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Friday, September 5, 2014

Air India Ltd. - Hotel Corporations of India Ltd - workmen employed in canteens of Air India are worker of Air India or the workers of Hotel Corporations of India Ltd., - in view of the different opinion between the two judges , the matter was referred to H.L. DATTU, R.K. AGRAWAL, ARUN MISHRA three bench judges - Apex court held that Therefore, in our considered view and in light of the above, the appellants-workmen could not be said to be under the effective and absolute control of Air India. The Air India merely has control of supervision over the working of the given statutory canteen. Issues regarding appointment of the said workmen, their dismissal, payment of their salaries, etc. are within the control of the HCI. It cannot be then said that the appellants are the workmen of Air India and therefore are entitled to regularization of their services. It would be pertinent to mention, at this stage, that there is no parity in the nature of work, mode of appointment, experience, qualifications, etc., between the regular employees of the Air India and the workers of the given canteen. Therefore, the appellants-workmen cannot be placed at the same footing as the Air India’s regular employees, and thereby claim the same benefits as bestowed upon the latter.= CIVIL APPEAL NOS. 10264-10266 OF 2013 |BALWANT RAI SALUJA & ANR. | .. APPELLANT(S) | VERSUS |AIR INDIA LTD. & ORS. | .. RESPONDENT(S) = 2014 Aug.Part - http://judis.nic.in/supremecourt/filename=41843

    Air India Ltd. - Hotel Corporations of India Ltd - workmen employed in canteens of Air India are worker of Air India or the workers of Hotel Corporations of India Ltd., - in view of the different opinion between the two judges , the matter was referred to H.L. DATTU, R.K. AGRAWAL, ARUN MISHRA three bench judges - Apex court held that   Therefore, in our considered view and in  light  of  the  above, the appellants-workmen could not be said  to  be  under  the  effective  and absolute control  of  Air  India.  The  Air  India  merely  has  control  of
supervision  over  the  working  of  the  given  statutory  canteen.  Issues regarding appointment of the  said  workmen,  their  dismissal,  payment  of their salaries, etc. are within the control of the HCI. It  cannot  be  then said that the appellants are the workmen of  Air  India  and  therefore  are entitled to regularization of their services. It would be pertinent to mention, at this stage, that  there  is no  parity  in  the  nature  of  work,  mode  of  appointment,   experience, qualifications, etc., between the regular employees of  the  Air  India  and the workers of the given canteen. 
Therefore, the  appellants-workmen  cannot be placed at the same footing as the  Air  India’s  regular  employees,  and thereby claim the same benefits as bestowed upon the latter.=

 In view of the difference of opinion by two learned Judges,  and
by referral order dated 13.11.2013 of this Court, these  Civil  Appeals  are
placed before us for our consideration and  decision.  The  question  before
this bench is whether the workmen engaged in statutory canteens,  through  a
contractor, could be treated as employees of the principal establishment.
2.          At the outset, it  requires  to  be  noticed  that  the  learned
Judges differed in their opinion regarding the liability  of  the  principal
employer running statutory canteens and further regarding the status of  the
workmen engaged thereof. The  learned  Judges  differed  on  the  aspect  of
supervision and control which was exercised  by  the  Air  India  Ltd.  (for
short, “the Air India”)- respondent No. 1, and  the  Hotel  Corporations  of
India Ltd. (for short, “the HCI”)-respondent No. 2, over  the  said  workmen
employed  in  these  canteens.  The  learned   Judges   also   had   varying
interpretations regarding the status of the HCI as  a  sham  and  camouflage
subsidiary by the  Air  India  created  mainly  to  deprive  the  legitimate
statutory and fundamental rights of the concerned workmen and the  necessity
to pierce the veil to ascertain their relation with the principal employer.

3.          The Two Judge bench has expressed contrasting  opinions  on  the
prevalence  of  an  employer–employee  relationship  between  the  principal
employer and the workers in the  said  canteen  facility,  based  on,  inter
alia, issues surrounding the economic dependence of the subsidiary  role  in
management and  maintenance  of  the  canteen  premises,  representation  of
workers,  modes  of  appointment  and  termination  as  well  as   resolving
disciplinary issues among workmen. The Bench  also  differed  on  the  issue
pertaining to whether such workmen should be treated  as  employees  of  the
principal employer only for the purposes of the  Factories  Act,  1948  (for
short, “the Act, 1948”) or for other purposes as well.=

 In our considered view, and in light of the  principles  applied
in the Haldia case (supra), such control  would  have  nothing  to  do  with
either the appointment, dismissal or removal from service, or the taking  of
disciplinary action against the workmen working in  the  canteen.
The  mere
fact that the Air India has a certain degree of control over the  HCI,  does
not mean that the employees working in  the  canteen  are  the  Air  India’s
employees. 
The Air  India  exercises  control  that  is  in  the  nature  of
supervision.
Being the  primary  shareholder  in  the  HCI  and  shouldering
certain financial burdens such as providing with the subsidies  as  required
by law, the Air India would be entitled to have  an  opinion  or  a  say  in
ensuring effective utilization of  resources,  monetary  or  otherwise.
The
said supervision or  control  would  appear  to  be  merely  to  ensure  due
maintenance of standards and quality in the said canteen.

85.         Therefore, in our considered view and in  light  of  the  above,
the appellants-workmen could not be said  to  be  under  the  effective  and
absolute control  of  Air  India.  The  Air  India  merely  has  control  of
supervision  over  the  working  of  the  given  statutory  canteen.  Issues
regarding appointment of the  said  workmen,  their  dismissal,  payment  of
their salaries, etc. are within the control of the HCI. It  cannot  be  then
said that the appellants are the workmen of  Air  India  and  therefore  are
entitled to regularization of their services.

86.         It would be pertinent to mention, at this stage, that  there  is
no  parity  in  the  nature  of  work,  mode  of  appointment,   experience,
qualifications, etc., between the regular employees of  the  Air  India  and
the workers of the given canteen.
Therefore, the  appellants-workmen  cannot
be placed at the same footing as the  Air  India’s  regular  employees,  and
thereby claim the same benefits as bestowed upon the latter. It  would  also
be gainsaid to note the fact that the appellants-herein  made  no  claim  or
prayer against either of the other respondents, that  is,  the  HCI  or  the
Chefair.

87.         In terms of the above, the reference is answered as follows :
     The workers engaged by a contractor to work in  the  statutory  canteen
of a factory would be the workers of the said  factory,  but  only  for  the
purposes of the Act, 1948, and not for other purposes, and further  for  the
said workers, to be called the employees of the factory  for  all  purposes,
they would need to satisfy the test of  employer-employee  relationship  and
it must be shown that the employer exercises absolute and effective  control
over the said workers.

88.         In view of the above, while answering  the  referral  order,  we
dismiss these appeals.  No order as to costs.

    2014 Aug.Part - http://judis.nic.in/supremecourt/filename=41843

                                                R e p o r t a b l e


                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                    CIVIL APPEAL NOS. 10264-10266 OF 2013




|BALWANT RAI SALUJA & ANR.                 |    .. APPELLANT(S)               |



                                   VERSUS

|AIR INDIA LTD. & ORS.                     |    .. RESPONDENT(S)              |




                               J U D G M E N T

H.L. Dattu, J.



1.          In view of the difference of opinion by two learned Judges,  and
by referral order dated 13.11.2013 of this Court, these  Civil  Appeals  are
placed before us for our consideration and  decision.  The  question  before
this bench is whether the workmen engaged in statutory canteens,  through  a
contractor, could be treated as employees of the principal establishment.
2.          At the outset, it  requires  to  be  noticed  that  the  learned
Judges differed in their opinion regarding the liability  of  the  principal
employer running statutory canteens and further regarding the status of  the
workmen engaged thereof. The  learned  Judges  differed  on  the  aspect  of
supervision and control which was exercised  by  the  Air  India  Ltd.  (for
short, “the Air India”)- respondent No. 1, and  the  Hotel  Corporations  of
India Ltd. (for short, “the HCI”)-respondent No. 2, over  the  said  workmen
employed  in  these  canteens.  The  learned   Judges   also   had   varying
interpretations regarding the status of the HCI as  a  sham  and  camouflage
subsidiary by the  Air  India  created  mainly  to  deprive  the  legitimate
statutory and fundamental rights of the concerned workmen and the  necessity
to pierce the veil to ascertain their relation with the principal employer.

3.          The Two Judge bench has expressed contrasting  opinions  on  the
prevalence  of  an  employer–employee  relationship  between  the  principal
employer and the workers in the  said  canteen  facility,  based  on,  inter
alia, issues surrounding the economic dependence of the subsidiary  role  in
management and  maintenance  of  the  canteen  premises,  representation  of
workers,  modes  of  appointment  and  termination  as  well  as   resolving
disciplinary issues among workmen. The Bench  also  differed  on  the  issue
pertaining to whether such workmen should be treated  as  employees  of  the
principal employer only for the purposes of the  Factories  Act,  1948  (for
short, “the Act, 1948”) or for other purposes as well.

FACTS :
4.          The present set of appeals came  before  a  two-Judge  Bench  of
this Court against a judgment and  order  dated  02.05.2011  of  a  Division
Bench of the High Court of Delhi in LPA Nos. 388, 390 and 391 of  2010.  The
present dispute finds origin in an industrial dispute  which  arose  between
the Appellants-workmen herein of the statutory canteen and Respondent No. 1-
herein. The said industrial dispute was referred by the Central  Government,
by its order dated 23.10.1996 to the Central Government Industrial  Tribunal
cum Labour Court (for short “the CGIT”). The question referred  was  whether
the workmen as employed by  Respondent  No.  3-herein,  to  provide  canteen
services at the establishment of Respondent No. 1-herein, could  be  treated
as deemed  employees  of  the  said  Respondent  No.  1.  Vide  order  dated
05.05.2004, the CGIT held that the workmen were employees of the  Respondent
No.1-Air India and therefore their claim  was  justified.  Furthermore,  the
termination of services of the workmen during the pendency  of  the  dispute
was held to be illegal.
5.          By judgment and  order  dated  08.04.2010,  the  learned  Single
Judge of the High Court of Delhi set aside and quashed the CGIT’s award  and
held that the said workmen would not be entitled to be treated as or  deemed
to be the employees of the Air India. The Division Bench of the  High  Court
of Delhi vide impugned order dated 02.04.2011 found no error  in  the  order
passed by the learned Single  Judge  of  the  High  Court.  The  appeal  was
dismissed by the Division Bench confirming the order of the  learned  Single
Judge  who  observed  that  the  responsibility  to  run  the  canteen   was
absolutely with the HCI and that  the  Air  India  and  the  HCI  shared  an
entirely contractual relationship. Therefore, the claim  of  the  appellants
to be treated as employees of the  Air  India  and  to  be  regularized  was
rejected by the learned Single Judge.

6.          In the present set of appeals, the appellants  are  workers  who
claim to be the deemed employees of the  management  of  Air  India  on  the
grounds, inter alia,  that  they  work  in  a  canteen  established  on  the
premises of the respondent No. 1-Air India and that too, for the benefit  of
the employees of the said respondent. It is urged that since the canteen  is
maintained as a consequence of a statutory obligation under  Section  46  of
the Act, 1948, and that since by virtue of  notification  dated  21.01.1991,
Rules 65-70 of the Delhi Factory Rules, 1950 (for short, “the Rules,  1950”)
have become applicable to the respondent No. 1, the said workers  should  be
held to be the employees of the management  of  the  corporation,  on  which
such statutory obligation is placed, that is, Air India.

7.          Respondent No. 1 is a company incorporated under  the  Companies
Act, 1956 and is owned by the Government of India.  The  primary  object  of
the  said  respondent  is  to  provide  international  air  transport/travel
services. It has Ground Services Department at Indira  Gandhi  International
Airport,  Delhi.  The  Labour  Department  vide   its   notification   dated
20.01.1991 under sub-rule (1) of Rule 65 of the Rules,  1950,  has  enlisted
the said M/s. Air India Ground Services Department, thereby making Rules  65
to 70, of the Rules, 1950 applicable to the same.

8.          Respondent No. 2-HCI is also a company  incorporated  under  the
Companies Act, 1956 and is a separate legal entity from the  Air  India.  As
per the Memorandum of Association of Respondent No. 2, the same is a wholly-
owned subsidiary of the Air India. The main objects of the said  respondent,
inter alia, are to establish refreshment rooms, canteens, etc. for the  sale
of food, beverages, etc.

9.          Respondent No. 2 has various units and Respondent No.  3,  being
Chefair  Flight  Catering  (for  short,  “the  Chefair”),  provides   flight
catering services to various airlines,  including  Air  India.  It  is  this
Chefair unit of HCI that operates and runs the canteen. It  requires  to  be
noticed that the appellants-workmen are engaged on  a  casual  or  temporary
basis by the respondent Nos. 2 and 3  to  render  canteen  services  on  the
premises of respondent No.1 - Air India.

ISSUE :

10.         The main issue  for  consideration  before  this  Court  in  the
present reference is “whether workers, engaged  on  a  casual  or  temporary
basis by a contractor (HCI) to operate and run a  statutory  canteen,  under
the provisions of the Act, 1948, on the premises of a factory –  Air  India,
can be said to be the workmen of the said factory or corporation”.

SUBMISSIONS :
11.         Shri Jayant Bhushan, learned Senior Counsel for the  appellants-
workmen has two alternative submissions; firstly, that in  the  event  of  a
statutory requirement to provide for a canteen or any  other  facility,  the
employees of the said facility would automatically become employees  of  the
principal employer, irrespective of the existence of any  intermediary  that
may have  been  employed  to  run  that  facility.  Secondly,  the  test  of
sufficient control by the principal  employer  over  the  operation  of  the
canteen  and  consequently  over  the  appellants-workmen,  should  prevail.
Therefore, the Court should pierce the veil and take note of the  fact  that
the contractor was a mere camouflage, and  the  principal  employer  was  in
real control of the canteen and  its  workmen.  Reference  is  made  to  the
following cases in support of his submissions- Saraspur Mills  Co.  Ltd.  v.
Ramanlal  Chimanlal,  (1974)  3  SCC  66;  Hussainbhai  v.   Alath   Factory
Thezhilali Union, (1978) 4 SCC 257; M.M.R. Khan  v.  Union  of  India,  1990
Supp SCC 191; and Parimal Chandra Raha v. LIC, 1995 Supp (2) SCC 611.

12.         Shri Jayant Bhushan also submits that the issue raised in  these
appeals is squarely covered by the observations  made  by  the  Constitution
Bench in the case of  Steel  Authority  of  India  Ltd.  v.  National  Union
Waterfront Workers, (2001) 7 SCC 1.

13.         While supporting the judgment in the Steel Authority of  India’s
case (supra), Shri C.U. Singh, learned Senior Counsel for Respondent No.  1-
Air India would contend that  the  issue  that  came  up  for  consideration
before the Constitution Bench is  entirely  different  and,  therefore,  the
said decision has no bearing on the facts and the question of law raised  in
the present set of appeals.
14.         Shri C.U. Singh would then refer to the various case laws  cited
by the learned counsel for the appellants to show that  they  are  not  only
distinguishable on facts, but are inapplicable to the facts of  the  present
case. He would also refer to the three-Judge Bench decision  of  this  Court
in the case of Indian Petrochemicals Corpn. Ltd. v. Shramik Sena,  (1999)  6
SCC 439, and then would submit that the proposition  of  law  enunciated  in
the Indian Petrochemicals case (supra) is followed by  this  Court  in  Hari
Shankar Sharma v. Artificial Limbs Mfg. Corpn., (2002) 1  SCC  337;  Workmen
v. Coates  of  India  Ltd.,  (2004)  3  SCC  547;  Haldia  Refinery  Canteen
Employees Union v. Indian Oil Corpn. Ltd., (2005) 5 SCC  51;  and  Karnataka
v. KGSD Canteen Employees’ Welfare Assn., (2006) 1 SCC 567.

15.         In so far as the second submission of the  learned  counsel  for
the appellants is concerned,  Shri C.U. Singh would submit that  it  is  not
the test of sufficient control, but  the  test  of  effective  and  absolute
control which would be relevant, and that if the said  test,  in  the  given
facts is applied, the appellants would fail to establish  the  employer  and
employee relationship. In aid  of  his  submissions,  he  refers  to  Bengal
Nagpur Cotton Mills v. Bharat Lal, (2011) 1 SCC 635;  International  Airport
Authority of India v. International Air Cargo Workers’ Union, (2009) 13  SCC
374; and National Aluminium Co. Ltd. v. Ananta Kishore Rout &  Ors.,  (2014)
6 SCC 756.

RELEVANT PROVISIONS :

16.         To appreciate the point of view of the parties  to  the  present
lis, it is necessary to notice the relevant provisions.

17.         Section 46 of the Act, 1948 statutorily places an obligation  on
the occupier of a factory to provide and maintain a canteen in  the  factory
where more than two  hundred  and  fifty  workers  are  employed.  There  is
nothing in the said provision which provides  for  the  mode  in  which  the
factory must set up a canteen. It appears to be left to  the  discretion  of
the concerned factory to either discharge the said obligation of setting  up
a canteen either by way of direct involvement or  through  a  contractor  or
any other third party. The provision reads as under:

“46. Canteens.-(1) The State Government may make  rules  requiring  that  in
any specified factory wherein more than two hundred and  fifty  workers  are
ordinarily employed, a canteen or canteens shall be provided and  maintained
by the occupier for the use of the workers.
(2) Without prejudice in the generality of the foregoing power,  such  rules
may provide for -
(a) the date by which such canteen shall be provided;
(b) the standard in respect of construction,  accommodation,  furniture  and
other equipment of the canteen;
(c) the foodstuffs to be served therein and the charges which  may  be  made
therefor;
(d)  the  constitution  of  a  managing  committee  for  the   canteen   and
representation of the workers in the management of the canteen;
(dd) the items of expenditure in the running of the canteen  which  are  not
to be taken into account in fixing the cost of foodstuffs  and  which  shall
be borne by the employer;
(e) the delegation to Chief Inspector subject to such conditions as  may  be
prescribed, of the power to make rules under clause (c).”

18.          By  virtue  of  Notification  No.  27(12)89-CIF/Lab/464   dated
21.01.1991, rules 65 to 70 of the Rules, 1950 were made applicable  to  M/s.
Air India Ground Services Department. The rules impose obligations upon  the
occupier of the factory as regards providing for and  maintaining  the  said
canteen.

19.         Rules 65 to 70 of the Rules, 1950  are  in  furtherance  of  the
duty prescribed on the State Government to run  statutory  canteens  as  per
Section 46 of the Act, 1948. Rule 65, inter alia, provides for  an  official
notification and approval of  the  occupier  canteen  facility  as  well  as
additional guidelines regarding the  construction,  accommodation,  hygiene,
ventilation, sanitation and other maintenance works. Rule 66 prescribes  for
setting up a dining hall, with  adequate  space  and  furniture  along  with
reservation of dining space for women  employees.  Rule  67  enumerates  the
requisite equipment such as utensils, furniture, uniforms  for  the  canteen
staff and other equipment to be  purchased  and  maintained  in  a  hygienic
manner. Rule 68 prescribes that the prices to be charged on  foodstuffs  and
other items will be on a  non-profit  basis,  as  approved  by  the  Canteen
Managing Committee. Rule 69  illustrates  the  procedure  for  handling  the
auditing  of  accounts,  under  the  supervision  of  the  Canteen  Managing
Committee as well as Inspector of Factories. Lastly, Rule 70 enumerates  the
consultative role of the  Managing  Committee  regarding,  inter  alia,  the
quality and quantity of foodstuffs served, arrangement  of  menus,  duration
for meals, etc. It also prescribes that such a  Committee  must  have  equal
representation of persons nominated by the occupier and elected  members  by
the workers of the factory. The Manager is entrusted  with  determining  and
supervising the procedure for conducting such elections and  dissolving  the
Committee at the expiry of its two year statutory term.

DISCUSSION :

20.         Before we deal with the issue that arises for consideration,  it
would be necessary to consider the applicability of the  Constitution  Bench
decision in the Steel Authority  of  India  case  (supra).  Learned  counsel
refers to paragraphs 106 and 107 of the said judgment to  contend  that  the
observations made therein is the expression of the Court on the question  of
law and since it is the decision of the Constitution Bench, the  same  would
be binding on this Court.  To  appreciate  the  submission  of  the  learned
counsel, we notice the aforesaid paragraphs:
“106. We have gone through the decisions of this  Court  in  VST  Industries
case (2001) 1 SCC 298, G.B. Pant University case (2000) 7  SCC  109  and  M.
Aslam case (2001) 1 SCC 720. All of them relate to  statutory  liability  to
maintain   the    canteen    by    the    principal    employer    in    the
[pic]factory/establishment. That is why  in  those  cases,  as  in  Saraspur
Mills case (1974) 3 SCC 66 the contract labour working in the  canteen  were
treated as workers of  the  principal  employer.  These  cases  stand  on  a
different footing and it is not possible  to  deduce  from  them  the  broad
principle of law that on the contract labour system  being  abolished  under
sub-section (1) of Section 10 of the CLRA Act the  contract  labour  working
in the establishment of the  principal  employer  have  to  be  absorbed  as
regular employees of the establishment.
107. An analysis of the cases, discussed above,  shows  that  they  fall  in
three classes: (i) where contract labour is  engaged  in  or  in  connection
with the work of an establishment  and  employment  of  contract  labour  is
prohibited  either  because   the   industrial   adjudicator/court   ordered
abolition of contract labourer because  the  appropriate  Government  issued
notification under Section 10(1) of the CLRA Act,  no  automatic  absorption
of the contract labour working in the establishment was ordered; (ii)  where
the contract was found to be a sham and nominal,  rather  a  camouflage,  in
which  case  the  contract  labour  working  in  the  establishment  of  the
principal employer were held, in fact and in reality, the employees  of  the
principal employer himself. Indeed, such cases do not  relate  to  abolition
of contract labour but present instances wherein the Court pierced the  veil
and declared the correct position as a fact at the  stage  after  employment
of  contract  labour  stood  prohibited;  (iii)  where  in  discharge  of  a
statutory obligation of  maintaining  a  canteen  in  an  establishment  the
principal employer availed the services of  a  contractor  the  courts  have
held that  the  contract  labour  would  indeed  be  the  employees  of  the
principal employer.”

21.         By placing his fingers on Clause (iii)  of  paragraph  107,  the
learned counsel would contend that the said observation is the ratio of  the
Court’s decision and, therefore, it is binding on all other  Courts.  We  do
not agree. The  Constitution  Bench  in  Steel  Authority  of  India’s  case
(supra)  was  primarily  concerned  with  the  meaning  of  the   expression
“appropriate  Government”  in  Section  2(1)(a)  of  the   Contract   Labour
(Regulation and Abolition) Act, 1970 and in Section 2(a) of  the  Industrial
Disputes Act, 1947 and the other  issue  was  automatic  absorption  of  the
contract labour  in  the  establishment  of  the  principal  employer  as  a
consequence of an abolition notification issued under Section 10(1)  of  the
Contract Labour (Regulation and Abolition) Act. The Court while  over-ruling
the judgment in Air India Statutory  Corporation  vs.  United  Labour  Union
(1997) 9 SCC 377,  prospectively,  held  that  neither  Section  10  of  the
Contract Labour (Regulation and Abolition) Act nor any  other  provision  in
the Act,  whether  expressly  or  by  necessary  implication,  provides  for
automatic absorption of contract labour on issue of notification  under  the
said section, prohibiting contract labour  and  consequently  the  principal
employer is not required to  absorb  the  contract  labour  working  in  the
concerned establishment.

      In  the  aforesaid  decision,  firstly,  the  issue  whether  contract
labourers working in statutory canteen(s) would fall within the  meaning  of
expression “workmen” under the Act, 1948 and therefore  they  are  employees
of the principal employer and secondly, whether the  principal  employer  to
fulfil  its  obligation  under  Section  46  of  the  Act,  1948  engages  a
contractor, the employees of the contractor  can  claim  regularisation  and
extension of the  service  conditions  extended  to  the  employees  of  the
principal employer did not remotely arise for consideration of the Court.
      Secondly, in  our  considered  view,  the  observations  made  by  the
Constitution Bench in paragraph  107  of  the  Judgment  by  no  stretch  of
imagination can be considered ‘the law declared’ by the  Court.  We  say  so
for the reason, the  Court  after  noticing  several  decisions  which  were
brought to its notice, has summarised the view expressed in  those  decision
in  three  categories.  The  categorisation  so  made  cannot  be  said  the
declaration of law made by the Court which  would  be  binding  on  all  the
Courts within the territory of India as envisaged under Article 141  of  the
Constitution of India.  This Court  in  the  case  of  The  Commissioner  of
Income Tax v. Sun  Engineering  Works  (P)  Ltd.,  (1992)  4  SCC  363,  has
observed:
      “39.       It is neither desirable nor permissible to pick out a  word
or a sentence from the judgment of this Court divorced from the  context  of
the question under consideration and treat it to be complete ‘law’  declared
by this Court.  The Judgment must be read as a whole  and  the  observations
from the judgment have to be considered in the light of the questions  which
were before this Court.  A decision of this Court takes its colour from  the
questions involved in the case in which it was rendered and  while  applying
the decision to the later case,  the Courts must carefully try to  ascertain
the true principle laid down by the decision of this Court and not pick  out
words or sentences from the judgment,  divorced  from  the  context  of  the
questions under consideration by this Court, to support their reasonings”

22.         Further, this Court in Punjab Land Development  and  Reclamation
Corporation Ltd., Chandigarh v. Presiding Officer, Labour Court,  Chandigarh
and Ors., (1990) 3 SCC 682, observed as follows:
“44. An analysis of judicial precedent, ratio decidendi  and  the  ambit  of
earlier and later decisions is to be found in the House of  Lords’  decision
in F.A. & A.B. Ltd. v. Lupton (Inspector of  Taxes),  Lord  Simon  concerned
with the  decisions  in  Griffiths  v.  J.P.  Harrison  (Watford)  Ltd.  and
Finsbury  Securities  Ltd.  v.  Inland  Revenue  Commissioner   with   their
interrelationship and with the question whether Lupton’s case  fell  with-in
the precedent established by the one or the other case, said: (AC p. 658)
‘...what constitutes binding precedent is the ratio  decidendi  of  a  case,
and this is almost always to be ascertained by an analysis of  the  material
facts of the case—that is, generally, those facts which the  tribunal  whose
decision is in  question  itself  holds,  expressly  or  implicitly,  to  be
material.’ ”

23.          It  is  stated  therein  that  a  judicial  decision   is   the
abstraction of the principle from the facts and arguments of  the  case.  It
was further observed in the Punjab Land Development case (supra), that:
“53. Lord Halsbury’s dicta in Quinn v. Leatham, 1901 AC 495: (AC p. 506)
“...every judgment must be  read  as  applicable  to  the  particular  facts
proved, or assumed to be proved, since the  generality  of  the  expressions
which may be found there are not intended to be  expositions  of  the  whole
law, but governed and qualified by the  particular  facts  of  the  case  in
which such expressions are to be found. The other is that a case is only  an
authority for what it actually decides.”
This Court held in State of Orissa v. Sudhansu Sekhar  Misra  (1968)  2  SCR
154, that a decision is only an authority  for  what  it  actually  decides.
What is of the essence in a decision is its ratio and not other  observation
found therein nor what logically follows from the various observations  made
in it. ...”

24.         A Constitution Bench of this Court  in  the  case  of  State  of
Punjab v. Baladev Singh, (1999) 6 SCC 172, held that a judgment  has  to  be
considered in the context in which it was rendered and that  a  decision  is
an authority for what it decides and  it  is  not  everything  said  therein
constitutes a precedent.

25.         In our view, the binding nature of a decision  would  extend  to
only observations on points raised and decided by the Court and  neither  on
aspects which it has not decided nor had occasion  to  express  its  opinion
upon. The observation made in a prior decision on  a  legal  question  which
arose in a manner not requiring any decision and  which  was  to  an  extent
unnecessary, ought to be considered merely  as  an  obiter  dictum.  We  are
further of the view that a ratio of  the  judgment  or  the  principle  upon
which the question before  the  Court  is  decided  must  be  considered  as
binding to be applied as an appropriate precedent.

26.         The Constitution  Bench  in  Steel  Authority  of  India’s  case
(supra),  decided  on  the  limited  issue  surrounding  the  absorption  of
contract  workers  into  the   principal   establishment   pursuant   to   a
notification issued by the appropriate Government under Section  10  of  the
Contract Labour (Abolition and Regulation)  Act,  1970.  The  conclusion  in
paragraph 125 of Steel  Authority  of  India’s  case  (supra),  inter  alia,
states that on issuance of a notification under Section  10(1)  of  Contract
Labour (Abolition and  Regulation)  Act,  1970  passed  by  the  appropriate
Government would not entail the automatic  absorption  of  contract  workers
operating in the establishment  and  the  principal  employer  will  not  be
burdened with any liability thereof. The issue surrounding workmen  employed
in statutory canteens and the liability of principal  employer  was  neither
argued nor subject of  dispute  in  the  Steel  Authority  of  India’s  case
(supra).  Therefore, in our considered view the decision on  which  reliance
was placed by learned counsel does not  assist  him  in  the  facts  of  the
present case.

27.         The Act, 1948 is a social legislation and it  provides  for  the
health, safety,  welfare,  working  hours,  leave  and  other  benefits  for
workers employed in factories and it also provides for  the  improvement  of
working conditions within the factory premises. Section 2 of the  Act,  1948
is the interpretation clause. Apart from others, it provides the  definition
of worker under Section 2(l) of the Act, 1948, to mean  a  person  employed,
directly or through any other agency, whether  for  wages  or  not,  in  any
manufacturing or cleaning process. Section 46 of the Act, 1948 requires  the
establishment of canteens in factories employing more than two  hundred  and
fifty workers. The State Government have been given power under the  Section
to make Rules requiring that such canteens to be  provided  in  the  factory
under Sub Section (2), the items for which rules are to be framed have  been
specified.  The Sub Section also contemplates the delegation  by  the  State
Government the power to the Chief Inspector to make rules in respect of  the
food to be served in such canteens and their charges. In exercise  of  rules
making power, the Delhi State has framed and notified the  Rules,  1950,  in
which rules 65 to 70 are incorporated to  give  effect  to  the  purpose  of
Section 46 of the Act, 1948.

28.         The question before  us  is  “when  the  company  is  admittedly
required to run the canteen in compliance of the statutory obligation  under
Section 46 of the Act, 1948, whether the canteen employees employed  by  the
contractor are to be treated as the employees of the company  only  for  the
purpose of Act 1948 or for all the other purposes.”

29.         Before we advert to the aforesaid issue  raised  and  canvassed,
we intend to notice some of the decisions of  this  Court  where  a  similar
issue was raised and answered. In  Indian  Petrochemicals  case  (supra),  a
three Judge Bench of this Court has stated the law on the point  by  holding
that the  employees  of  the  statutory  canteens  are  covered  within  the
definition of ‘workmen’ under the Act, 1948 and not for all other  purposes.
The Court went on to observe that the Act, 1948 does not govern  the  rights
of  employees  with  reference   to   recruitment,   seniority,   promotion,
retirement benefits  etc.  They  are  governed  by  other  statutes,  rules,
contracts or policies.
30.         The aforesaid viewpoint is reiterated by this Court in the  case
of Haldia  Refinery  Canteen  Employees  Union  and  others  v.  Indian  Oil
Corporation Ltd. and ors., (2005) 5 SCC 51 and in  Hari  Shankar  Sharma  v.
Artificial Limbs Manufacturing Corporation, (2002) 1 SCC  337.  As  observed
by the Constitution Bench of this Court in the case of  Union  of  India  v.
Raghubir Singh, 178 ITR 548 (SC), the pronouncement of  law  by  a  Division
Bench of the Supreme Court is binding on a Division Bench of the same  or  a
smaller number of Judges and in order that such decision is binding,  it  is
not necessary that it should be a decision rendered by a  Full  Court  or  a
Constitution Bench of the Supreme Court.  The  Indian  Petrochemical’s  case
(supra) is decided by a three-Judge Bench of this Court and  the  facts  and
the legal issues raised in the present appeals are the same  or  similar  as
in Indian Petrochemicals case (supra), and since we  are  not  persuaded  to
take a different view in  the  matter,  the  observations  made  therein  is
binding on us.

31.         This Court in  the  Indian  Petrochemical  case  (supra),  while
explaining the decision in Parimal Chandra Raha’s case (supra),  has  stated
that in Raha’s case, the Supreme Court did not specifically  hold  that  the
deemed  employment  of  the  workers  is  for  all  purposes  nor   did   it
specifically hold that it is  only  for  the  purposes  of  the  Act,  1948.
However, a reading of the judgment in its entirety makes it clear  that  the
deemed employment is only for the purpose of the Act, 1948.   Therefore,  it
has to be held that the workmen of a statutory canteen would be the  workmen
of the establishment for the purpose of the Act, 1948 only and not  for  all
other purposes.  To arrive at this conclusion, the Court  has  followed  the
view expressed by this Court in M.M.R Khan’s case (supra) and  Reserve  Bank
of India v. Workmen, (1996) 3 SCC 267.

32.         The  proposition  of  law  in  the  Indian  Petrochemicals  case
(supra) has been reiterated in the Hari Shankar Sharma’s case (supra).  This
Court stated that:
“6. The  observations  in  Parimal  Chandra  Raha  case  relied  on  by  the
appellants which might have supported the submission of the appellants  have
been explained by a larger Bench in Indian  Petrochemicals  Corpn.  Ltd.  v.
Shramik Sena where it was held, after  considering  the  provisions  of  the
Factories Act and the previous decisions on the issue, that the  workmen  of
a statutory canteen would be 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.”
33.         The aforesaid principle has also been applied in  Haldia’s  case
(supra); KGSD Canteen case (supra); Indian Overseas  Bank  v.  I.O.B.  Staff
Canteen Workers’ Union & Anr., (2000) 4 SCC  245;  and  Barat  Fritz  Werner
Ltd. v. State of Karnataka, 2001 (4) SCC 498.

34.         The Coates of India Ltd.’s case (supra) was regarding a  dispute
over the status of  the  appellant-workmen  therein  who  were  hired  by  a
contractor to work in a canteen  run  on  the  premises  of  the  respondent
company. This Court observed that merely some  requirement  under  the  Act,
1948 of providing a canteen in the industrial  establishment  is  by  itself
not conclusive of the question or sufficient to determine the status of  the
persons employed in the  canteen.  The  Industrial  Court  and  the  learned
Single Judge of the High Court held in favour of the workmen.  However,  the
Division Bench of the High Court held in favour  of  the  respondent-company
therein. This Court took note  of  the  relevant  finding  of  fact  by  the
learned Single Judge therein and  upheld  the  conclusion  of  the  Division
Bench of the High  Court,  that  the  workmen  were  employed  only  by  the
contractor  to  run  the  canteen,  and  they  were  not  employees  of  the
respondent Company. The Court went on to  observe  that  since  the  canteen
employees were not directly appointed by  the  Company  nor  had  they  ever
moved the Company for  leave  or  other  benefits  enjoyed  by  the  regular
employees of the Company, and further that the canteen employees  got  their
wages  from  the  respective  contractors  and,  therefore,  they  are   not
employees of the Company.

35.         The Haldia case (supra) was similar to the facts of the  present
case. In that case, the appellant-workmen  were  working  in  the  statutory
canteen run by the respondent through a contractor in its  factory.  It  was
contended therein that the factory of the respondent where the workmen  were
employed was governed by the provisions of the Act,  1948  and  the  canteen
where the said workmen were employed would be a statutory  canteen  and  the
same was maintained for the benefit of the workmen employed in the  factory.
It was alleged therein that the respondent had direct control over the  said
workmen  and  the  contractor  had   no   control   over   the   management,
administration  and  functioning  of  the  said  canteen.  Therefore,   writ
applications were filed seeking issuance of mandamus to  the  respondent  to
absorb the appellants in the  service  of  the  respondent  therein  and  to
regularize them as such. This Court then made a detailed  reference  to  the
Parimal Chandra Raha case (supra), the MMR Khan case (supra) and the  Indian
Petrochemicals case (supra). The Court  then  extensively  referred  to  the
terms and conditions of the contract between the canteen contractor and  the
respondent to ascertain whether there was  any  control  of  the  respondent
company therein over the workers in the canteen, and  if  so  what  was  the
nature of the said control. It was observed as follows:
“14. No doubt, the respondent management  does  exercise  effective  control
over the contractor on certain matters in  regard  to  the  running  of  the
canteen but such control is being exercised to ensure that  the  canteen  is
run in an efficient manner and to provide wholesome and healthy food to  the
workmen of  the  establishment.  This,  however,  does  not  mean  that  the
employees  working  in  the  canteen  have  become  the  employees  of   the
management.
15. A free hand has  been  given  to  the  contractor  with  regard  to  the
engagement of the employees working in the canteen. There is  no  clause  in
the agreement stipulating that the canteen contractor unlike in the case  of
Indian Petrochemicals Corpn. Ltd. shall retain and engage  compulsorily  the
employees who were  already  working  in  the  canteen  under  the  previous
contractor. There is no stipulation  of  the  contract  that  the  employees
working in the canteen at the time of the commencement of the contract  must
be  retained  by  the  contractor.   The   management   unlike   in   Indian
Petrochemicals Corpn. Ltd. case is not reimbursing the wages of the  workmen
engaged in the canteen. Rather the contractor has been made  liable  to  pay
provident  fund  contribution,  leave  salary,  medical  benefits   to   his
employees and to observe statutory working hours. The  contractor  has  also
been made responsible for the proper maintenance of registers,  records  and
accounts so far as compliance with any statutory  provisions/obligations  is
concerned. A duty has been cast on the contractor  to  keep  proper  records
pertaining to payment of wages, etc. and also for depositing  the  provident
fund contributions with the authorities concerned. The contractor  has  been
made liable to defend, indemnify and hold harmless  the  employer  from  any
liability or penalty which may be imposed by the  Central,  State  or  local
authorities by reason of any violation  by  the  contractor  of  such  laws,
regulations and also from all claims,  suits  or  proceedings  that  may  be
brought against the management arising under or incidental to or  by  reason
of the  work  provided/assigned  [pic]under  the  contract  brought  by  the
employees of the  contractor,  third  party  or  by  the  Central  or  State
Government authorities.”

36.         As regards the nature of control  exercised  by  the  management
over the workmen employed by the contractor to work in the said canteen,  it
was observed by this Court in the Haldia case (supra) that the  control  was
of a supervisory nature and that there  was  no  control  over  disciplinary
action or dismissal. Such control was held not to be  determinative  of  the
alleged fact that the workmen were under  the  control  of  the  management.
This Court observed as follows:
“16. 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 the workmen working in  the  canteen.  Only  because
the management exercises such control  does  not  mean  that  the  employees
working  in  the  canteen  are  the  employees  of  the   management.   Such
supervisory control is being exercised by the management to ensure that  the
workers employed are well qualified and capable of rendering proper  service
to the employees of the management.”

37.         The last case that we intend to refer on this point is  that  of
KGSD Canteen case (supra), wherein this Court was  required  to  answer  the
question as to whether the employees of the canteen  are  employees  of  the
State or whether their services should be  directed  to  be  regularized  or
not. However, in the said case, the State had  no  statutory  compulsion  to
run and maintain any canteen for its employees. This  Court  made  reference
to numerous cases on  this  issue,  inter  alia,  the  Saraspur  Mills  case
(supra), the Parimal Chandra Raha case (supra), the MMR Khan  case  (supra),
the Indian Petrochemicals case (supra), the Constitution Bench  decision  in
the Steel Authority of India case (supra),  the  Hari  Shankar  Sharma  case
(supra), and the Haldia case (supra).

38.         We conclude that the question as regards the status  of  workmen
hired by a contractor to work in a statutory canteen established  under  the
provisions of the Act, 1948 has been well settled by a catena  of  decisions
of this Court.  This Court is in agreement with the principle laid  down  in
the Indian Petrochemicals case (supra) wherein it was held that the  workmen
of a statutory canteen would be the workmen of  the  establishment  for  the
purpose of the Act, 1948 only and not for all other purposes.  We  add  that
the statutory  obligation  created  under  Section  46  of  the  Act,  1948,
although establishes certain liability of  the  principal  employer  towards
the workers employed in the given canteen facility, this must be  restricted
only to the Act, 1948 and it does not govern the rights  of  employees  with
reference to  appointment,  seniority,  promotion,  dismissal,  disciplinary
actions, retirement benefits, etc., which are the subject matter of  various
other  legislations,  policies,  etc.  Therefore,  we  cannot   accept   the
submission of Shri Jayant Bhushan, learned counsel  that  the  employees  of
the statutory Canteen ipso-facto  become  the  employees  of  the  principal
employer.

39.         We may now refer to the  various  decisions,  cited  by  learned
counsel, Shri Jayant Bhushan.

40.         The Saraspur Mills case (supra) came  before  this  Court  as  a
result of a dispute under the Bombay  Industrial  Relations  Act,  1946.  In
that  case,  the  appellant-Company  was  responsible  for  maintaining  the
canteen under the provisions of Section 46 of the Act, 1948  and  the  rules
made thereunder. The appellant-therein had handed over the task  of  running
the said  canteen  to  a  cooperative  society.  The  society  employed  the
respondent-workmen in the canteen. One  of  the  issues  that  came  up  for
consideration before this Court was that, whether the employees of the  said
cooperative society could be said to be  the  employees  of  the  appellant-
company. The case of the workmen was that the appellant-company was  running
the canteen to fulfill its statutory obligations and  thus  the  running  of
the said canteen would be part of the undertaking of the appellant  although
the appellant did not run itself the canteen but handed  over  the  premises
to the     co-operative society to run it for the use  and  welfare  of  the
Company’s employees and to discharge its legal  obligation.  The  appellant-
company had resisted the claim by contending  that  the  workmen  had  never
been employed by it but by the co-operative society which was its  licensee.
This Court after  referring  to  the  amended  definition  of  employee  and
employer in Section 3(13) and 3(14) of Bombay Industrial Relation Act,  1946
and the definition of `Worker’ under the Act, 1948, and  also  referring  to
earlier decision in Basti Sugar Mills Ltd. v. Ram Ujagar and Ors., (1964)  2
SCR 838, held that since under Act, 1948, it was the duty of the  appellant-
company to run and maintain the canteen for use of its employees, the  ratio
of the decision in Ahmedabad Mfg. and Calico Printing  Co.  Ltd.,  v.  Their
Workmen (1953) II LLJ 647 would be fully applicable in which the  very  same
provision of the Act, 1948 were considered and confirmed the finding of  the
Industrial Court.

41.         It would be relevant to note that the primary reasoning  of  the
Court in the Saraspur Mills case (supra) to hold that  the  workers  of  the
canteen run by a cooperative society to be the employees of  the  appellant-
company therein, was in view of the amended  definition  of  “employer”  and
“employee” as found under the Bombay  Industrial  Relations  Act,  1946  and
definition of `Workmen’  under  the  Act,  1948.  Since  no  such  expansive
definition finds mention neither in the Act, 1948 nor in the  facts  of  the
present case, it would not be proper to place reliance on the given case  as
a precedent herein.

42.         In the Hussainbhai  case  (supra),  the  dispute  arose  between
workmen hired by a contractor to make ropes within the factory  premises  on
one hand, and the petitioner who was the factory owner  manufacturing  ropes
who had engaged such contractor,  on  the  other  hand.  The  issue  therein
pertained to whether such workmen would be that  of  the  contactor  or  the
petitioner. In the said case, the Court went into the concept  of  employer-
employee relationship from the point of view of economic realities.  It  was
observed, by a three-Judge Bench, that:
“5. The true test may, with  brevity,  be  indicated  once  again.  Where  a
worker or group of workers labours to produce goods or  services  and  these
goods or services are for the business of another, that other is,  in  fact,
the employer. He has economic control over the workers’ subsistence,  skill,
and continued employment. If he, for any reason, chokes off, the worker  is,
virtually, laid off. The presence  of  intermediate  contractors  with  whom
alone the workers have immediate or direct relationship ex contractu  is  of
no consequence when, on lifting the veil or looking  at  the  conspectus  of
factors governing employment, we discern the naked truth, though  draped  in
different  perfect  paper  arrangement,  that  the  real  employer  is   the
Management, not the immediate contractor. ...”

43.         The Hussainbhai case (supra) did not deal with  the  Act,  1948,
much less any statutory obligation thereunder. The  case  proceeded  on  the
test of employer-employee relationship to  ascertain  the  actual  employer.
The Court gave due weight and consideration  to  the  concept  of  ‘economic
control’ in this regard. It may only be appropriate for  the  Court  in  the
present case to refer to this judgment as regards determining the  employer-
employee relationship.

44.         The case of M.M.R. Khan (supra), also came up for  consideration
before a three-Judge  Bench  of  this  Court.  It  related  to  the  workers
employed in canteens  run  in  the  different  railway  establishments.  The
relief claimed was that the workers concerned should be treated  as  railway
employees and should be extended all service benefits  which  are  available
to the said railway employees. The Court was concerned, in  the  said  case,
with  three  types  of  canteens:-     (i)  Statutory  Canteens;  (ii)  Non-
Statutory, Recognized  Canteens;  and  (iii)  Non-Statutory,  Non-Recognized
Canteens. As regards  statutory  canteens,  the  Court  noticed  that  under
Section 46 of the Act, 1948, the occupier of a factory was not only  obliged
to provide for and maintain a  canteen  where  more  than  250  workers  are
employed, but was also obliged to abide by the  rules  which  the  concerned
Government may make, including the rules  for  constitution  of  a  managing
committee for running the canteen and for representation of the  workers  in
the management of the  canteen.  In  other  words,  the  whole  working  and
functioning of the canteen has to conform to the  statutory  rules  made  in
that behalf.

45.         It would be relevant to notice the facts noted by this Court  in
the MMR Khan’s case (supra). This Court had made an  explicit  reference  to
the  relevant  provisions  of  the  Railway  Establishment  Manual  and  the
Administrative  Instructions  on  Departmental  Canteens  in   Offices   and
Industrial Establishments of the Government as issued by the  Department  of
Personnel  and  Training,  Ministry  of  Personnel,  Public  Grievances  and
Pensions of the Government of India, which dealt with the canteens  and  had
express provisions thereunder that were integral to the  final  decision  of
this Court. The issue that arose before the Court was whether the  employees
of the statutory canteen could be said to be the employees  of  the  railway
administration as well. This Court observed that:
“25. Since in terms of  the  Rules  made  by  the  State  Governments  under
Section 46 of the Act, it is obligatory on  the  railway  administration  to
provide a canteen, and  the  canteens  in  question  have  been  established
pursuant to the said provision there is no difficulty in  holding  that  the
canteens are incidental to or connected with the  manufacturing  process  or
the subject of the manufacturing process. The provision of  the  canteen  is
deemed by the statute  as  a  necessary  concomitant  of  the  manufacturing
activity. Paragraph 2829 of the Railway Establishment Manual recognizes  the
obligation on the railway Administration created by the Act and  as  pointed
out earlier paragraph 2834 makes provision  for  meeting  the  cost  of  the
canteens.  Paragraph   2832   acknowledges   that   although   the   railway
administration may employ  anyone  such  as  a  staff  committee  or  a  co-
operative  society  for  the  management  of   the   canteens,   the   legal
responsibility for the proper management rests  not  with  such  agency  but
solely with the railway administration. If the management of the canteen  is
handed over to a consumer cooperative society the bye-laws of  such  society
have to be amended suitably  to  provide  for  an  overall  control  by  the
railway administration.

26. In fact as has been pointed out earlier the Administrative  Instructions
on departmental canteens in terms state that even those canteens  which  are
not governed by the said Act have to  be  under  a  complete  administrative
control of the concerned department and the recruitment, service  conditions
and the disciplinary proceedings to be taken against the employees  have  to
be taken according to the rules made in that behalf by the said  department.
In the circumstances, even where the employees are appointed  by  the  staff
committee/cooperative  society  it  will  have  to  be   held   that   their
appointment  is  made  by  the  department  through  the   agency   of   the
committee/society as the case may be. ...”

46.         We are in agreement with the view expressed  in  MMR  Khan  case
(supra). We further observe that the reasoning  of  the  Court,  as  noticed
hereinabove, was based on the Railway Establishment Rules and  the  relevant
Administrative instructions issued by the Government of India. By virtue  of
the aforesaid Rules and Administrative instructions, it was  made  mandatory
that the complete administrative control of the  canteen  be  given  to  the
Railway Administration. Such mandatory obligations are not  present  in  the
instant case. In light of the same, the given case cannot be said  to  be  a
precedent on the general proposition as regards the status of  employees  of
a statutory canteen established under the Act, 1948.
47.         We have already referred  to  the  decision  of  this  Court  in
Parimal Chandra Raha case (supra), and, therefore, we are not  referring  to
the said decision once over again.  However, we  add  that  in  the  Parimal
Chandra Raha case (supra), this Court made a general observation that  under
the provisions of the  Act,  1948,  it  is  statutorily  obligatory  on  the
employer to provide and maintain a canteen for the use of his employees.  As
a consequence, the Court stated that, the canteen would  become  a  part  of
the principal establishment and, therefore, the  workers  employed  in  such
canteen would be the employees of the said establishment.  This  Court  went
on to observe that the canteen was  a  part  of  the  establishment  of  the
Corporation, that the contractors engaged  were  only  a  veil  between  the
Corporation and the canteen workers and therefore, the canteen workers  were
the employees of the Corporation. This Court, while  arriving  at  the  said
conclusion laid emphasis on the contract between  the  corporation  and  the
contractor, whereby it was shown that the terms of the  said  contract  were
in the nature of directions to the contractor about the manner in which  the
canteen should be run and the canteen services should  be  rendered  to  the
employees. Furthermore, it was found that majority of the workers  had  been
working in the said canteen  continuously  for  a  long  time,  whereas  the
intermediaries were changed on numerous occasions.

48.         In light of the above discussion, in our view, the case laws  on
which the reliance is placed by learned counsel  would  not  assist  him  to
drive home the point canvassed.

49.         To ascertain whether  the  workers  of  the  Contractor  can  be
treated as the employees of the factory or company on  whose  premises  they
run the said statutory canteen, this Court must apply the test  of  complete
administrative control. Furthermore, it would  be  necessary  to  show  that
there exists an employer-employee relationship between the factory  and  the
workmen working in the canteen. In this regard, the  following  cases  would
be relevant to be noticed.


50.         This Court would first refer to the relevant  pronouncements  by
various  English  Courts  in  order  to  analyze  their  approach  regarding
employer-employee relationship. In the case of  Ready  Mix  Concrete  (South
East) Ltd v. Minister of Pensions and National Insurance, [1968] 2  QB  497,
McKenna J. laid down three conditions for the existence  of  a  contract  of
service. As provided at p.515 in the Ready Mix Concrete  case  (supra),  the
conditions are as follows:


“(i)  The  servant  agrees  that,  in  consideration  of  a  wage  or  other
remuneration, he will provide his own work and skill in the  performance  of
some service for his master; (ii) he agrees, expressly  or  impliedly,  that
in the performance of that  service  he  will  be  subject  to  the  other's
control in a sufficient degree to make that other master;  (iii)  the  other
provisions of the contract are consistent  with  its  being  a  contract  of
service.”





51.         In the Ready Mix  Concrete  case  (supra),  McKenna  J.  further
elaborated upon the  above-quoted  conditions.  As  regards  the  first,  he
stated  that  there  must  be  wages  or  remuneration;  else  there  is  no
consideration and therefore no contract of any kind. As regards  the  second
condition, he stated that control would include the power  of  deciding  the
thing to be done, the way in which  it  shall  be  done,  the  means  to  be
employed in doing it, the time when and the place where it  shall  be  done.
Furthermore, to establish a master-servant relationship, such  control  must
be existent in a sufficient degree.

52.         McKenna J. further referred to Lord Thankerton's “four  indicia”
of a contract of service said in Short v. J. and  W.  Henderson  Ltd. (1946)
62 TLR 427. The J. and W. Henderson  case  (supra)  at  p.429,  observes  as
follows:

“(a) The master's power of selection of his  servant;  (b)  the  payment  of
wages or other remuneration; (c) the master's right to  control  the  method
of doing the work; and (d) the master's right of suspension or dismissal.”


53.         A recent decision by the Queen’s Bench, in JGE v.  The  Trustees
of Portsmouth Roman Catholic Diocesan  Trust,  [2012]  EWCA  Civ  938,  Lord
Justice Ward,  while  discussing  the  hallmarks  of  the  employer-employee
relationship, observed that an employee  works  under  the  supervision  and
direction of his employer, whereas an  independent  contractor  is  his  own
master bound by his contract but not by his employer's orders. Lord  Justice
Ward followed the observations made by McKenna J. in the Ready Mix  Concrete
case (supra) as mentioned above. The JGE case (supra),  further  noted  that
‘control’ was  an  important  factor  in  determining  an  employer-employee
relationship. It was held, after referring to numerous  judicial  decisions,
that there was no single test to determine such  a  relationship.  Therefore
what would be needed to be done is to marshal various  tests,  which  should
cumulatively point either towards an employer-employee relationship or  away
from one.

54.         The case of Short v. J. and W. Henderson Ltd., as cited  in  the
Ready Mix Concrete case (supra) and  in  the  JGE  case  (supra),  was  also
referred to in the four-Judge Bench decision of this  Court  in  Dhrangadhra
Chemical Works Ltd. v.  State  of  Saurashtra,  AIR  1957  SC  274.  In  the
Dhrangadhra Chemical Works case (supra), it  was  observed  that  the  prima
facie test for the determination of  the  relationship  between  master  and
servant is the existence of  the  right  in  the  master  to  supervise  and
control the work done by the servant not only in  the  matter  of  directing
what work the servant is to do but also the manner in which he shall do  his
work.

55.         In Ram Singh v. Union Territory, Chandigarh, (2004) 1  SCC  126,
as regards the concept of  control  in  an  employer-employee  relationship,
observed as follows:
“15. In determining the relationship of employer  and  employee,  no  doubt,
“control” is one of the important tests but is not to be taken as  the  sole
test. In determining the relationship of employer and  employee,  all  other
relevant facts and circumstances are required  to  be  considered  including
the terms and conditions  of  the  contract.  It  is  necessary  to  take  a
multiple pragmatic approach weighing up all the factors for and  against  an
employment instead of going by the sole “test  of  control”.  An  integrated
approach is needed. “Integration” test is one of the relevant tests.  It  is
applied by examining whether  the  person  was  fully  integrated  into  the
employer’s concern or remained apart from and independent of it.  The  other
factors which may be relevant  are  —  who  has  the  power  to  select  and
dismiss, to pay remuneration, deduct insurance contributions,  organize  the
work, supply tools and materials  and  what  are  the  “mutual  obligations”
between them. (See Industrial Law, 3rd Edn., by I.T. Smith  and  J.C.  Wood,
at pp. 8 to 10.)”

56.         In the case of Bengal Nagpur Cotton  Mills  case  (supra),  this
Court observed that:
“9. In this case, the industrial  adjudicator  has  granted  relief  to  the
first respondent in view of its finding that he should be  deemed  to  be  a
direct employee of the appellant. The question for consideration is  whether
the said finding was justified.
10. It is now well settled that if the  industrial  adjudicator  finds  that
the contract between the principal employer  and  the  contractor  to  be  a
sham, nominal or merely a camouflage to  deny  employment  benefits  to  the
employee and that there was in  fact  a  direct  employment,  it  can  grant
relief to the employee by holding that the workman is  the  direct  employee
of the principal employer. Two of the  well-recognized  tests  to  find  out
whether the contract labourers are the direct  employees  of  the  principal
employer are: (i) whether the principal employer pays the salary instead  of
the contractor;  and  (ii)  whether  the  principal  employer  controls  and
supervises the work of the employee. In  this  case,  the  Industrial  Court
answered both questions in the affirmative and as a  consequence  held  that
the first respondent is a direct employee of the appellant.”

57.         Further, the above case  made  reference  to  the  case  of  the
International  Airport  Authority  of  India  case   (supra)   wherein   the
expression “control and supervision” in the context of contract  labour  was
explained by this Court. The relevant  part  of  the  International  Airport
Authority of India case (supra), as quoted in  Bengal  Nagpur  Cotton  Mills
case (supra) is as follows:
“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
[pic]contractor, if the  right  to  regulate  the  employment  is  with  the
contractor,  and  the  ultimate  supervision  and  control  lies  with   the
contractor.

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  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.”

58.          A  recent  decision  concerned   with   the   employer-employee
relationship was  that  of  the  NALCO  case  (supra).  In  this  case,  the
appellant had established two schools for the benefit of the  wards  of  its
employees. The Writ Petitions were filed by the  employees  of  each  school
for a declaration that they be treated as the employees  of  the  appellant-
company on grounds of, inter alia,  real  control  and  supervision  by  the
latter. This Court, while answering the issue canvassed was of  the  opinion
that the proper approach would be to ascertain whether  there  was  complete
control and supervision by the appellant-therein. In this regard,  reference
was made to the case of Dhrangadhra  Chemical  Works  case  (supra)  wherein
this Court had observed that:
“14. The principle which emerges from these authorities is  that  the  prima
facie test for the determination of  the  relationship  between  master  and
servant is the existence of  the  right  in  the  master  to  supervise  and
control the work done by the servant not only in  the  matter  of  directing
what work the servant is to do but also the manner in which he shall do  his
work, or to borrow the words of Lord Uthwatt at p.23  in  Mersey  Docks  and
Harbour Board v. Coggins & Griffith (Liverpool) Ltd., (1952)  SCR  696  “The
proper test is whether or not the hirer had authority to control the  manner
of execution of the act in question”.”
59.         The NALCO case (supra) further made reference  to  the  case  of
Workmen of Nilgiri Coop. Mkt. Society Ltd. v. State of T.N.,  (2004)  3  SCC
514, wherein this Court had observed as follows:
“37. The control test and the organization  test,  therefore,  are  not  the
only factors which can be said to be decisive. With a  view  to  elicit  the
answer, the Court is required to consider several factors which  would  have
a bearing on the result: (a) who is the appointing  authority;  (b)  who  is
the paymaster; (c) who can dismiss; (d) how long alternative service  lasts;
(e) the extent of control and supervision; (f) the nature of  the  job  e.g.
whether it is professional or skilled work;  (g)  nature  of  establishment;
(h) the right to reject.

38. With a view to find out reasonable solution in  a  problematic  case  of
this nature, what is  needed  is  an  integrated  approach  meaning  thereby
integration of the relevant tests wherefor it may be  necessary  to  examine
as  to  whether  the  workman  concerned  was  fully  integrated  into   the
employer’s concern meaning  thereby  independent  of  the  concern  although
attached therewith to some extent.”

60.         It was concluded by this Court in the NALCO  case  (supra)  that
there may  have  been  some  element  of  control  with  NALCO  because  its
officials were nominated to the Managing  Committee  of  the  said  schools.
However, it was observed that the above-said fact was only  to  ensure  that
the schools run smoothly and properly. In this regard,  the  Court  observed
as follows:
“30. ... However, this kind of “remote control” would  not  make  NALCO  the
employer of these workers. This only shows that since NALCO  is  shouldering
and meeting financial deficits, it wants to ensure that the money  is  spent
for the rightful purposes.”

61.         Thus, it can be concluded that the relevant factors to be  taken
into consideration to  establish  an  employer-employee  relationship  would
include, inter alia, (i)  who  appoints  the  workers;  (ii)  who  pays  the
salary/remuneration; (iii) who has the authority to dismiss;  (iv)  who  can
take disciplinary action; (v) whether there is continuity  of  service;  and
(vi) extent of control and supervision, i.e. whether there  exists  complete
control and supervision. As regards, extent of control and  supervision,  we
have already taken note of the observations in Bengal  Nagpur  Cotton  Mills
case (supra), the International Airport Authority of India case (supra)  and
the NALCO case (supra).

62.         In the present set of appeals, it is an admitted fact  that  the
HCI is a wholly owned subsidiary of the Air India. It has been urged by  the
learned counsel for the appellants that this Court should  pierce  the  veil
and declare that the  HCI  is  a  sham  and  a  camouflage.  Therefore,  the
liability regarding the appellants herein would fall  upon  the  Air  India,
not the HCI. In this regard, it would be pertinent  to  elaborate  upon  the
concept of a subsidiary company and the principle of lifting  the  corporate
veil.

63.         The  Companies  Act  in  India  and  all  over  the  world  have
statutorily recognized  subsidiary  company  as  a  separate  legal  entity.
Section 2(47) of the  Companies  Act,  1956  (for  short  “the  Act,  1956”)
defines ‘subsidiary company’ or ‘subsidiary’, to mean a  subsidiary  company
within the meaning of Section 4 of the Act, 1956.  For the  purpose  of  the
Act, 1956, a company shall be, subject to the provisions of sub-section  (3)
of Section 4, of the Act, 1956, deemed to be subsidiary of  another.  Clause
(1) of Section 4 of the Act, 1956 further imposes certain preconditions  for
a company to be a  subsidiary  of  another.  The  other  such  company  must
exercise control over the composition of  the  Board  of  Directors  of  the
subsidiary company, and have a controlling  interest  of  over  50%  of  the
equity shares and voting rights of the given subsidiary company.

64.         In a concurring judgment by K.S.P.  Radhakrishnan,  J.,  in  the
case of Vodafone International Holdings BV v. Union of India, (2012)  6  SCC
613, the following was observed:
“Holding company and subsidiary company
....
257. The legal relationship between a holding company and WOS is  that  they
are two distinct legal persons and the holding  company  does  not  own  the
assets of the subsidiary and, in law, the management of the business of  the
subsidiary also vests in its Board of Directors. ...
258. Holding company, of course, if the subsidiary is a WOS, may appoint  or
remove any Director if  it  so  desires  by  a  resolution  in  the  general
[pic]body meeting of the subsidiary. Holding companies and subsidiaries  can
be considered as single economic entity and consolidated  balance  sheet  is
the accounting relationship  between  the  holding  company  and  subsidiary
company, which shows the status of the entire business  enterprises.  Shares
of stock in the subsidiary company are held as assets on the  books  of  the
parent  company  and  can  be  issued  as  collateral  for  additional  debt
financing. Holding company and subsidiary company are,  however,  considered
as  separate  legal  entities,  and  subsidiary  is  allowed   decentralized
management. Each subsidiary can reform  its  own  management  personnel  and
holding company may also provide expert, efficient  and  competent  services
for the benefit of the subsidiaries.”

65.         The Vodafone case (supra), further made reference to a  decision
of the US Supreme Court in United States v. Bestfoods [141 L Ed 2d  43:  524
US 51 (1998)]. In that case, the  US  Supreme  Court  explained  that  as  a
general principle of corporate law a parent corporation is  not  liable  for
the acts of its subsidiary. The US Supreme Court went  on  to  explain  that
corporate veil can be pierced and the parent company can be held liable  for
the conduct of its subsidiary, only if it is shown that  the  corporal  form
is misused to accomplish certain wrongful purposes,  and  further  that  the
parent company is directly a participant in the wrong  complained  of.  Mere
ownership, parental control, management, etc. of a subsidiary was  held  not
to be sufficient to pierce the status of their  relationship  and,  to  hold
parent company liable.

66.         The doctrine of ‘piercing  the  corporate  veil’  stands  as  an
exception to the principle that a company is a  legal  entity  separate  and
distinct from its shareholders with its own legal  rights  and  obligations.
It seeks to disregard the separate personality of the company and  attribute
the acts of the company to those who are allegedly in direct control of  its
operation. The  starting  point  of  this  doctrine  was  discussed  in  the
celebrated case of Salomon v. A Salomon  &  Co  Ltd.,  [1897]  AC  22.  Lord
Halsbury LC (paragraphs 31–33), negating the applicability of this  doctrine
to the facts of the case, stated that:
“...a company must be treated like any other  independent  person  with  its
rights and liabilities legally appropriate to itself ..., whatever may  have
been the ideas or schemes of those who brought it into existence.”

67.         Most of the  cases  subsequent  to  the  Salomon  case  (supra),
attributed the doctrine of piercing the veil to the fact  that  the  company
was a ‘sham’ or a ‘façade’. However, there was yet  to  be  any  clarity  on
applicability of the said doctrine.

68.         In recent times, the law has been crystallized  around  the  six
principles formulated by Munby J. in Ben Hashem v. Ali Shayif,  [2008]  EWHC
2380 (Fam). The six principles, as found at paragraphs 159– 164 of the  case
are as follows-    (i) ownership and control of a company  were  not  enough
to justify piercing the corporate veil;    (ii) the Court cannot pierce  the
corporate veil, even  in  the  absence  of  third  party  interests  in  the
company, merely because it is thought to be necessary in  the  interests  of
justice; (iii) the corporate veil can be  pierced  only  if  there  is  some
impropriety; (iv) the impropriety in question must be linked to the  use  of
the company  structure  to  avoid  or  conceal  liability;  (v)  to  justify
piercing the corporate veil, there must be both control of  the  company  by
the wrongdoer(s) and impropriety, that is use or misuse of  the  company  by
them as a device or  facade  to  conceal  their  wrongdoing;  and  (vi)  the
company may be a ‘façade’ even though it  was  not  originally  incorporated
with any deceptive intent, provided that it is being used  for  the  purpose
of deception at the time of the  relevant  transactions.  The  Court  would,
however, pierce the corporate veil only so far as it was necessary in  order
to provide a remedy for the particular wrong  which  those  controlling  the
company had done.

69.         The principles laid down by the Ben  Hashem  case  (supra)  have
been reiterated by UK Supreme Court by Lord Neuberger in Prest  v.  Petrodel
Resources Limited  and  others,  [2013]  UKSC  34,  at  paragraph  64.  Lord
Sumption, in the Prest case (supra), finally observed as follows:
“35. I conclude that there is a  limited  principle  of  English  law  which
applies when a person is under an existing legal obligation or liability  or
subject to an existing legal restriction which  he  deliberately  evades  or
whose enforcement he deliberately frustrates by interposing a company  under
his control. The Court may then pierce the corporate veil for  the  purpose,
and only for the purpose, of depriving the company or its controller of  the
advantage that they would otherwise have obtained by the company's  separate
legal personality. The principle is properly described  as  a  limited  one,
because in almost every case where the test is satisfied, the facts will  in
practice  disclose  a  legal  relationship  between  the  company  and   its
controller which will make it unnecessary to pierce the corporate veil.”

70.         The position of law regarding this principle in India  has  been
enumerated in various decisions. A Constitution Bench of this Court in  Life
Insurance Corporation of India v. Escorts Ltd. & Ors.,  (1986)  1  SCC  264,
while discussing the doctrine of corporate veil, held that:
“90. ... Generally and broadly speaking, we may say that the corporate  veil
may be lifted where a statute  itself  contemplates  lifting  the  veil,  or
fraud or improper conduct is intended to be prevented, or a  taxing  statute
or a  beneficent  statute  is  sought  to  be  evaded  or  where  associated
companies are inextricably connected as to  be,  in  reality,  part  of  one
concern. It is neither necessary nor desirable to enumerate the  classes  of
cases where lifting the veil is permissible,  since  that  must  necessarily
depend on the relevant statutory or other provisions, the object  sought  to
be achieved, the impugned conduct, the involvement of  the  element  of  the
public interest, the effect on parties who may be affected etc.”

71.         Thus, on relying upon the aforesaid decisions, the  doctrine  of
piercing  the  veil  allows  the  Court  to  disregard  the  separate  legal
personality of a company and impose liability upon  the  persons  exercising
real control over the said company. However, this  principle  has  been  and
should be applied in a  restrictive  manner,  that  is,  only  in  scenarios
wherein it is evident that  the  company  was  a  mere  camouflage  or  sham
deliberately created  by  the  persons  exercising  control  over  the  said
company for the purpose of avoiding liability. The intent  of  piercing  the
veil must be such that would seek to remedy a  wrong  done  by  the  persons
controlling the  company.   The  application  would  thus  depend  upon  the
peculiar facts and circumstances of each case.

72.         Having considered the relevant judicial decisions and  the  well
established and settled principles, it would be appropriate to  revert  back
to the controversy as found in the present factual matrix.

73.         In the present reference, this Court is  required  to  ascertain
whether workmen, engaged on a casual or temporary basis by a  contractor  to
operate and run a  statutory  canteen  on  the  premises  of  a  factory  or
corporation, can  be  said  to  be  the  workmen  of  the  said  factory  or
corporation.

74.          It has been noticed above that workmen hired  by  a  contractor
to work in a statutory canteen established under the provisions of the  Act,
1948 would be the said workmen of the given factory or corporation, but  for
the purpose  of  the  Act,  1948  only  and  not  for  all  other  purposes.
Therefore, the appellants-workmen, in the present  case,  in  light  of  the
settled principle of law, would be workmen of the Air India,  but  only  for
the purposes of the Act, 1948.  Solely  by  virtue  of  this  deemed  status
under  the  Act,  1948,  the  said  workers  would  not  be  able  to  claim
regularization in their employment from the Air India. As has been  observed
in the Indian Petrochemicals case (supra), the Act,  1948  does  not  govern
the  rights  of  employees  with  reference   to   recruitment,   seniority,
promotion, retirement benefits, etc. These are governed by  other  statutes,
rules, contracts or policies.

75.         To ascertain whether the appellants-herein would be entitled  to
other benefits and rights such as regularization, this Court would  have  to
apply the test of employer-employee  relationship  as  noticed  hereinabove.
For the said purpose, it would be necessary to refer to  the  Memorandum  of
Association and the Articles of Association of the  HCI  to  look  into  the
nature of the activities it undertakes. The objects of the HCI, as  provided
under its Memorandum of Association, inter alia, include the following:
(i) To carry on the business of  hotel,  motel,  restaurant,  café,  tavern,
flight kitchen, refreshment room and boarding  and  lodging,  house-keepers,
licensed victuallers, etc.;
(ii) To provide lodging and boarding and other facilities to the public;
(iii) To purchase, erect, take on lease  or  otherwise  acquire,  equip  and
manage hotels;
(iv) To establish shops, kitchens, refreshment rooms,  canteens  and  depots
for the sale of various food and beverages.

76.          The  objects  incidental  or  ancillary  to  the  main  objects
include, inter alia:
“...
(5) To carry on any business by means of  operating  hotels  etc.  or  other
activity which would tend to promote or assist Air-India’s  business  as  an
international air carrier.
...”

77.         It can be noticed from the above, that the  primary  objects  of
the HCI have no direct relation with the Air India. It is only  one  of  the
many incidental  or  ancillary  objects  of  the  HCI  that  make  a  direct
reference to assisting Air  India.  The  argument  that  the  HCI  runs  the
canteen solely for Air India’s purpose and  benefit  could  not  succeed  in
this light. The HCI has several primary objects, which include  the  running
of hotels, motels,  etc.,  in  addition  to  establishing  shops,  kitchens,
canteens and refreshment rooms. The  Air  India  only  finds  mention  under
HCI’s  ancillary  objects.  It  cannot  be  said  that  the  Memorandum   of
Association of the HCI provides that HCI functions only for Air  India.  Nor
can it be said that the fundamental activity  of  the  HCI  is  to  run  and
operate the said statutory canteen for the Air India.

78.         As regards HCI’s Articles of Association, it is  stated  therein
that the HCI shall be a wholly-owned subsidiary of the Air  India  and  that
its share capital shall be held  by  the  Air  India  and/or  its  nominees.
Furthermore,  the  said  Articles  included  provisions  whereby  Air  India
controls the composition of the Board of Directors  of  the  HCI,  including
the power to remove any such director or even the  Chairman  of  the  Board.
Further, Air India has the right to issue directions to the HCI,  which  the
latter is bound to comply with. In this regard, it  may  be  contended  that
the Air India has effective and absolute  control  over  the  HCI  and  that
therefore latter is merely a veil between  the  appellants-workmen  and  Air
India. We do not agree with this contention.

79.         In support of the above we find that nothing  has  been  brought
before  this  Court  to  show  that  such  provisions  in  the  Articles  of
Association are either bad in law or would impose some  liability  upon  the
Air India, in terms of calling the appellants to be its own workers. In  our
view, the said Articles are not impermissible in law. It is  our  considered
opinion that the doctrine of piercing the veil  cannot  be  applied  in  the
given factual scenario. Despite being a wholly owned subsidiary of  the  Air
India, Respondent No. 1 and Respondent No. 2 are  distinct  legal  entities.
The management of business of the HCI is under its own Board  of  Directors.
The issue relating to the appointment of the Board of Directors of  the  HCI
by the Air India would be  a  consequence  of  statutory  obligations  of  a
wholly owned subsidiary under the Act, 1956.

80.         The present facts would not be a fit case to  pierce  the  veil,
which as enumerated above,  must  be  exercised  sparingly  by  the  Courts.
Further, for piercing the veil of incorporation, mere ownership and  control
is not a sufficient ground. It should be established that  the  control  and
impropriety by the Air India resulted in  depriving  the  Appellants-workmen
herein of their legal rights.  As regards the question of  impropriety,  the
Division Bench of the High Court  of  Delhi  in  the  impugned  order  dated
02.05.2011, noted that there has been no advertence on merit, in respect  of
the workmen’s rights qua HCI, and the claim to the said right may  still  be
open to the workmen  as  per  law  against  the  HCI.  Thus,  it  cannot  be
concluded that the controller ‘Air India’ has avoided any  obligation  which
the workmen  may  be  legally  entitled  to.  Further,  on  perusal  of  the
Memorandum of Association and Articles of Association of the HCI, it  cannot
be said that the Air India intended to create HCI as a mere façade  for  the
purpose of avoiding liability towards the Appellants-workmen herein.

81.         Therefore, the only  consideration  before  this  Court  is  the
nature of control that the Air India may have  over  the  HCI,  and  whether
such control may be called effective  and  absolute  control.  Such  control
over the  HCI  would  be  required  to  be  established  to  show  that  the
appellants-workmen were in fact the employees of the Air India.

82.         It may be noticed again that the NALCO case (supra)  dealt  with
a similar issue. In that case, the Court had observed  that  the  day-to-day
functioning of the school as setup by the appellant therein  was  not  under
NALCO, but under a managing committee therein. Further,  the  said  Managing
Committee was a separate and distinct  legal  entity  from  NALCO,  and  was
solely responsible for recruitment, disciplinary action,  termination,  etc.
of its staff. The Court therefore had  held  that  the  respondents  therein
could not be said to be employed by NALCO. In the present  case,  HCI  is  a
separate legal entity incorporated under the Act, 1956 and is  carrying  out
the activity of operating  and  running  of  the  given  canteen.  The  said
Articles of Association of the HCI, in no way give control  of  running  the
said canteen to the Air India.  The  functions  of  appointment,  dismissal,
disciplinary action, etc. of the canteen staff, are retained with  the  HCI.
Thus, the exercise of control by the HCI clearly  indicated  that  the  said
respondent No. 2 is not a sham or camouflage created by respondent No. 1  to
avoid certain statutory liabilities.

83.          Reference  was  also  made  by  the  learned  counsel  for  the
Appellants to certain documents such as minutes of meetings,  etc.  to  show
that the Air India was exercising control over the HCI in  matters  relating
to transfer of workmen in the canteen, rates  of  subsidies,  items  on  the
menu, uniforms of the  canteen  staff,  etc.   On  a  perusal  of  the  said
documents, it is found that the said matters were, again, in the  nature  of
supervision.  In  fact,  most  of  these  were  as  a  consequence  of   the
obligations imposed under the Rules,  1950.  Air  India,  being  the  entity
bearing the financial burden, would give suggestions on the running  of  the
canteen. Furthermore, in light of complaints,  issues  or  even  suggestions
raised by its own employees who would avail the said canteen  services,  Air
India would put forth recommendations or requests to  ensure  the  redressal
of said complaints or grievances.  As  regards  discussions  over  uniforms,
prices, subsidies, etc., it may be  noted  that  the  same  are  obligations
under the Rules, 1950 as applicable to Air India.

84.         In our considered view, and in light of the  principles  applied
in the Haldia case (supra), such control  would  have  nothing  to  do  with
either the appointment, dismissal or removal from service, or the taking  of
disciplinary action against the workmen working in  the  canteen.  The  mere
fact that the Air India has a certain degree of control over the  HCI,  does
not mean that the employees working in  the  canteen  are  the  Air  India’s
employees. The Air  India  exercises  control  that  is  in  the  nature  of
supervision. Being the  primary  shareholder  in  the  HCI  and  shouldering
certain financial burdens such as providing with the subsidies  as  required
by law, the Air India would be entitled to have  an  opinion  or  a  say  in
ensuring effective utilization of  resources,  monetary  or  otherwise.  The
said supervision or  control  would  appear  to  be  merely  to  ensure  due
maintenance of standards and quality in the said canteen.

85.         Therefore, in our considered view and in  light  of  the  above,
the appellants-workmen could not be said  to  be  under  the  effective  and
absolute control  of  Air  India.  The  Air  India  merely  has  control  of
supervision  over  the  working  of  the  given  statutory  canteen.  Issues
regarding appointment of the  said  workmen,  their  dismissal,  payment  of
their salaries, etc. are within the control of the HCI. It  cannot  be  then
said that the appellants are the workmen of  Air  India  and  therefore  are
entitled to regularization of their services.

86.         It would be pertinent to mention, at this stage, that  there  is
no  parity  in  the  nature  of  work,  mode  of  appointment,   experience,
qualifications, etc., between the regular employees of  the  Air  India  and
the workers of the given canteen. Therefore, the  appellants-workmen  cannot
be placed at the same footing as the  Air  India’s  regular  employees,  and
thereby claim the same benefits as bestowed upon the latter. It  would  also
be gainsaid to note the fact that the appellants-herein  made  no  claim  or
prayer against either of the other respondents, that  is,  the  HCI  or  the
Chefair.

87.         In terms of the above, the reference is answered as follows :
     The workers engaged by a contractor to work in  the  statutory  canteen
of a factory would be the workers of the said  factory,  but  only  for  the
purposes of the Act, 1948, and not for other purposes, and further  for  the
said workers, to be called the employees of the factory  for  all  purposes,
they would need to satisfy the test of  employer-employee  relationship  and
it must be shown that the employer exercises absolute and effective  control
over the said workers.

88.         In view of the above, while answering  the  referral  order,  we
dismiss these appeals.  No order as to costs.

Ordered accordingly.


                                                      ....................J.
                                                              [ H.L. DATTU ]


                                                      ....................J.
                                                            [ R.K. AGRAWAL ]


                                                      ....................J.
                                                             [ ARUN MISHRA ]
NEW DELHI,
AUGUST 25, 2014.

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