Case Note & Summary
The Supreme Court addressed an industrial dispute arising from the statutory obligation of a textile mill to maintain a canteen under Section 46 of the Factories Act, 1948. The appellant mill, instead of running the canteen directly, entrusted its management to a cooperative society. Canteen workers employed by that society filed an application under Section 79 of the Bombay Industrial Relations Act, 1946 claiming wages and dearness allowance in accordance with certain awards of the Bombay Industrial Court. The Labour Court dismissed their claim, but the Industrial Court, Gujarat reversed and held that the canteen workers were employees of the mill under the extended definition contained in Sections 3(13) and 3(14) of the Act as amended by the Gujarat Legislature in 1962. The mill appealed by special leave. The material facts showed that the appellant was statutorily bound to maintain a canteen for its workers. It handed over the premises and running to the cooperative society. The workers contended that running the canteen was an ordinary part of the undertaking because of the statutory obligation, and therefore they became statutory employees of the mill despite being paid by the society. The mill argued that the workers were employed by the cooperative society, which was neither its agent nor contractor, and hence the awards were not binding on it. The legal issue was whether canteen workers engaged by a cooperative society to run a statutory canteen could be treated as employees of the factory owner for the purpose of wage claims. The court examined the pre-amendment definition, which covered only persons employed by a contractor in execution of a contract with an employer within Section 3(14)(e). The 1962 Gujarat amendment replaced this with an entrustment-based fiction: where the owner of an undertaking entrusts the execution of any work which is ordinarily part of the undertaking to any person otherwise than as servant or agent, the owner is deemed employer and persons employed in such work are statutory employees. The court noted that under the Factories Act, the mill had a duty to run and maintain a canteen, making that work ordinarily part of the undertaking. It relied on Ahmedabad Mfg. & Calico Printing Co. Ltd. v. Their Workmen and Basti Sugar Mills Ltd. v. Ram Ujagar to hold that the extended definition applied irrespective of the cooperative society's legal relationship with the mill. The court reasoned that the statutory fiction created a direct employer-employee relationship for the limited purpose of the Act. Consequently, the Supreme Court dismissed the appeal and affirmed the Industrial Court's order directing the appellant to pay the difference in wages and dearness allowance in accordance with the relevant awards. The decision reinforced that statutory obligations cannot be outsourced to defeat workers' rights under labour legislation.
Headnote
A) Labour Law - Statutory Employee - Extended Definition and Legal Fiction - Bombay Industrial Relations Act, 1946, Sections 3(13) and 3(14)(e) - The factory owner entrusted running of a statutory canteen to a cooperative society; the amended definition includes persons employed in execution of work which is ordinarily part of the undertaking, even if engaged by another person not as servant or agent. The court held that canteen workers of the cooperative society were statutory employees of the mill because running the canteen was a statutory obligation under Section 46 of the Factories Act and thus ordinarily part of the undertaking. Held that workers were entitled to wage differentials as per Awards. B) Factories Act - Canteen Obligation - Section 46, Factories Act, 1948 - A factory is statutorily obliged to maintain a canteen for workers; entrusting its running to a cooperative society does not absolve the factory owner from responsibility. The court reasoned that the work of running the canteen is incidental to or connected with the manufacturing process and an ordinary part of the undertaking. Held that the cooperative society's employees were covered under the extended definition of employee. C) Interpretation - Amendment by Gujarat Act 1962 - Clauses 13 and 14 of Section 3 - The 1962 amendment replaced the earlier contractor-based definition by creating statutory employees through entrustment 'otherwise than as servant or agent'. The court construed the amendment to cover canteen workers where the owner entrusts work in the course of conducting the undertaking. Held that the amendment applies to a factory owner entrusting canteen management to a cooperative society.
Issue of Consideration
Whether canteen workers employed by a cooperative society running a canteen on behalf of a factory can be treated as employees of the factory owner under the amended definitions of 'employee' and 'employer' in the Bombay Industrial Relations Act, 1946, for the purpose of payment of wages and dearness allowance.
Final Decision
The Supreme Court dismissed the appeal and affirmed the Industrial Court's order. It held that the canteen workers employed by the cooperative society were employees of the appellant mill under the extended definitions in Sections 3(13) and 3(14) of the Bombay Industrial Relations Act, 1946, as amended by Gujarat Act 1962. The appellant was directed to pay the difference in wages and dearness allowance in accordance with the relevant Awards.
Law Points
- Statutory obligation under Section 46 of Factories Act to maintain canteen makes its running an ordinary part of undertaking
- extended definitions under Sections 3(13) and 3(14)(e) of Bombay Industrial Relations Act
- 1946 as amended by Gujarat Act 1962 create statutory employees
- entrustment of work otherwise than as servant or agent triggers deeming fiction
- factory owner liable for wages of canteen workers even if engaged by cooperative society
- appeal dismissed.
