Shivnandan Sharma vs The Punjab National Bank Ltd

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 207 of 1954

Decision Date: 15 March 1955

Coram: Bhuvneshwar P. Sinha, Vivian Bose, B. Jagannadhadas

In this matter the Supreme Court of India considered a petition filed by Shivnandan Sharma against The Punjab National Bank Ltd, and rendered its judgment on 15 March 1955. The opinion was authored by Justice Bhuvneshwar P. Sinha, who sat together with Justices Vivian Bose and B. Jagannadhadas as the bench for the case. The parties were identified as petitioner Shivnandan Sharma and respondent The Punjab National Bank Ltd. The decision is reported in the official reporters as 1955 AIR 404 and 1955 SCR (1) 1427. The central issue involved the master-servant relationship arising from an agreement between the bank and the treasurers, specifically whether a cashier appointed by the treasurers was to be regarded as an employee of the bank.

The headnote of the judgment explains that the appellant had been appointed head cashier in one of the bank’s branches by the treasurers who oversaw the Cash Department under an agreement with the bank. The question that arose was whether the appellant should be treated as an employee of the bank. The Court held that (i) the terms of the agreement clearly demonstrated that the treasurers were servants of the bank rather than independent contractors, and (ii) because the bank exercised complete direction and control over the appellant and the ministerial staff of the Cash Department, the appellant was consequently an employee of the bank. The Court further observed that when a master employs a servant who is then authorized to employ others for a specific task and to guarantee their fidelity for remuneration, those persons appointed by the servant become servants of the master as well. The determination of whose employee a person is must be made by examining the facts and circumstances of each case, and the most satisfactory test is to ask which party has the authority to dictate how the work is to be performed. The Court quoted authorities such as (1) 1924 I.L.R. 51 Cal. 703 and (2) 1931 I.L.R. 59 Cal. 297, 1428, as well as Donovan v. Laing, Wharton & Down Construction Syndicate ([1893] 1 Q.B.D. 629) and Mersey Docks & Harbour Board v. Coggins & Griffith (Liverpool) Ltd. ([1947] A.C. 1).

The procedural history indicates that this was Civil Appeal No. 207 of 1954, filed by special leave against the order dated 31 August 1953 of the Labour Appellate Tribunal of India, Lucknow, in Appeal No. III-57 of 1953. Counsel for the appellant was A. S. R. Chari, assisted by Bawa Shiv Charan Singh and M. R. Krishna Pillai, while counsel for the respondent was Achhru Ram, assisted by Naunit Lal. The judgment was delivered by Justice Sinha, who began by noting that the appeal was brought by special leave against the orders of the Lucknow Bench of the Labour Appellate Tribunal dated 31 August 1953, which had set aside an award dated 13 October 1952 made by the Chairman of the Central Government Industrial Tribunal, Calcutta.

The Tribunal reinstated the appellant as head cashier of the Punjab National Bank and ordered that he be paid back salary. The appellant had been appointed head cashier of the Bank’s Una Branch on 18 June 1949. The Cash Department of the Bank, which oversees the Treasurers, was connected to the Treasurers by an agreement dated 1 May 1944 (Exhibit 1). That agreement was between the Bank and Messrs Rai Bahadur Karam Chand Puri & Bros, who were appointed as Treasurers at the Bank’s head office and at other locations in and outside Punjab. On 28 September 1951 the District Manager of the Northern Circle of the Bank sent a letter (Exhibit 4) to the Treasurers stating that the Una office would be closed with effect from the close of business on 3 November 1951. In response, the Treasurers issued a letter dated 2 October 1951, enclosing a copy of Exhibit 4, informing the appellant that the Una Branch would cease to operate after the close of business on 3 November 1951 and that his services would no longer be required thereafter. The Punjab National Bank Employees’ Union (Punjab) intervened on behalf of the appellant and other employees and made representations to the Government of India. By Notification No. SRO-432 dated 8 March 1952, published in the Gazette of India, Part II, Section 3, and in exercise of the powers conferred by section 10 of the Industrial Disputes Act, 1947, the Government referred the industrial dispute between the Bank and its workmen listed in Schedule 2 (dismissed workers) and Schedule 3 (transferred workers) to the Industrial Tribunal at Calcutta, which was constituted under section 7 of the Act. For the purposes of this case, Schedule 1 set out the essential points of dispute: (1) the alleged wrongful dismissal of the workmen named in Schedule II and their reinstatement; and (2) the entitlement to wages and other allowances from the date of dismissal to the date of reinstatement, should reinstatement be ordered. The appellant appeared as number 5 in Schedule 2. The Tribunal issued its award on 13 October 1952 concerning several employees, and the judgment records only the portion relevant to the appellant. After rejecting the Bank’s preliminary objection that the Union lacked locus standi to represent the appellant, the Tribunal framed the decisive issue for determination as follows: “On merits, the main point involved is whether the services of an employee of the Cash Department can be terminated on a change made in the services of the Contractor Cashier.”

The Tribunal was asked to consider whether the services of an employee in the bank’s Cash Department could be terminated solely because of a change in the services of the Contractor Cashier. In answering this question, the Tribunal observed that the issue had arisen in several earlier cases. The Tribunal member, referring to his earlier decision in Reference No. 3 of 1951 as Chairman of the Industrial Tribunal in the P. N. Bank dispute involving five cashiers, stated that employees of the Cash Department are employees of the Bank itself and not merely nominees of the Contractor Cashiers with respect to their service conditions. He further expressed the view that it would be unnecessary to recount all the legal precedents cited, particularly because the Supreme Court had already settled the point in Civil Appeal No. 66 of 1952, United Commercial Bank Ltd. v. Secretary, U. P. Bank Employees’ Union and Others. Accordingly, the Tribunal concluded that the dismissal of Shri Sharma was wrongful and should be set aside. The appropriate remedy, in the Tribunal’s opinion, was reinstatement, and it ordered that Shri Sharma be reinstated without hesitation. In addition, the Tribunal directed that he be paid back salary and the appropriate allowance for the period from the date of his dismissal up to the date of reinstatement.

Notwithstanding the merits of the Tribunal’s answer to the question framed, the Court observed that the question itself had been incorrectly framed. The dismissal of the appellant was not related to any change in the personnel of the Treasurer’s service. Instead, the appellant’s services were terminated on the ground that the Una Branch, where he served as head cashier, was deemed an un-economic unit and therefore had to be closed, rendering his services unnecessary. The respondent-Bank contended that the firm Messrs R. B. Karam Chand Puri & Bros. had been engaged as contractors for the Cash Department at the head office and at various other offices across the Punjab and beyond. The Bank alleged that periodic agreements were executed between it and this contracting firm, the most recent of which was dated 1 May 1954 (Exhibit 1). According to the Bank, the appellant was a nominee of that firm, and his employment termination was effected by the firm, not by the Bank itself, which allegedly had no direct involvement in employing cashiers and other workers in the Cash Department that were overseen by the so-called “Contractor Treasurers.” Consequently, the principal dispute between the parties centered on whether the appellant was an employee of the Bank or of the Contractor Treasurers, hereafter referred to simply as the “Treasurers.” The Tribunal, however, did not address the determination of this fundamental question. Likewise, this Court had not expressly examined or decided the issue in Civil Appeal No. 66 of 1952, but had implicitly assumed that the cashiers were employees of the Bank.

In the earlier stages of the dispute the Court treated the cashiers as employees of the Bank. The Tribunal, however, had not expressly answered the pivotal query as to whether the head cashier was actually an employee of the Bank or merely a nominee of the contractor treasurers, a point that the Tribunal had mistakenly assumed had already been settled by this Court in Civil Appeal No 66 of 1952. Had this Court truly resolved that question, the controversy would have concluded at that stage. Consequently, when the respondent-Bank filed an appeal before the Appellate Tribunal, it foregrounded a principal ground of attack on the Tribunal’s award. The Bank contended that the Tribunal had failed to determine the essential issue that conferred jurisdiction on it, namely the true nature of the relationship between the head cashier and the Bank as opposed to the alleged nominee status of the “Treasurer” asserted by the Bank’s representatives.

The Bank placed great reliance before the Appellate Tribunal upon the memorandum of agreement identified as Exhibit 1, together with a series of correspondences exchanged between the Bank and the contractor treasurers on one side and, subsequently, between the treasurers and the appellant on the other, evidenced as Exhibits 2, 3, 4 and 5. The Appellate Tribunal correctly observed that the original Tribunal had recorded no finding on the fundamental question and had merely presumed that the respondent before it was an employee of the Bank. After an extensive examination of the terms contained in the agreement, the Appellate Tribunal concluded that the agreement was decisive for the determination of the employment relationship. It held that, on the basis of the agreement’s provisions, the cashier was not an employee of the Bank but rather an employee of the contractor treasurers. Accordingly, the Tribunal concluded that it lacked jurisdiction to grant any relief to the complainant, and it accordingly set aside the Tribunal’s award and allowed the Bank’s appeal.

In the present proceedings, counsel for the appellant argued that the Appellate Tribunal had misinterpreted the Industrial Disputes Act when it ruled that the Tribunal possessed no jurisdiction to entertain the dispute merely because one of the parties had successfully denied the existence of an employer-employee relationship. The appellant’s counsel further asserted that the Tribunal had misconceived its function by basing its findings solely on the written agreement between the Bank and the treasurers, without examining all relevant facts to ascertain the substance of the relationship. Additionally, the appellant’s counsel maintained that the Tribunal had erred in its interpretation of the agreement, which led it to conclude that the appellant was not an employee of the Bank but a nominee of the “Treasurers.” The appellant further contended that the Tribunal’s decision relied upon an earlier award dated 16 September 1952 in Reference No 3 of 1951, which involved parties occupying positions similar to those of the appellant and the respondent-Bank, and that this earlier award, together with the findings of prior tribunals such as the award of the Conciliation Board presided over by Justice Bind Basni Prasad of the Allahabad High Court, the award rendered by the Tribunal under Mr K C Sen, and the award of the All India Industrial Tribunal (Bank Disputes) presided over by S Panchapagesa Sastri on 24 March 1951, constituted a final factual determination not open to review by the Appellate Tribunal. Consequently, the appellant argued that the Appellate Tribunal lacked jurisdiction to entertain the appeal and to overturn the original Tribunal’s award.

In this matter, the Court considered the award rendered by the India Industrial Tribunal (Bank Disputes), which was presided over by Sri S. Panchapagesa Sastri and dated 24 March 1951 in Reference No. 20. The appellant argued that this award was final because it rested upon the facts and circumstances disclosed in earlier awards that involved the Bank, its cashiers and other employees of the Cash Department. Accordingly, the appellant maintained that the award constituted a final finding of fact and was therefore not subject to appeal before the Appellate Tribunal; consequently, the Appellate Tribunal had no jurisdiction to entertain an appeal and could not reverse the Tribunal’s decision. On the other side, the respondent-Bank contended that the appellant had not raised any specific ground before the Appellate Tribunal, nor in the memorandum of appeal to this Court, asserting that the Tribunal lacked jurisdiction. Neither had such a ground been included in the statement of case. The respondent further submitted that, on the merits, the Tribunal was bound by the ordinary rules of evidence and procedure, and that the Tribunal had not addressed the question of whether the cashier-appellant was an employee of the Bank. That question therefore remained open before the Appellate Tribunal, which was competent to decide that basic issue. The respondent also argued that, upon a correct construction of the agreement annexed as Exhibit 1, this Court should accept the Appellate Tribunal’s finding that the appellant was not an employee of the Bank, and that, on that basis, the Tribunal possessed no jurisdiction to grant any relief to the appellant. The respondent’s case was essentially founded on the interpretation of the agreement. Relying on the terms of the agreement, the respondent’s counsel explained that the Treasurers were not servants or employees of the Bank but were “independent contractors.” Because the appellant and other Cash Department employees were nominees of those independent contractors, the respondent asserted that no employer-employee relationship could exist between the Bank and the appellant. The Court therefore found it necessary to examine the agreement in detail. The agreement, dated 1 May 1944, contains a clause stating that it shall be deemed to have commenced and to have been in force from 15 March 1942—the date of the death of R. B. Karam Chand Puri—and that it would replace the earlier agreement dated 26 July 1941, thereby preserving the continuity of the relationship between the Bank and the Treasurers. The agreement further obliges the Treasurers to diligently and faithfully serve the Bank at its Head Office and at such other offices as may be specified, and to obey all lawful orders and instructions issued by the Bank or its authorized representatives in the performance of their duties as Treasurers.

The agreement required the Treasurers to serve diligently and faithfully at the Head Office and at all offices listed in Schedule A, as well as at any other offices where they might later be appointed treasurers. They were also obliged to obey and observe every lawful order and instruction given by the Bank or by any person authorized by the Bank to supervise them in the performance of their duties as Treasurers. In addition to the duties, liabilities and responsibilities expressly set out in the agreement, the Treasurers were required to perform such customary duties that usually fell on treasurers employed by a bank. Their remuneration was specified in Schedule A, but the General Board of Directors of the Bank retained the authority to determine a different amount from time to time. From the remuneration paid by the Bank, the Treasurers were required to pay salaries to the nominees they employed as cashiers or to other functionaries of a similar nature who worked on their behalf. The amount of salary for each nominee was to be fixed by the Treasurers themselves, subject, however, to the approval of the Bank. After deducting the salaries of their nominees, the Treasurers received the net remuneration, which constituted the only compensation they were entitled to receive. The Treasurers themselves were not permitted to claim any additional allowances, whereas their nominees or working cashiers could receive allowances that the Bank’s authorities might sanction for staff members from time to time. The number of men to be employed at each office was prescribed in Schedule A, but the Board of Directors possessed the power to increase or decrease that number and to adjust the remuneration fixed for each office. The Treasurers bore responsibility for the safety of all money, cash, bullion, ornaments, specie, and other valuable documents received by them for or on behalf of the Bank, whether such items were kept within or outside the Bank’s premises. They were answerable to the Bank for any loss that occurred either inadvertently or through the negligence or misconduct of either the Treasurers themselves or any of their nominees. The Treasurers could resign by giving the Bank a notice period of three calendar months, and the Bank similarly could terminate their services by providing three months’ notice. However, if the Treasurers or any of their nominees committed gross negligence, misconduct, fraud, misappropriation or embezzlement in the performance of their duties, the Bank was entitled to dispense with their services immediately without any notice.

In this case the Court noted that the Bank possessed the immediate right to dismiss the Treasurers without any notice when the Bank deemed it necessary. The Bank also retained the authority to re-assign the Treasurers to any other office of the Bank after settling their remuneration. Both the Treasurers and their nominees were required to obey every order, rule and regulation that the Bank prescribed for the performance of duties by the cashiers as well as for the amount of cash balance they were permitted to retain. The cashiers, on their part, had an explicit duty to notify the Bank manager as soon as the cash balance in their possession exceeded the prescribed limit and to seek further instructions. The Treasurers were prohibited from engaging any assistant or peon whose character, conduct or reliability might be objected to by the manager of the Board of Directors. Moreover, the Treasurers had to ensure that no employee under their employment was absent from duty without obtaining written permission from the manager then in office. If any such employee was absent without leave, or was dismissed on the Board’s or the manager’s objection, the Treasurers were required to promptly appoint a substitute in his place. Responsibility for the acts and defaults of all their nominees rested with the Treasurers. Both the Treasurers and their nominees were entitled to a travelling allowance at rates sanctioned by the Board of Directors. The Treasurers had deposited a security of fifteen thousand rupees, which earned interest at a rate of thirty-one per cent per annum. As additional security for the proper performance of the agreement and as a cover for any loss that might be caused to the Bank by any act or omission of the Treasurers or any of their nominees, the Treasurers hypothecated properties as listed in Schedule C, which formed part of the agreement. Schedule A, also attached to the agreement, set out the names of the offices, the monthly remuneration payable to the Treasurers for each office, and the net savings of the Treasurers after payment of the salaries of all staff, including cashiers, for each office. Apart from the terms governing the relationship between the Bank and the Treasurers, the agreement also contained provisions directly affecting the relationship between the Treasurers’ nominees—such as the appellant—and the Bank. The agreement granted the Board of Directors the power to increase or decrease the number of nominees for any particular office and to adjust the remuneration fixed for that office. The nominees, being servants of the Bank, were entitled to any bonus that the Bank might declare for its staff, although such bonus was limited to the amount of their own net remuneration and they were not eligible for any bonus to which the cashiers were not entitled under the Bank’s rules. The nominees were also entitled to participate as ordinary members of the staff in the provident fund constituted by the Bank and to receive travelling allowance at rates sanctioned by the Board whenever they were required to travel on Bank business. From the terms of the agreement it appears that the Treasurers were employed by the Bank on a monthly basis for an indefinite term, continuing until either party terminated the agreement in accordance with the stipulated provisions, and that they remained under the complete control and direction of the Bank through its manager or other functionaries.

The Court explained that the nominees of the Treasurers could receive a bonus only up to the amount of their own net remuneration and no more. They could not claim any bonus that the cashiers under them were ineligible to receive under the Bank’s rules. The nominees were also allowed to join the Bank’s provident fund as ordinary staff members. In addition, the nominees were entitled to a travelling allowance at the rates approved by the Board of Directors whenever they were required to travel to out-stations on Bank business. By examining the terms of the agreement, and omitting clauses that were not relevant to the present dispute, the Court observed that the Treasurers were employed by the Bank on a monthly basis for an indefinite period, continuing until either party terminated the agreement according to its prescribed terms. The Treasurers operated under the complete control and direction of the Bank through its manager or other functionaries, and they were required to follow daily orders concerning cash balances and other matters related to the safe custody of cash, valuable documents, and similar assets belonging to the Bank or its constituents. For each office they supervised, the Treasurers received a fixed sum from which they were obliged to pay the salaries of a specified number of assistants, who could be head cashiers, cashiers, assistant cashiers, or other similar functionaries. Their entitlement to a bonus was calculated on the net amount of this fixed remuneration after deducting the salaries of the assistants. The Court noted that the Treasurers could not be expected to be personally present at all the numerous offices spread across Punjab and beyond, and therefore they were authorized to engage head cashiers or assistant cashiers for each office under their charge. They were required to ensure the fidelity of these assistants, selecting persons whose honesty and efficiency the Bank and the Treasurers both trusted. While the Treasurers had the right to nominate these assistants, the final decision rested with the Bank, whose manager possessed complete authority over matters of leave, discipline, and conduct for the nominated assistants as they managed cash and other valuables in the Bank’s custody. The Court emphasized that this arrangement created a dual-control situation: the Treasurers nominated the assistants to perform responsible functions concerning cash and valuables, yet the Bank could not relinquish its full control over the day-to-day operations of the cash department.

The Court observed that the persons nominated by the Treasurers were placed on the same level as other employees of the Bank for purposes of receiving bonuses, travelling allowances, provident fund contributions and similar benefits. Although the Treasurers were responsible for paying these nominees, the monies used for such payments came from funds provided by the Bank. The Court noted that it is often difficult to decide whether the relationship between the Treasurers and the Bank is that of a master and servant or that of a master and an independent contractor who has agreed to perform a specific task for the employer. This question commonly arises when determining the vicarious liability of an employer for acts carried out by an agent, a term that encompasses both servants and independent contractors. The Court explained that the distinction between a servant and an independent contractor has been examined in a large body of case law, and that legal textbooks on torts have tried to formulate general tests for the distinction. For instance, the Court cited the explanation offered in Pollock’s Law of Torts, which states that a master not only sets the ultimate objective for the workman but also retains the power to direct the means of achieving that objective; a servant is therefore a person who must follow the master’s commands regarding how the work is performed. By contrast, an independent contractor is described as a person who undertakes to achieve a specified result but, in carrying out the work, is not subject to the orders or control of the party for whom the work is done and may exercise his own discretion in matters not predetermined. The Court further referred to Clerk & Lindsell on Torts, which adopts the same description of an independent contractor as quoted from Pollock. Additionally, the Court mentioned the 11th edition of Salmond’s Treatise on the Law of Torts, which reiterates that the test for distinguishing a servant from an independent contractor is the existence of a right of control over the manner in which the work is performed. According to that source, a servant works under the supervision and direction of the employer, whereas an independent contractor is his own master, bound only by the contract and not by the employer’s orders. The Court noted that the authors have discussed numerous illustrative cases, outlining the circumstances in which the general rule has been applied.

In this case the Court examined whether the doctrinal test spoken of by the leading treatises on tort law could be applied to decide if the Treasurers of the Bank were to be regarded as the Bank’s servants, as the appellant contended, or as independent contractors, as the respondent Bank asserted. The agreement between the parties was described as a composite arrangement in which the Treasurers acted as agents of the Bank and undertook to indemnify the Bank against any loss that might arise from the lack of fidelity or efficiency of the ministerial staff who were entrusted with the Bank’s cash and valuable documents. Under the terms of the agreement the Treasurers were obliged to nominate assistants who would be responsible for the day-to-day work of the Cash Department. The Bank retained full control over those assistants with respect to matters such as leave of absence, the manner in which cash and other valuables were to be kept, and the general direction given by the Bank’s manager or any other functionary nominated by the Bank to supervise the Cash Department. The Bank furthermore made the assistants answerable for the receipt of bonuses, provident fund contributions and travelling allowances, and insisted that, for those purposes, the assistants should be placed on the same footing as the other employees of the Bank.

The Bank argued that its agreement with the Treasurers demonstrated that the Treasurers bore complete responsibility for the appointment, dismissal and payment of salary of the employees in charge of the Cash Department, and therefore could only be characterised as independent contractors. The Court observed, however, that the power to appoint such assistants was not vested exclusively in the Treasurers. The appointment required the Bank’s approval, and the Treasurers could not continue to employ staff whose fidelity and efficiency the Bank did not trust. Consequently, both the appointment and the dismissal of the employees remained subject to the Bank’s authority to give directions to the Treasurers. In the matter of salary payment, although the Treasurers might physically disburse the wages, the money originated from the Bank’s coffers. The appellant contended that the salary of the Cash Department employees was paid through the Bank itself, but the Court noted that no concrete evidence was presented to substantiate this claim beyond the mere assertion of counsel. In the Court’s view, the factual matrix indicated that the Bank retained decisive control over the essential aspects of appointment, dismissal and remuneration, thereby weakening the proposition that the Treasurers were independent contractors.

The Court observed that the situation regarding the appointment, dismissal and payment of salary of the employees of the Cash Department is analogous to the situation of employees in a particular Government department, where the appointment and dismissal of ministerial staff may rest with an authority empowered by the head of that department. In such a governmental context, salary may also be paid by the appointing authority, but the money is drawn from the Government treasury. In those circumstances, the Court questioned whether it could be correctly asserted that those employees are not servants of the Government. The Court noted that the analogy is not perfect, because in the present case the appointment and dismissal of the employees of the Cash Department is a joint responsibility of the Bank and its Treasurers. This joint responsibility is necessary because the Treasurers act as guarantors of the fidelity and efficiency of the employees, while the Bank must exercise complete control over the day-to-day discharge of their functions, since the Bank is vitally and immediately concerned with the honest and efficient performance of the duties of the assistants in the Cash Department, and the efficient running of that department is the most important function of a bank. The Court further pointed out that, with reference to the terms of the agreement set out earlier, the Treasurers and their nominees are required to take their orders from the Bank Manager or another such functionary. However, the agreement contains no specific provision that those nominees must discharge their daily functions under the direct control of the Treasurers, nor that they are subject to the immediate control of the Treasurers in matters such as the grant of leave of absence. The Court explained that a provision creating dual control in the daily work of the employees could not exist, because such dual control would lead to great confusion and a lack of discipline among the ministerial staff. Consequently, the employees of the Cash Department necessarily have to be under the direct control of the Bank Manager or some other functionary appointed by the Bank. The Bank has undertaken the responsibility for their pay and their prospects in the service, and naturally, such employees, like other employees of the Bank, must take their orders from the Bank. The Court therefore held that the Treasurers are servants of the Bank and that their nominees must likewise be considered servants of the Bank. The Court also observed that the Appellate Tribunal, after reading the clauses of the agreement as a whole, held that the appellant was an employee of the Treasurers and not of the Bank. However, the Tribunal did not address pointedly the exact relation between the Bank and the Treasurers, nor did it consider the position of the employees of the Cash Department with respect to the Bank if it were held that the Treasurers themselves were servants of the Bank.

In the proceedings before the Appellate Tribunal both parties directed their arguments to the question of whether the employees of the Cash Department were servants of the Bank or servants of the Treasurers. The Court held that this focus was not the proper way to resolve the controversy between the parties. It explained that even if the relationship of the Treasurers to the Bank were characterised as that of a servant to his master, the fact that the Treasurers were authorised to appoint and dismiss the ministerial staff of the Cash Department would not make those staff independent of the Bank. In such a circumstance the ultimate employer would remain the Bank, acting through the agency of the Treasurers. The respondent contended that, even assuming the Treasurers were servants of the Bank and not independent contractors, the legal position of the Cash Department employees vis-à-vis the Bank would be unchanged, namely that they would be servants of the Treasurers. The Court found no substance in that contention. It observed that when a master employs a servant and authorises that servant to employ a number of persons to perform a particular job for a cash consideration, the persons thus appointed become, together with the master, servants of the master. Consequently, it is not always correct to say that persons appointed and liable to be dismissed by an independent contractor can in no circumstances be employees of a third party. To illustrate this point the Court referred to the observations of Lord Esher, M.R., in Donovan v. Laing, Wharton & Down Construction, Syndicate (1): “It is true that the defendants selected the man and paid his wages, and these are circumstances which, if nothing else intervened, would be strong to show … that he was the servant of the defendants. So, indeed, he was as to a great many things- but as to the working of the crane he was no longer their servant, but bound to work under the orders of Jones & Co., and, if they saw the man misconducting himself in working the crane or disobeying their orders, they would have a right to discharge him from that employment.” Those observations have been approved in the recent House of Lords decision in Mersey Docks & Harbour Board v. Coggins & Griffith (Liverpool) Ltd. (1). While the House of Lords distinguished that ruling on the facts, it did not depart from the general principle laid down in the earlier case that the decisive factor is which party has control over the workers in the day-to-day performance of their duties. Lord Macmillan, speaking at paragraph 14 of that judgment, reiterated that many reported cases were cited, but that the question in each case turns on its own circumstances and that attempts to formulate a universally applicable criterion have not been very successful. Thus, the Court concluded that the question of whose employee a particular person is must be determined by examining the facts and circumstances of each individual case.

The Court observed that the determination of which party is the employer of a particular worker depends on the specific facts and circumstances of each case, and that rulings in other cases merely serve as illustrative guides rather than binding authorities. It further noted that efforts to devise a universally applicable rule for identifying an employer have not been especially successful. In this context, the Court cited the observations of Lord Porter, who explained that a variety of factors influence the outcome, including who pays the wages, who possesses the power to dismiss, the duration of any alternative service, and the nature of the machinery involved. Lord Porter emphasized that the terminology used in any case must be interpreted in light of the subject matter under consideration, and he suggested that the most satisfactory test for determining the employer at any given time is to ask which party has the authority to instruct the employee on how to perform the work to which he or she is engaged. (1) [1947] A.C. 1.

Applying this principle to the case at hand, the Court found that the direction and control over the appellant and the ministerial staff responsible for the Bank’s Cash Department were wholly vested in the Bank, exercised through its manager or other senior officers. Consequently, the Court expressed no hesitation in departing from the Appellate Tribunal’s earlier conclusion and ruled that the appellant was indeed an employee of the Bank. Because the appellant was an employee of the Bank, the Tribunal possessed the jurisdiction to issue the directions it had made concerning the appellant. The respondent never challenged the Tribunal’s orders on their merits at any stage of the proceedings. Having reached this conclusion, the Court saw no difficulty in affirming the Tribunal’s orders regarding the appellant and deemed it unnecessary to address the remaining points raised by the parties. Accordingly, the appeal was allowed, with costs awarded throughout.