of U.P. (AIR 2000 SC 2695) it was observed that the regulation framed under the statute U.P. Agricultural University Act, the University was under the obligation to maintain the cafeteria to serve food as the inmates of the hostel were not allowed to have food from outside. The court held that in view of the requirement of the regulations framed under the Act having statutory sanction and force with overall control and supervision being established the employees of the cafeteria are the employees of the university. In Union of India V. Mohammed Aslam (2001 1 SCC 720) it was opined that the employees working in the unit-run canteens was held to be government servants, as it has emerged that providing canteen facilities to the defence service personnel is obligatory on the part of the Government. All these three cases cited above have been referred to in the SAIL case.

One of the important case in the field has been Parimal Chandra Raha & Ors. vs. L.I.C. of India & Ors. (1995 (Supp.) (2) SCC 611 cited in SAIL case, has set out the broad principlefor regularization of employees working in canteen of an establishment. The following important ratio can be enunciated from this case:

I) Where under the provision of the Factories Act, it is statutorily obligatory on the employer to provide and maintain canteen for the use of his employees, the canteen becomes a part of the establishment and, therefore, the workers employed in such canteen are the employees of the management.

II) A canteen which is run as an obligation by the employer otherwise than an obligation to provide a facility to run canteen and even though it is not a statutorily obligation the canteen become a part of the establishment and the workers working in the canteen will be the employees of the management.

III) The obligation to provide canteen may be explicit or implicit. If providing canteen services has become a part of the service conditions of the employees, the canteen becomes a part of the establishment and the workers in such canteen become the employees of the management.

However, another landmark judgement in the field is Indian Petrochemicals Corporation Ltd. vs. Shramik Sena (1999 (6) SCC 439=1999 LLR 961 (SC) which set out the principle that "that the workmen of a statutory canteen would be the workmen of the establishment for the purpose of the Factories Act only and not for all other purposes". In this case an important question was raised by the court as to the implication of the status of the workman under the Factories Act. The court inter-alia observed:

"The question however is: does this status of a workman under the Factories Act confine the relationship of the employer and the employees to the requirements of the Factories Act alone or does this definition extend for all other purposes which include continuity of service, seniority, pension and other benefits which a regular employee enjoys. The Factories Act does not govern the rights of the employees with reference to recruitment, seniority, promotion, retirement benefits etc. These are governed by other statutes, rules, contracts or polices. Therefore, the workmens' contention that employees of a statutory canteen ipso facto become the employees of the establishment for all purposes cannot be accepted".

However, based on the affidavits filed by the parties the court on merits of the facts cumulatively and in addition that the canteen in the establishment of the management is the statutory the court was of the opinion "that in the instant case the respondent workmen are in fact the workmen of the appellant management". The facts upon which the court based its opinion are as follows:

a) The canteen has been there since the inception of the appellant's factory.

b) The workmen have been employed for long years and despite a change of contractors the workers have continued to be employed in the canteen.

c) The premises, furniture, fixture, fuel electricity, utensils, etc. have been provided for by the appellant.

d) The wages of the canteen workers are reimbursed by the appellant

e) The supervision and control on the canteen is exercised by the appellant through its authorized officer, as can be seen from the various clauses of the contract between the appellant and the contractor.

f) The contractor is nothing but an agent or a manager of the appellant, who works completely under the supervision, control and directions of the appellant.

g) The workmen have the protection of continuous employment in the establishment."

The submission of the Management that in view of no abolition of the Contract Labour is in place it is open to the appellant establishment to manage the affairs of the canteen through a Contractor had been negated by the court as the Contractor was wholly not independent of the management and therefore the court held that "for all purposes" the workmen in this instant case are in fact the workmen of the management.

In the case between Employers, Management of Reserve bank of India vs. Workmen, Reserve Bank of India (1996 (73) FLR 965 (SC)= 1996 LLR 387 (SC)= 1996 (1) LLN 465 (SC) canteens at various locations are managed by the Implementation Committee (Canteen Committee) of the Bank, Co-operative Society and Contractor respectively. In this instant case the court did not agree with the opinion of the Tribunal that the ratio laid down in M.M.R. Khan's case (supra) shall apply. The Court was of the opinion in  the absence of  any  statutory  or other legal obligation and in the absence of any right in the Bank to supervise and control the work or the details thereof in any manner regarding  the canteen  workers employed in the three types of  canteens, it cannot be said that the relationship  of master  and servant existed between  the  Bank  and   the   various  persons employed in  three types  of canteens.

In Hari Shankar Sharma and others vs. M/s Artificial Limbs Manufacturing Corporation and others ((2002 (92) FLR 14 (SC) = 2002 (1) CLR 13 (SC) = 2002 LLR 88 (SC) = 2002 (1) LLJ 237 (SC)) the Apex Court ruled that whenever in discharge of a statutory mandate, a canteen is set up it should not be deemed that obligation has been cast upon the principal employer to regularize the services of the contractor employees engaged for the purpose of maintaining a statutory canteen. In case of statutory obligation under section 46 of the Factories Act the court was of the opinion that that it cannot be said as an absolute proposition of law that whenever in discharge of a statutory mandate, a canteen is set up or other facility provided by an establishment, the employees of the canteen or such other facility become the employees of that establishment. It would depend on how the obligation is discharged by the establishment. It may be carried out wholly or substantially by the establishment itself or the burden may be delegated to an independent contractor. There is nothing in Section 46 of the Factories Act which provides for the mode in which the specified establishment must set up a canteen. Where it is left to the discretion of the concerned establishment to discharge its obligation of setting up a canteen either by way of direct recruitment or by employment of a contractor, it cannot be postulated that in the latter event, the persons working in the canteen would be the employees of the establishment. In regard to Prarimal Chandra Raha's case relied on by the appellants the court was of the opinion that the larger bench in Indian Petrochemicals Corporation Ltd. vs. Shramik Sena and Others (supra) the workmen of the establishment only for the purpose of the Factories Act and not for all other purposes unless it was otherwise proved that the establishment exercised complete administrative control over the employees serving in the canteen.

In Haldia Refinery Canteen employees Union & others vs. M/S Indian Oil Corporation Ltd. and Others (2005 LLR 529 (SC)) negating the contentions of the appellant the Apex Court considered the Indian Petrochemicals Corporation Ltd. case and extensively quoted the judgment of the Indian Petrochemicals Corporation Ltd. case (supra) to bring home the point that the Indian Petrochemicals Corporation Ltd. case elaborately referred and analyzed M.M. R Khan case and Parimal Chandra Rahas case and it was held in these cases that the workmen were the employees of the management for the purposes of the Factories Act alone and did not become the employees of the establishment for any other purpose. On facts of the case the court was of the opinion that the respondent management does not "exercise effective control over the Contractor" and observed the management has kept with it the right to test, interview or otherwise assess or determine the quality of the employees/workers with regard to their level of skills, knowledge, proficiency, capability etc. so as to ensure that the employees/ workers are competent and qualified and suitable for efficient performance of the work covered under the contract. This control has been kept by the management to keep a check over the quality of service provided to its employees. It has nothing to do with either the appointment or taking disciplinary action or dismissal or removal from service of theworkmen working in the canteen. Only because the management exercises such control does not mean that the employees working in the canteen are the employee of the management.

In Hindalco Industries Ltd. vs. Association Of Engineering Workers (2008 (2) LLJ 1064(SC) = 2008 (1) CLR 1023) held that even though the record shows that canteen is being run by the Contractor, ultimate control and supervision over the canteen is of the Company. Inasmuch as the facts on hand are identical to the decision in Indian Petrochemicals Corporation Ltd. case (Supra) which is a three-Judge Bench decision the court accepted the conclusion arrived by the Industrial Tribunal directing to absorb all the employees of the canteen in the company's employment and pay them wages and other benefits to the extent of last category of the unskilled workers in the company.

In Balwant Rai Saluja vs. Air India Ltd. 2014 (9) SCC 407 it was held that the workers engaged by a Contractor in statutory canteen will be a workman under the Factories Act and not for any other purposes. The court was of the opinion that for the workers to be called the employees of the Factory for all purposes need to satisfy the test of employer and employee. It was observed that as the appellant workmen are not under effective and absolute control of Air India and therefore not entitled to regularization of their services. During its judgement the court relied upon cases of Indian Petrochemicals Corporation, Hari Shankar Sharma, Haldia Refinery Canteen employees Union which we discussed in foregoing paragraphs of this article. 
Very recently in Chennai Port trust vs. The Chennai Port Trust Industrial Employees Canteen Workers Welfare Association & Ors (2018 LLR 612 (SC)) the court has upheld the single and Division Bench judgement of Madras High Court wherein it directed the appellant to regularize the services of the canteen workers. The canteen in question was run through a Co-Operative Society called "Chennai Port Trust Industrial Employees Co-operative Canteen Limited" since 1964. The apex court concurred with the findings and judgement of the lower court wherein the Division Bench of the said High Court relying upon Indian Petrochemicals Corporation case has found great similarities in the facts of both the cases.

Conclusion:

Hence from our discussion we can conclude that though the SAIL judgment has put the canteen cases in different pedestal but merely because a contractor employee is engaged in a statutory canteen he will not automatically accrue the right to be regularized unless and until it is proved that the contractor labours are under the effective and absolute control of the Principal Employer. From our above discussion we can conclude that the Indian Petrochemicals Corporation case is pioneer in the field as we found out from various judgments discussed above. Hence, in terms of this judgement a Contractor employee engaged in any statutory canteen shall be deemed to be a workman under the Factories Act and not for any other purpose unless and until it is proved that the effective and absolute control lies with the Principal Employer and there exist a relationship of Employer and Employee between the Principal Employer and contractor workmen.