Allowed

The Management of M/S Stumpp v. Sri U Mallikarjuna

Karnataka HC21 Oct 2024WA/1685/2018

Case brief

AI extract

What is this about?

The High Court allowed the appeal, setting aside the Single Judge's order that had held the respondent to be an employee of the appellant. The Court ruled that the appellant failed to prove the claimant was ever employed by them, relying on the claimant's own admission of working for contractors and Supreme Court precedents shielding principal employers when qualifications are lacking. The pending

What did the court decide?

Impugned order setting aside Labour Court award is set aside. Pending IA No.1/2018 disposed of as infructuous.

The Management of M/S Stumpp Vs Sri U Mallikarjuna — Service and Employment | Karnataka HC (2024)

¶1

¶2

WA No. 1685 of 2018

¶3

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

¶4

DATED THIS THE 21^ST DAY OF OCTOBER, 2024

¶5

PRESENT

¶6

THE HON'BLE MR JUSTICE V KAMESWAR RAO

¶7

AND

¶8

THE HON'BLE MR JUSTICE C M JOSHI

¶9

WA NO. 1685 OF 2018 (L-TER)

¶10

BETWEEN:

¶11

THE MANAGEMENT OF M/S STUMPP, SCHULE AND SOMAPPA SPRINGS PVT LTD., NO. 139/2, HOSUR ROAD, KORAMANGALA, BANGALORE - 560 095, NOW REP BY ITS CHIEF FINANCE OFFICER, SRI. G.V. KRISHNA KUMAR.

¶12

…APPELLANT

¶13

(BY SRI. S.N. MURTHY, SENIOR ADVOCATE FOR SRI. SOMASHEKAR, ADVOCATE)

¶14

AND:

¶15

SRI.U. MALLIKARJUNA, S/O. VEERANNA, AGED ABOUT 64 YEARS, R/AT: NO. 61, 1^ST MAIN ROAD, 5^TH CROSS, NANJAPPA LAYOUT, ADUGODI, BENGLAURU - 560 030.

¶16

…RESPONDENT

¶17

(BY SRI. NAGENDRA NAIK .R., ADVOCATE)

¶18

¶19

WA No. 1685 of 2018

¶20

THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE KARNATAKA HIGH COURT ACT, 1961 PRAYING TO SET ASIDE THE ORDER DATED 4/4/2018 IN WP 8167/2009 PASSED BY THE LEARNED SINGLE JUDGE.

¶21

THIS WRIT APPEAL HAVING BEEN RESERVED FOR JUDGMENT ON 08.07.2024, COMING ON FOR PRONOUNCEMENT THIS DAY, V KAMESWAR RAO J., DELIVERED THE FOLLOWING:

¶22

CORAM: THE HON'BLE MR JUSTICE V KAMESWAR RAO AND THE HON'BLE MR JUSTICE C M JOSHI

¶23

CAV JUDGMENT

¶24

(PER: THE HON'BLE MR JUSTICE V KAMESWAR RAO)

¶25

The challenge in this appeal is to an order dated 04.04.2018 passed by the learned Single Judge in WP No.8167/2009 filed by the respondent herein, whereby the learned Single Judge has allowed the petition filed by the respondent.

¶26

Suffice to state, the writ petition was filed by the respondent challenging the award dated 15.09.2008 passed by the III Additional Labour Court, Bengaluru (‘Labour Court’ for short) in ID No.71/2000 whereby the

¶27

¶28

WA No. 1685 of 2018

¶29

Labour Court has answered the reference made by the appropriate Government against the respondent herein.

¶30

The facts that need to be noted for the purpose of decision of this appeal are, the case of the respondent before the Labour Court was that he was appointed by the appellant as an operator in the Hardening Department in the year 1981. His salary was paid through one contractor viz., Vijaya Engineering at the rate of Rs.7/per day initially. The work he was doing was perennial in nature. At the time of termination, he was paid Rs.90/per day. The contractor Vijaya Engineering was subsequently changed and Hemadri was appointed as a contractor and thereafter, Shivashakti Enterprises was appointed as contractor. Irrespective of contractors, the respondent continued to work as an employee of the appellant. His PF and ESI were deducted by the appellant. On 13.11.1999, when he went to work as usual, it was mentioned in the attendance register as ‘not allowed’. On

¶31

inquiry, he came to know that his services have been terminated by the appellant. No enquiry was held and no

¶32

¶33

WA No. 1685 of 2018

¶34

notice was issued to him. At the time of termination, he was aged about 47 years. According to him, there was no prospect of getting alternative employment. It was also his case that the respondent, to avoid statutory liabilities, appointed contractors and paid salary in the name of contractors. Irrespective of change of contractors, all the workmen continued to work. They are only name-lending contractors. They have nothing to do with the workmen and as such, he sought for his reinstatement including back wages.

¶35

The case of the appellant before the Labour Court was that, it had given some work on contract basis to the contractors. Contractors used to raise bill every month in respect of the contract work carried out by them. The contractor was paying wages to the workmen engaged by them and they were allotting and supervising the work of the workmen. The appellant is registered as a principal

¶36

employer under Contract Labour (Regulation and Abolotion) Act, 1970 (‘Act of 1970’ for short). The contractor is also a licensee under the Act. The

¶37

¶38

WA No. 1685 of 2018

¶39

respondent was not an employee of the appellant at any

¶40

point of time. There is no master and servant relation. The respondent was governed by the action of his contractor employer.

¶41

The Labour Court had framed the following issues:

¶42

“1. Whether the II Party proves that the I Party was not an employee of the II Party and he was appointed by a contractor by name Shivashakti Enterprises?

¶43

2. Is this dispute not maintainable?

¶44

3. Is the dispute is bad for non-joinder of necessary parities.

¶45

4. Is the I Party entitled for the reliefs of reinstatement, backwages, etc.?

¶46

5. What reliefs, is the parties entitled?”

¶47

Insofar as issues No.1 and 2 are concerned, the

¶48

Labour Court had referred to the evidence of appellant/ management witnesses i.e., MW-1 Sri. K.R.Viswanathan, MW-2 Sri. M.Rajendra and MW-3 Sri. S.Sidda Reddy,

¶49

¶50

WA No. 1685 of 2018

¶51

The respondent had also produced three witnesses

¶52

i.e., WW-1 Sri. U.Mallikarjuna, WW-2 Sri. N.Shankaraiah and WW-3 Sri. P.Krishna Reddy. The Labour Court on issue No.1, in paragraph No.13, has held as under:

¶53

“13. On perusal of the entire oral evidence as well as the documents produced by both the parties, the I Party himself in the course of his crossexamination, has clearly admitted that he was appointed initially by one Vijaya Engineering and thereafter he continued under Hemadri contractor. The I Party has again admitted that the payment register and way bills produced by ing Shivashakti Enterprises indicate his name. It is also admitted that the documents produced by the management categorically proved the fact that he received salary from the Shivashakti Enterprises. There is no any appointment order issued by the II Party. The I Party has also admitted that he has never signed in the roll of the II Party management at any time. The records produced by the management indicate in abundance that he used to engage the contractors to attend their civil and allied works besides house 7 keeping. This aspect of the matter is established by the documents produced by M.W.2 pertaining to Shivashakti Enterprises. The management has produced the bill received by the contractors as well as the attendance register right from the year 1997

¶54

¶55

WA No. 1685 of 2018

¶56

to 1999. They have also produced the wage register for the period 1995 to 1999. All these documents indicate in abundance that the name of the I Party finds place on the roll of the contractors pertaining so those years and that the I Party had received salary from the contractors. For all these reasons, the management has been able to establish the fact that the I Party was not an employee of the Party management at any point of time. For these reason, I have no other option, but to hold that the I Party is not an employee of II Party management. Accordingly the issue No.1 has to be answered in the 'positive'.”

¶57

Suffice to state, the Labour Court was of the view

¶58

that the respondent had admitted that he was appointed initially by Vijaya Engineering and thereafter, he continued in Hemadri Enterprises. It was also held that the respondent admitted that he received salary from Shiva Shakthi Enterprises. The Labour Court also held the documents produced by MW-2, like the bills received from the contractors, license, attendance register, wage register, indicate that the name of the respondent is found on the rolls of the contractors pertaining to the years in question i.e., 1995 to 1999. For this reason, the Labour

¶59

¶60

WA No. 1685 of 2018

¶61

Court held that the appellant could able to establish the

¶62

fact that the respondent was not its employee.

¶63

Based on the finding on issue No.1, issues No.2 to 5 were also decided and the petition filed by the respondent was rejected.

¶64

The learned Single Judge, in the impugned order, has set aside the award dated 15.11.2008 passed by the Labour Court by stating in paragraphs No.14 to 20 as under:

¶65

“14. Substantiating his submission learned counsel, placed reliance on evidence of WW2 and WW3 who are N. Shankaraiah and P. Krishna Reddy have stated that the petitioner was appointed in the Hardening department in the year 1981 as an operator. He was doing his work in a perennial nature. Without Hardening department, the manufacturing process cannot be completed. The documents marked as Ex. W1 to W3PF annual statements, W4 - ESI card, W11 PF statement and W15 copy of PF statement which showed the production directly made by the respondent. This further shows that after Vijaya Engineering period was completed, the respondent has taken the petitioner to make production. Thus specific defence

¶66

¶67

WA No. 1685 of 2018

¶68

has not been taken by the respondent though it is submitted under sub-section 2(9) of ESI Act and Section 40(1) of ESI Act and Section 2(F) Employees Provident Fund Act r/w Section 32 (1) (2) and (3) of the Act which initially had made the employer to contribute the ESI contribution. The principal employer shall pay in respect of every employee whether directly employed by or through an immediate employer, both the employers contribution and the employees contribution. Therefore it is to be seen whether services of the petitioner were with the respondent or with the contractor. It could be seen from evidence of WW2 and WW3. WW2 N. Shankaraiah has deposed "I know Sri. Mallikarjun, the first party herein. He was working in the Hardening department as operator. He was working from 1981 as operator in 714 C Hardening department. The Hardening department is our neighbour department. The nature of work, he was doing was a perennial one. Without Hardening department, the manufacturing process cannot be completed. He had never worked in the Garvebhavipalya Branch. He was working without any break to the duty." On similar terms WW3 P. Krishna Reddy deposed since 1981 he was working in the Hardening department in a perennial nature for the purpose of production. WW2 in his cross examination has deposed that "I do not know that first party was working under a contractor. First

¶69

10 -

¶70

WA No. 1685 of 2018

¶71

party was working in Hardening department. Management was paying salary to the first party. I have seen the payment of salary to the first party. It is not correct to suggest that Shivashakti contractors were paying salary to the first party. It is not correct to suggest that first party was not working as an operator in the Hardening department. First party was appointed by the 2nd party management. I do not know whether appointment order was given to the first party or not. Second party was giving appointment orders to all the workers generally."

¶72

15. MW2 evidence in cross examination is that petitioner was working as an operator in Hardening department before the contract between first and second parties contractors. Further he deposed that he was not working at GVP plant. PF and ESI amount was deducted in the salary itself and there were no relationship between petitioner and contractor. It is proved that he was working at Principal plant for Vijaya Engineering and Hemadri contractors but the fact is that even before contract between respondent and with the contractors, petitioner was working. The first party was not working in GVP plant.

¶73

16. Subsequently Hemadri though took the work contract with respondent, there is no evidence and materials available to prove that employment of the petitioner also transferred to Hemadri or Shivashakti Enterprises as per evidence MW2. The

¶74

11 -

¶75

WA No. 1685 of 2018

¶76

PF contribution has been made by respondent and petitioner took salary from the respondent. This evidence does not prove that petitioner's service was directly under the respondent and does not establish the fact, he was working under either contractor Shivashakti or Hemadri.

¶77

With regard to this, it is relied upon the Judgment of Supreme Court reported in 2009 13 SCC 374 - International Airport Authority of India vs. International Air Cargo Workers' Union, which reads as under,

¶78

"The expression 'control and supervision' in the context of contract labour was explained by this Court in International Airport Authority of India v. International Air Cargo Workers' Union-3.

¶79

38. if the contract is for supply of labour, necessarily, the labour supplied by the contractor will work under the directions, supervision and control of the principal employer but that would not make the worker a direct employee of the principal employer, if the salary is paid by a contractor, if the right to regulate the employment 1S with the contractor, and the ultimate supervision and control lies with the contractor.

¶80

39. The principal employer only controls and directs the work to be done by a contract labour, when such labour is assigned/allotted/ sent to him. But it is the contractor as employer, who chooses whether the worker is to be assigned/allotted to the principal employer or used otherwise. In short, worker being the employee of the contractor, the

¶81

12 -

¶82

WA No. 1685 of 2018

¶83

ultimate supervision and control lies with the contractor as he decides where the employee will work and how long he will work and subject to what conditions. Only when the contractor assigns/ sends the worker to work under the principal employer, the worker works under the supervision and control of the principal employer but that is secondary control. The primary control is with the contractor."

¶84

17. In the light of the observations made above, case of the petitioner is examined it is found that after the agreement period by Vijaya Engineering, he became lemployee under the respondent since the respondent has not placed any reliance on subsequent contractors to claim that they were employers of the petitioner.

¶85

18. Payment of ESI or PF contribution, it would not decide the relationship of him and employment as per provisions of ESI and PF Act. As submitted by learned senior counsel it shall be perennial duty of the employer or respondent to contribute PF and ESI, but such contributions would not decide the relationship. However in the light of evidence of petitioner, WW2 and WW3 who have deposed that petitioner was working since 1981 and he continued till 1998 till his termination for which the contribution was made by the respondent.

¶86

19. The object of ID Act is to make provisions for investigation and settlement of industrial

¶87

13 -

¶88

WA No. 1685 of 2018

¶89

disputes. However, it makes other provisions in respect of lay off, retrenchment, closure etc., the purpose is to bring the conflicts between employer and employees to an amicable settlement.

¶90

20. The materials and evidence available on record, such as evidence of WW1 to WW3 and evidence of MW2 and MW3 show that no doubt petitioner was initially appointed by Vijaya Engineering, but later he was continued in the services of the respondent continuously in a perennial nature. There are no materials to show that he was with the later contractors of the respondent. Now the petitioner has retired from service. Hence he is entitled for only consequential benefits, as a proper adjudication of the matter by giving monetary benefits. I hold it is proper to take Rs.100/- per day which comes to Rs.3,000/- p.m. It will have to be calculated for 12 years (date of termination is 1999 and he retired in the year 2011 ie., 12 years) which comes to Rs.4,32,000/- interest of 6% Rs.3,11,000/- in total Rs.7,43,000/-. Same is directed to be paid within a period of 8 weeks.

¶91

Writ petition is accordingly disposed of.”

¶92

It may be stated here, the learned Single Judge has also relied upon the judgment of the Supreme Court

¶93

in the case of International Airport Authority of India

¶94

14 -

¶95

WA No. 1685 of 2018

¶96

-Vs.International Air Cargo Workers’ Union

¶97

[(2009) 13 SCC 374] .

¶98

Submissions:

¶99

The submission of Sri. S.N.Murthy, learned Senior Counsel for the appellant is that, the conclusion of the learned Single Judge in paragraph No.17 of the impugned order wherein he has observed that after the agreement period with M/s Vijaya Engineering, the respondent became the employee of the appellant since the appellant has not placed any reliance on subsequent contractors to claim that they were employers of the appellant is contrary to the real facts. According to him,

¶100

the respondent had admitted in paragraph No.3 of the claim statement that he started working as contract labour under M/s Vijaya Engineering and later with Hemadri and lastly under Shivashakthi Enterprises. According to him, MW-2 Sri. Rajendra of Shivashakthi Enterprises, labour contractor produced all the wage registers and payment registers and bills as Exs.M5 to M17 to show that the respondent was working in his company. The respondent’s

¶101

15 -

¶102

WA No. 1685 of 2018

¶103

name is indicated in the payment registers and wage bills

¶104

of Shivashakthi Enterprises from 1995 to 1999. Therefore, the conclusion of the learned Single Judge being perverse, is liable to be set aside. He stated that the judgment of the learned Single Judge is contrary to the judgment of the Supreme Court in the case of Municipal Corporation of Greater Mumbai -Vs.K.V.Kshamik Sangh [2002 II LLJ 554] wherein it is

¶105

held that after the abolition of the contract labour under Section 10 of the Act of 1970, there is no automatic absorption of contract labour. Hence, the Court’s direction for absorption of contract labour as direct employees of principal employer cannot be sustained.

¶106

On the other hand, Sri. Naik, learned counsel appearing for the respondent would justify the judgment of the learned Single Judge to say that in effect the respondent was working with the appellant, the contractors were namesake as all the supervision in the manner, the work to be carried out was being done by the appellant and no one else. That apart, the work done by

¶107

16 -

¶108

WA No. 1685 of 2018

¶109

the respondent was perennial in nature. Hence, the present appeal is liable to be dismissed.

¶110

Analysis:

¶111

Having heard the learned counsel for the parties, the short issue which arises for consideration in this appeal is, whether the learned Single Judge was right in setting aside the award passed by the Labour Court and thereby granting the relief to the respondent herein in the manner depicted above?

¶112

On perusal of the impugned order, it is noted that the learned Single Judge has primarily held that the respondent had become an employee of the appellant after the period of the agreement between the appellant and Vijaya Engineering came to an end, as the appellant had not placed reliance on any material to claim that the subsequent contractors were the employers of the respondent herein. That apart, in paragraph No.18, the learned Single Judge by holding that the payment of ESI and PF contribution would not decide the relationship

¶113

17 -

¶114

WA No. 1685 of 2018

¶115

between the parties herein, has still held, as the respondent was working since 1981 and continued till 1998 till his termination for which the contribution was made by the appellant herein, the respondent was working under the appellant.

¶116

Suffice to state, the conclusion of the learned Single Judge is at variance with the stand of the respondent himself in his application before the Labour Court in as much as in paragraph No.3, the respondent has stated as under:

¶117

“3. Though the first party was paid the salary through a contractor by name Vijaya subsequently the contractors were changed on several occasions. After Vijaya Engineering, Hemadri was appointed as contractor thereafter Shivashakthi enterprises was appointed as contractor. It is submitted that all these contractors are relatives of the Directors of the company. The work allotted to the first party is not seasonal one. The nature of the work is of permanent in nature. The second party has paid contribution to the employee's provident fund to the companies account in the name of the first party. The first party was registered with the Employees State Insurance Corporation.”

¶118

18 -

¶119

WA No. 1685 of 2018

¶120

The aforesaid admission of the respondent is conclusive in respect of the fact that he was initially engaged by Vijaya Engineering and thereafter by Hemadri and thereafter by Shivashakthi Enterprises. Hence, for the learned Single Judge to say that the appellant herein had not placed reliance on subsequent contractors to claim that they were the employers of the respondent is a misplaced finding. The Supreme Court in Sangramsinh P. Gaekwad and Others -Vs.- Shantadevi P. Gaekwad (Dead) through LR’s and Others [(2005) 11 SCC 314] has held, admissions in the pleadings are admissible proprio vigore against the maker thereof. If that be so, the conclusion of the learned Single Judge being at variance with the admission of the respondent, the same is a perverse finding as well.

¶121

It is also a settled position of law, that the claim as made by the respondent before the Labour Court could only be considered if the claimant (respondent herein) had made a case that the contract entered by the appellant with the contractors was sham and camouflage.

¶122

19 -

¶123

WA No. 1685 of 2018

¶124

In this regard, the Supreme Court in the case of Steel Authority of India Ltd. -Vs.National Union Waterfront Workers, [(2001)7 SCC 1] at paragraph No.125(5), held as under :

¶125

(5) On issuance of prohibition notification under Section 10(1) of the CLRA Act prohibiting employment of contract labour or otherwise, in an industrial dispute brought before it by any contract labour in regard to conditions of service, the industrial adjudicator will have to consider the question whether the contractor has been interposed either on the ground of having undertaken to produce any given result for the establishment or for supply of contract labour for work of the establishment under a genuine contract or is a mere ruse/camouflage to evade compliance with various beneficial legislations so as to deprive the workers of the benefit thereunder. If the contract is found to be not genuine but a mere camouflage, the so-called contract labour will have to be treated as employees of the principal employer who shall be directed to regularise the services of the contract labour in the establishment concerned subject to the conditions as may be specified by it for that purpose in the light of para 6 hereunder”.

¶126

20 -

¶127

WA No. 1685 of 2018

¶128

It is seen that case as above was not set up by the respondent. The Labour Court has, by rendering a finding that respondent was not working under the appellant, has rightly answered the reference by rejecting the same against the respondent herein.

¶129

Additionally, admittedly, the salary of the respondent was being paid by the contractors. The Supreme Court in the case of International Airport Authority of India (supra), has held that one of the test to determine who is the employer is as to who is paying the salary to the workman/claimant. (Ref: Paragraph No.38), wherein following has been stated:

¶130

“8. The tests that are applied to find out whether a person is an employee or an independent contractor may not automatically apply in finding out whether the contract labour agreement is a sham, nominal and is a mere camouflage. For example, if the contract is for supply of labour, necessarily, the labour supplied by the contractor will work under the directions, supervision and control of the principal employer but that would not make the worker a direct employee of the principal employer, if the salary is paid by a contractor, if the right to regulate

¶131

21 -

¶132

WA No. 1685 of 2018

¶133

the employment is with the contractor, and the ultimate supervision and control lies with the contractor”.

¶134

It follows, the contractors were the employers of the respondent. The ESI and PF contribution made by the appellant would not be relevant / conclusive to hold the appellant was employer. This is for the reason under the provisions of the Act of 1970, the principal employer is under an obligation to ensure that ESI and PF contributions are made by the contractor; failure on the part of his employer (contractor), the liability shall shift on the Principal employer i.e., the appellant herein. In that regard, the finding of the learned Single Judge in paragraph No.18 is contradictory and is not sustainable in law. Further, the Supreme Court in the same Judgment has also in paragraph No.28.3, on the working of the contract labour under the supervision of the Principal employer, has stated as under :

¶135

“28.3. The next ground referred is that

¶136

the contract labour were working under the direct supervision and control of officers of

¶137

22 -

¶138

WA No. 1685 of 2018

¶139

IAAI. This is not in fact disputed. The contract labour were engaged in handling cargo, that is loading, unloading and movement of cargo in the Cargo Complex of IAAI. Naturally, the work had to be done under the supervision of the officers of IAAI. Merely because the contract labour work is under the supervision of the officers of the principal employer, it cannot be taken as evidence of direct employment under the principal employer. Clause 17 of the Contract Agreement required a supervisor to be employed by the society also. Exercise of some control over the activities of contract labour while they discharge their duties as labourers, is inevitable and such exercise is not sufficient to hold that the contract labour will become the direct employees of the principle employer”.

¶140

So, it is clear that, even if the respondent was working under the supervision of the appellant, he shall not become the employee of the Principal employer i.e., the appellant.

¶141