Shankar Balaji Waje vs State Of Maharashtra

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

Court: Supreme Court of India

Case Number: Criminal Appeal No. 63 of 1960

Decision Date: 27 October, 1961

Coram: Raghubar Dayal, J.L. Kapur, Subba Rao

In the matter titled Shankar Balaji Waje versus the State of Maharashtra, the judgment was delivered on 27 October 1961 by the Supreme Court of India. The opinion was authored by Justice Raghubar Dayal, with Justice J. L. Kapur and Justice Subbarao K. also forming part of the bench. The case is reported in the All India Reporter at citation 1962 AIR 517 and in the Supplement to the Supreme Court Reports (1962 SCR Supl. (1) 249). Subsequent citator references include entries such as 1963 SC 1591, 1966 SC 370, 1970 SC 66, 1974 SC 37, 1974 SC 1832, and 1987 SC 447, all relating to the interpretation of the definition of “worker” under the Factories Act, 1948 (Act 63 of 1948), particularly sections 2(1), 79, 79(11), 80, 90 and 92. The petition was filed by Shankar Balaji Waje challenging an order of the State of Maharashtra, and the central questions were whether an individual designated as “P” fell within the statutory meaning of a worker and, if so, whether he was entitled to wages for leave under section 80 of the Act.

The factual matrix established that the appellant owned a bidis‑manufacturing factory where, in addition to other labourers, an individual referred to as “P” rolled bidis using tobacco and leaves supplied by the factory. No contract of service existed between the appellant and P, and P was not obligated to work for any fixed hours or a specified period. He could enter the factory at any time during operating hours and leave whenever he chose. P was permitted to be absent for any number of days, including up to ten days without notifying the appellant, provided he obtained permission for any absence exceeding ten days. He was also free to roll bidis at his home, provided he received the appellant’s consent to take the supplied tobacco. The appellant exercised no supervision over P’s work; at the end of each day P’s rolled bidis were delivered to the appellant, and any sub‑standard bidis were rejected. Compensation to P was based solely on a fixed rate per bidis produced, without any minimum‑output requirement. The Factory Inspector discovered that P had not been paid wage‑equivalent leave for four days that he had earned after a period of service, leading to a fine of Rs 101 imposed on the appellant for contravening section 79(11) of the Factories Act. The Court held, speaking for Justices Kapur and Dayal, that the precedent set in Birdhi Chand’s case was factually distinguishable and therefore inapplicable. Because the appellant exercised no control or supervision over P, the Court concluded that P did not satisfy the three criteria for a worker as articulated in the earlier decision of Chintaman Rao, and consequently P was not entitled to leave wages under section 80 of the Act.

In the present matter, the Court observed that the conditions laid down in Rao’s case for classifying a person as a worker were not satisfied. The decision in Birdhi Chand Sharma v. The First Civil Judge, Nagpur [1961] 3 S.C.R. 161 was therefore distinguished, while the principles articulated in Chintaman Rao v. The State of Madhya Pradesh [1958] S.C.R. 1340 were applied. The Court held that determining whether the appellant had violated sub‑section (1) of section 79 required a correct construction of sections 79 and 80 of the Factories Act. Because of the manner in which the work was organized in the present case, the Court found that there was no basis for computing the daily average of a worker’s “total full‑time earnings.” The term “total full‑time earnings” was explained as the amount earned by a worker in a day when he works the full time prescribed for that day, the full‑time period being the one displayed on the factory notice for that specific day. Consequently, the Court concluded that the wages payable for any period of leave could not be calculated, nor could the number of days for which leave with wages could be granted, on the facts before it. The Court emphasized that without a reliable measure of full‑time earnings, the statutory formula in section 80 could not be applied. On this ground, the conviction of the appellant under section 92 read with section 79(1) of the Act was held to be erroneous.

Justice Subba Rao, however, delivered a dissenting opinion. He argued that the question raised on appeal was directly addressed by the earlier judgment of this Court in the Birdhi Chand Sharma case. In his view, it could not be said that the appellant lacked any right of supervision or control over the labourers employed in the factory, nor that he failed to supervise them to the extent required by the nature of the work carried out. Referring to section 2(1) of the Act, Justice Subba Rao quoted that a “worker” means a person employed, directly through any agency, whether for wages or not, in any manufacturing process. He held that all the elements of the word “employed” as previously defined by this Court were present, and therefore the labourers fell within the meaning of “worker” under section 2(1). He cited several authorities including Birdhi Chand Sharma v. First Civil Judge, Nagpur [1961] 3 S.C.R. 161; Chintaman Rao v. State of M.P. [1958] S.C.R. 1340; Dharangadhara Chemical Works v. State of Saurashtra [1957] S.C.R. 152; State of Kerala v. V. M. Patel; and Palaiappa v. Court of Additional First Class Magistrate, Kulitalai I.L.R. 1958 Mad. 999. For the purpose of computing wages during a leave period under section 80, he explained that “full‑time earnings for a day” could be understood as the sum earned by a worker for the daily hours of work fixed by the factory. He observed that in the instant case the workers were required to remain on duty throughout the fixed working hours of the factory, although they could leave the premises at any time within those hours, and that they were paid on the basis of the number of bidis they rolled. Accordingly, the wages they earned during the factory’s working hours represented their full‑time earnings for the day, and there was therefore no difficulty in ascertaining the rate prescribed under the relevant provision.

According to section 80 of the Factories Act, the wages payable for a period of leave must be calculated at a rate equal to the daily average of the worker’s total full‑time earnings on the days actually worked. The present appeal arose under the criminal appellate jurisdiction, being Criminal Appeal No. 63 of 1960. The appeal was filed by special leave against a judgment and order dated 9 October 1959 passed by the High Court of Bombay in Criminal Reference No. 94 of 1959. The counsel for the appellant consisted of senior advocates, while the respondent was represented by counsel specializing in criminal matters. The judgment was delivered on 27 October 1961 by Justices Kanpur and Dayal, with Justice Dayal authoring the opinion and Justice Subba Rao delivering a separate judgment. The appeal challenged the order of the Bombay High Court that had rejected a reference made by the additional Sessions Judge of Nasik and had affirmed the conviction of the appellant under section 92 of the Factories Act, 1948 (Act LXIII of 1948), hereinafter referred to as “the Act.” The appellant owned and occupied a manufacturing unit named “Jay Parkash Sudhir Private Ltd.,” which produced bidis.

Pandurang Trimbak Londhe, hereinafter called Pandurang, was employed in the said factory as a bidi‑roller for a number of days during 1957 and ceased such work on 17 August 1957. The prosecution alleged that the appellant terminated Pandurang’s services by affixing a notice on 12 August 1957. Although the appellant admitted that the notice had been posted, he denied that Pandurang had left his service voluntarily. On 22 August 1957, Inspector Shinde, a Provincial Welfare Inspector, inspected the factory and examined both the weekly and wages registers. The inspection revealed that Pandurang had worked for a total of seventy days and had accrued four days of leave entitlement. Pandurang, however, did not take the accrued leave, and consequently he was entitled to receive wages for the four‑day leave period. The appellant failed to pay the leave wages, an omission that constituted a contravention of section 79(11) of the Act. As a result, a complaint was lodged against the appellant before the Judicial Magistrate, First Class, at Sinnar. Before the magistrate, the defence argued that Pandurang was not a “worker” within the meaning of section 2(1) of the Act; therefore, no leave entitlement could arise and the appellant could not be guilty of violating section 79(11). The learned magistrate rejected this contention, holding that Pandurang qualified as a worker, and consequently convicted the appellant of the offence under section 92 read with section 79(11) of the Act, imposing a fine of ten rupees. It is noteworthy that this case served as a test case, with similar proceedings concerning the non‑payment of leave wages to other workers pending before the court. The appellant subsequently filed a revision petition before the learned Additional Sessions Judge of Nasik, who was of

In the proceedings before the Sessions Judge, the learned magistrate expressed the opinion that Pandurang was not a worker and that the conviction of the appellant was unsound. Accordingly, the case was referred to the High Court. The High Court, however, rejected the Sessions Judge’s view, held that Pandurang satisfied the definition of a worker, dismissed the revision and affirmed both the conviction and the fine imposed. The appellant then filed the present appeal against the High Court order, raising two principal questions. The first question submitted was that Pandurang did not fall within the meaning of “worker” as defined in the Act. The second question contended that even assuming Pandurang was a worker, he was not entitled to any leave wages under section 80 of the Act.

The appellant’s submissions relied upon the established facts of the case, asserting that those facts precluded the existence of a master‑servant relationship between the appellant and Pandurang because the appellant exercised no supervision or control over the manner in which Pandurang performed his duties in the factory. The appellant highlighted that no written agreement or contract of service existed between the parties. Pandurang was not obliged to attend the factory for a fixed number of hours or for any predetermined period; he could arrive at the factory at any time he chose and could also leave at his discretion, although he could, if he wished, be present during the factory’s normal working hours. Moreover, Pandurang could be absent on any day he preferred and could remain absent for up to ten days without informing the appellant. When an absence exceeded ten days, Pandurang was required only to inform the appellant that he did not intend to abandon his work, not to obtain permission for leave. The appellant further argued that there was no actual supervision of Pandurang’s work inside the factory. Compensation was paid to Pandurang on a piece‑rate basis calculated on the quantity of bidis produced, without any stipulation of a minimum daily output. Leaves were sometimes permitted for Pandurang to take the tobacco home for cutting, because the factory supplied the tobacco needed to fill the bidis. Pandurang was not compelled to roll bidis on the factory premises; he could perform that task at his home after obtaining the appellant’s permission to remove tobacco, a requirement dictated by excise regulations rather than by any condition of service. At the end of each day, the bidis produced were delivered to the appellant, and any bidis that failed to meet quality standards were rejected. The appellant’s second contention asserted that the provisions of sections 79 and 80 of the Act were inapplicable to the facts, because the nature of Pandurang’s engagement did not allow calculation of the number of days worked or the full‑time earnings contemplated by section 80.

The Court noted that it was not possible to determine how many days the appellant actually worked or to calculate the total full‑time earnings for those days within the period referred to in section 80 of the Act. On behalf of the State, it was submitted that the appellant was entitled to exercise whatever supervision and control was feasible over Pandurang’s work, given that Pandurang’s duties were of a very simple nature, and consequently Pandurang should be regarded as a worker. The State further argued that there was no difficulty in ascertaining either the number of days worked or the total full‑time earnings contemplated by section 80. The Court stated that it had considered the matter with great care because the view adopted by the lower court had been endorsed in the Supreme Court’s decision in Shri Birdhichand Sharma. The respondent relied on the judgment of the First Civil Judge, Nagpur (1), but the Court distinguished the facts of that case, observing that only a few factual similarities existed between the two matters. The similarities consisted of the fact that both Pandurang and the workers in the earlier case could enter the factory at any time during the prescribed working hours, could leave at will, were paid on a piece‑rate basis, and that bidis failing to meet quality standards were rejected, as reported in [1961] 3 S.C.R. 161. The Court emphasized that the earlier decision was founded on facts that do not obtain in the present case; therefore the earlier decision was distinguishable, and the High Court’s view in the present case appeared to have been expressed without appreciating the material differences. The earlier case was based on the following facts: (1) the alleged workers were required to work inside the factory; (2) their attendance was recorded; (3) if they arrived after midday they were not allotted any work and consequently lost wages; and (4) the management could dismiss them if they were absent for a continuous period of eight days. By contrast, in the present matter Pandurang was allowed to work at his home provided the appellant gave permission to take tobacco home. No record showed that his attendance was noted, although the days he worked could be identified from the work register. Unlike the earlier case, there was no situation where Pandurang would be denied work for arriving after midday, nor was there any allegation that the appellant possessed the power to remove him for continuous absence over a fixed number of days. Accordingly, the Court held that the decision in Birdhichand’s case (1) was distinguishable on these grounds.

In this matter the Court observed that the decision in the earlier case reported at (1)[1961] 3 S.C.K. 161 could not be applied to the present facts because the essential element required to bring a person within the meaning of “worker” under clause (1) of section 2 of the Act is that the person must be employed in one of the processes specified in that clause. The Court noted that there was no dispute that the activity performed by Pandurang fell within one of those processes, namely the rolling of bidis. Consequently the only issue that remained was whether Pandurang could be said to be employed by the appellant. The Court then referred to the decision in Shri Chintaman Rao v. State of Madhya Pradesh (1), which explained that the concept of employment contains three essential ingredients: the employer, the employee and a contract of employment. It defined the employer as the person who engages the services of others, the employee as the person who works for another for hire, and the employment as the contract of service whereby the employee agrees to serve the employer subject to the employer’s control and supervision. The Court emphasized that employment therefore creates a relationship of service between the employer and the employed. Applying this principle, the Court pointed out that in the present case there was no agreement or contract of service between the appellant and Pandurang. At most, when Pandurang went to work, the appellant supplied him with tobacco for the purpose of rolling bidis and Pandurang accepted payment at a specified rate for each bidi produced. The Court observed that the appellant exercised no control or supervision over Pandurang’s work. Further, Section 85 empowers the State Government to declare that certain provisions of the Act shall apply to places where a manufacturing process is carried on, even though the persons working there are not employed by the owner, but are working with the permission of or under an agreement with the owner, as stated in (1)[1958] S.C.R. 1340, 1346, 1349, 1350, 1351. This provision makes a clear distinction between a person who is employed by the owner and a person who works with the owner’s permission or under an agreement. The Court was of the opinion that the facts of this case strongly indicate that Pandurang’s work was performed with the permission of or under an agreement with the owner and not on any terms of employment by the owner. Moreover, the factual record showed that the appellant had no control or supervision over the particulars of Pandurang’s work. The appellant could not dictate Pandurang’s hours of work nor the days on which he worked. Pandurang was free to be absent and to go to the factory at any time of his choosing and to return at any time according to his own will. The appellant could not require a minimum quantity of bidis to be produced each day, could not control the time Pandurang spent rolling a bidi, nor could he regulate the number of bidis produced. The Court noted that the task of rolling bidis is a simple activity that does not necessarily require particular supervision, further supporting the conclusion that no employer‑employee relationship existed between the appellant and Pandurang.

The Court observed that although the manufacturing process could, in theory, permit the management to issue directions, the record did not contain any evidence that such directions were actually given. In support of this observation, the Court referred again to the passage on page 1349 of the judgment in Shri Chintaman Rao’s Case, wherein the issue of whether the Sattedars were workers or independent contractors was examined. In that case, the Sattedars received tobacco from the factory management and supplied rolled bidis back to the management; they were also free to manufacture bidis outside the factory premises and could employ other labourers for the purpose. The Court therein stated that “the management cannot regulate the manner of discharge of his work.” The present case presented a similar factual scenario. Pandurang was supplied with tobacco by the appellant and was free to produce as many bidis as he wished, delivering them to the factory whenever he chose to cease work. During the period that Pandurang was engaged in the activity, the management was unable to regulate the manner in which he discharged his work; he could take his own time and roll any number of bidis he desired. His obligation under the daily agreement was satisfied simply by delivering the completed bidis, with any remaining tobacco staying in his possession unused. The appellant could only require Pandurang to roll bidis using the tobacco and leaves provided, but could not dictate the method by which the rolling was to be performed. Consequently, the Court held that the mere requirement that a bidi‑roller follow a particular form of rolling does not confer upon the management a right to control the manner of the work. While every worker must produce output that meets the prescribed specifications, the essential element of control in a master‑servant relationship relates not to prescribing the nature of the article or the work itself, but to the incidents that affect the process by which the work is executed. Thus, the manner of work must be distinguished from the type of work to be performed. In the present circumstances, the management merely stipulated that the labourer must produce bidis rolled in a specified shape; how the labourer actually carried out the rolling was his own concern and was not subject to management control, which was interested only in obtaining bidis of a particular style and composition. The Court further quoted its earlier observation in Shri Chintaman Rao’s Case, noting that an examination of the relevant provisions of the Act showed that “the scheme of the aforesaid provisions indicates that the workmen in the factory are under the direct supervision and control of the management. The conditions of service … are statutorily regulated and the management is to conform to the rules laid down at the risk of being penalised for” any breach.

In this case, the Court observed that the management of a factory could not determine the working hours, designate weekly holidays, organise night‑shift arrangements or otherwise satisfy the statutory duties imposed by the Act if persons such as the Sattedars, who performed work through others or through coolies, were to be regarded as “workers” within the meaning of the legislation. The Court held that it would be practically impossible for the factory’s management to regulate the work of such persons or to comply with the mandatory provisions of the Act. Consequently, the Court explained that a “worker” under the Act must be a person who has entered into a contract of service with the management and is therefore subject to the employer’s control and supervision; the definition does not extend to an independent contractor, his coolies or servants who operate without such control.

Applying this principle to the facts before it, the Court found that the appellant could not fix working hours, prescribe weekly holidays, require night‑shift arrangements or meet other statutory obligations if Pandurang were considered a worker within the scope of the Act. On this basis, the Court concluded that Pandurang was not a worker. The State contended that individuals engaged on a job‑work basis might be workers, but the Court clarified that only those who work regularly at the factory and receive payment for the work performed during regular employment would satisfy the definition. While piece‑rate labourers can qualify as workers, they must be regular employees and not persons who work at their own discretion. The Court also rejected the State’s further argument that a worker need not be a full‑time employee, noting that even a part‑time worker must have, under his contract of service, an obligation to work for a fixed period or during fixed hours. The notion of service, the Court said, does not conform to a servant who enjoys complete liberty to attend to work whenever he pleases, independent of the employer’s orders.

The Court’s opinion was reinforced by its second line of reasoning. It observed that if Pandurang were a worker, the statutory provisions concerning leave and leave wages would be applicable to him. Since those provisions did not apply, the Court affirmed that Pandurang was not a worker, as the three criteria articulated in Shri Chintaman Rao’s case were not satisfied. Before analysing sections 79 and 80 of the Act, which deal with leave and leave wages, the Court emphasized that the terms on which Pandurang worked did not contemplate any leave. He was not in regular employment; he received work assignments and was paid solely on the basis of the output he produced.

In this case the Court observed that the appellant was not obliged to report for work each day and was not required to obtain prior permission before being absent. The only situation that imposed a duty to inform the management was when the appellant’s absence exceeded ten days; the notice was required only for administrative convenience and was not intended to constitute a request for leave. The Court then turned to the provisions of Section 79, which provides for annual leave with wages, and Section 80, which provides for payment of wages during periods of leave. The Court explained that a proper construction of these provisions is necessary to determine whether the appellant violated sub‑section (11) of Section 79 of the Act and thereby committed an offence punishable under Section 92 of the Act. The Court referred to the authority cited as (1) [1958] S.C.R. 1340, 1346, 1349, 1350, 1351.

Sub‑section (1) of Section 79 reads: “Every worker who has worked for a period of 240 days or more in a factory during a calendar year shall be allowed during the subsequent calendar year leave with wages for a number of days calculated at the rate of—(i) if an adult, one day for every twenty days of work performed by him during the previous calendar year; (ii) if a child, one day for every fifteen days of work performed by him during the previous calendar year.” The provision is followed by two explanations. Explanation‑1 states that, for the purpose of this sub‑section, days of lay‑off by agreement or contract, maternity leave of a female worker not exceeding twelve weeks, and leave earned in the year prior to the year in which leave is taken shall be deemed days on which the worker has worked in the factory for computing the period of 240 days, but no leave shall accrue for those days. Explanation‑2 clarifies that the leave calculated under the sub‑section is exclusive of all holidays, whether occurring during or at either end of the period of leave.

The Court emphasized that the terms of Section 79 apply to every worker. If the provision did not apply to a particular class of persons employed in a factory, it would follow that such persons did not fall within the definition of “worker.” Accordingly, a worker is entitled to leave in the year following a period in which he or she has worked at least 240 days in the factory during the preceding calendar year. The Court then considered who can be said to have worked for a period of 240 days. According to clause (e) of Rule 8.2, a “day” means a period of twenty‑four hours beginning at midnight. Section 51 of the Act mandates that no adult worker shall be required or permitted to work in a factory for more than forty‑eight hours in any week, and Section 54 restricts the daily working hours of an adult to not more than nine hours. Section 61 requires that every factory display and maintain correctly a notice of periods of work for adults, showing clearly for each day the periods during which an adult worker may be required to work. This notice must be fixed in advance and must ensure that the working periods do not cause any breach of the provisions of Sections 51, 52, 54, 55, 56 and 58.

The notice displayed in a factory must specify the periods during which an adult worker may be required to work, and those periods must be fixed in advance so that workers who work during those periods do not violate any of the provisions of sections 51, 52, 54, 55, 56 and 58. Section 63 further provides that an adult worker may not be required or permitted to work in any factory except in accordance with the notice of periods of work for adults that is displayed in the factory. In this context, the word “day” refers to the particular period of work that is mentioned in the displayed notice. Consequently, only a worker whose service is governed by that notice can be said to have worked for a period of two hundred and forty days, because the amount of work he performs is limited by the hours of work prescribed in the notice under section 61. Pandurang was not bound to work according to the period of work shown on the notice in the factory, and therefore his days of work could not be counted for the purpose of section 79. The State argued that every calendar day on which Pandurang worked, irrespective of how many hours he actually worked, should count as one day of work for the purpose of the section. The Court did not accept that argument. When the provision provides leave on the basis of a number of working days, it necessarily contemplates a definite amount of work for each working day, not an indeterminate amount that a person may choose to work on any particular day. Section 80 deals with the wages payable during the leave period, and sub‑section (1) states: “For the leave allowed to him under section 79, a worker shall be paid at a rate equal to the daily average of his total full‑time earnings for the days on which he worked during the month immediately preceding his leave, exclusive of any overtime and bonus but inclusive of dearness allowance and the cash equivalent of the advantage accruing through the confessional sale to the worker of foodgrains, and other articles.” The Court therefore examined how the daily average of his total full‑time earnings for the days he worked in the relevant month should be calculated. To determine the rate of wages during leave, it is essential to ascertain his total “full‑time earnings” for the days he worked in the month immediately preceding the leave. The expression “total full‑time earnings” is not defined in the Act. It can only be understood to mean the earnings that a worker receives for a day when he works the full amount of time prescribed for that day in the notice displayed in the factory. This interpretation is supported by the fact that any payment for overtime or for bonus is expressly excluded from the computation of total full‑time earnings. The term “full‑time,” as defined in Webster’s International Dictionary, aligns with this understanding.

The Court explained that the term “full time” denotes the amount of time that is regarded as the normal or standard working period for a day, a week or a month. The definition was taken from the reference work Words & Phrases, Permanent Edition, published by West Publishing Co., volume 17. In that source the expression “full time” is described as having acquired a definite significance in an industrial community, a meaning that is recognised by popular usage. Similar to the expressions “part time” and “over time”, “full time” refers to the customary period of work, and the terms presuppose that a certain number of hours per day or a certain number of days per week constitute a day’s or a week’s work within a particular industry or factory. The same reference, on page 791, further states that “full time”, when used as a basis for determining the average weekly wages of an injured employee, means the time during which the employee is offered employment, excluding the time during which the employee has no opportunity to work. Applying this interpretation, the Court held that, in the present case, there could be no basis for calculating the daily average of the worker’s total full‑time earnings because the terms of employment did not specify a fixed period of work. Consequently, the wages payable for the leave period could not be computed, and the number of days for which leave with wages could be granted could not be determined. The record did not show, and it was unlikely, that any period of work was mentioned in the notice displayed under section 61 for workers who were free to arrive and depart at any time and to produce as much work as they chose. For these reasons, the Court concluded that the conviction of the appellant under section 92 read with section 79(11) of the Factories Act was erroneous. The Court therefore set aside the lower court’s order, acquitted the appellant, and ordered the refund of any fine that had been paid.

Justice Subba Rao, after reviewing the judgment prepared by his brother Justice Day, expressed dissent. He noted that he could not agree with the majority’s conclusion. The question before the appeal, he observed, had already been addressed by the Supreme Court in Birdhi Chand Sharma v. First Civil Judge, Nagpur. Because his brother Justice Day had taken a different view, Justice Subba Rao felt obliged to set out the reasons for his own conclusion. He explained that the present appeal, filed by special leave, challenged the judgment of the High Court of Bombay in Criminal Reference No. 94 of 1955, which had been rendered by the Additional Sessions Judge, Nasik, under section 438 of the Code of Criminal Procedure. The appeal raised the issue of interpreting certain provisions of the Factories Act, 1948. The appellant, identified as the owner of the factory “Jay Parkash Sudhir Private Ltd.” engaged in the manufacture of bidis, had employed sixty persons for bidi‑rolling. On August 12, 1957, the appellant issued a notice terminating the services of those workers with effect from August 17, 1957. Justice Subba Rao’s dissent therefore underscored his disagreement with the majority’s interpretation of “full time” and the resulting legal consequences for the appellant.

The appellant’s notice terminated the services of the workers with effect from 17 August 1957. On 22 August 1957 the Inspector of Factories visited the factory and discovered that one of the workers, Pandurang Trimbak, had worked there for seventy days and had earned four days of leave which he neither took nor received wages in lieu of before his dismissal. It was not contested that the remaining fifty‑nine workers were in a similar situation. Consequently, the Inspector of Factories lodged sixty complaints against the appellant before the Judicial Magistrate, First Class, at Sinnar, alleging violation of section 79(2) of the Factories Act. The magistrate held the appellant guilty, convicted him, and sentenced him to a fine of ten rupees. On revision, the learned Additional Sessions Judge of Nasik, believing that the conviction ought to be set aside, referred the matter to the High Court under section 438 of the Code of Criminal Procedure. A division bench of the High Court, after reviewing the factual record, the relevant provisions of the Act and the authorities cited, concluded that a person who rolls bidis in a factory qualifies as a “worker” within the meaning of section 2(1) of the Act, and therefore affirmed the conviction and the fine imposed by the magistrate. The appellant subsequently filed this appeal. Counsel for the appellant submitted that the bidi‑rollers are not “workers” under the Act because they may report for work on any day they choose and may work at their own discretion, and thus cannot be said to be employed by the manufacturer. He further argued that even assuming they are workers, section 79 of the Act, which governs leave with wages, should not apply to a worker whose wages are calculated on the basis of the quantity of bidis produced rather than on a daily or weekly rate. At the outset, it was necessary to determine precisely how these bidi‑rollers were engaged by the appellant and how they performed their duties in the factory. It is admitted that Pandurang Trimbak and the other fifty‑nine individuals were engaged by the appellant to roll bidis in his factory. The factory’s weekly register and wages register listed their names as labourers performing that work. It is a usual practice that these labourers attend the factory premises and roll bidis during the factory’s working hours. The labourers receive leaves the day before; they cut the leaves at home after dipping them in water, and on the following day, when they report to the factory, they are supplied with tobacco. After the bidis are made, they are examined to see whether they conform to a sample; those that do not meet the sample standards are

The bidis that did not meet the required sample were set aside as rejected, and subsequently the number of bidis each labourer produced was recorded in the bidi‑map register kept by the factory. D.W. 1, who occupies the position of gumasta and general supervisor, was responsible for overseeing the work of the individual who supplied tobacco to the workers. He entered the quantity of bidis rolled by each labourer alongside that labourer’s name in the register, and when a labourer was absent, he noted the absence against the same name. The wage rate applicable to the labourers was Rs 2‑2‑0 per thousand bidis rolled, or any other rate that the parties had mutually agreed upon.

Up to this point, there was no distinction between a labourer employed in the appellant’s bidi factory and a labourer employed in any other manufacturing establishment. Similar to any other manufacturer, the appellant hired the labourers, assigned them work, extracted the output from them, and compensated them for the work actually performed. The learned counsel for the appellant, however, placed great emphasis on perceived differences between labourers in a bidi factory and those in other factories. P.W. 1, the Inspector of Notified Factories, testified that during their working hours there was no supervision over the bidi workers. P.W. 2, identified as Pandurang Trimbak, admitted on cross‑examination that he could enter and leave the appellant’s factory at any time during the working day, could sit in any compartment, and was not compelled to produce a minimum quantity of bidis each day; he added that a worker needed the master’s permission only when absence exceeded ten days or when the worker wished to bind bidis at home.

D.W. 1, the gumasta and supervisor, also stated that a labourer could leave the factory in the middle of his shift after delivering the finished product and returning the unused tobacco. He explained that, upon receiving the finished goods, he verified that they conformed to the prescribed sample and then made the necessary entries in the register. The evidence thus reveals that there was no supervision in the sense of a person continuously monitoring each worker’s activity from beginning to end and giving directions whenever required. Nevertheless, the labourers understood that the bidis they produced had to match the sample, and they accordingly rolled the bidis to meet that standard. The registers recorded the names of absent workers, the quantity of tobacco issued to each labourer, and the number of bidis each produced. The rejected bidis were handed over to the labourers, indicating that the small quantity of rejected items was not a reward for dereliction of duty but merely a trivial leftover. In summary, the appellant engaged labourers, extracted work from them, and paid wages according to the quantity of bidis each labourer rolled, while exercising a limited supervisory role appropriate to the nature of the work.

The employer not only pays the labourer for the bidis that the labourer rolls, but also retains a supervisory right that the nature of the work necessarily demands. Having set out this factual background, the Court examined the meaning of the term “worker” defined in section 2(1) of the Factories Act. That provision declares that a “worker” means “a person employed, directly or through agency, whether for wages or not, in any manufacturing process.” Accordingly, anyone who is employed in a manufacturing process falls within the definition of a worker. The issue before the Court therefore turned on how the word “employed” should be interpreted within that definition. The Court referred to the earlier decision in Chintaman Rao v. State of Madhya Pradesh (1A), where the term “employed” was explained as encompassing three essential elements: (1) an employer, (2) an employee, and (3) a contract of employment. The employer is the party who engages the services of another, while the employee is the person who works for another for hire. The employment relationship is the contract between the two parties, under which the employee agrees to serve the employer subject to the employer’s control and supervision. The Court then considered the distinction between an employer and an independent contractor, relying on observations of Justice Bhagwati in Dharangadhara Chemical Works Ltd. v. State of Saurashtra (1), which stated that the uniformly applied test for determining the relationship is the existence of a right of control over the manner in which the work is performed. This principle was reiterated by the Court in The State of Kerala v. V.M. Patel (2), a case involving twenty‑three persons employed in garbling pepper and packing it into bags. Justice Hidayatullah, speaking for the Court, observed that to decide whether a person qualifies as a “worker,” the appropriate test is to examine whether the “employer” exercises control and supervision over how the work is carried out. Addressing the contrast between an independent contractor and a servant, the learned judge explained that an independent contractor is tasked with achieving a specific result, but the method of achieving that result is left to his discretion. In contrast, a servant may also be assigned a particular result, yet he remains subject to the employer’s directions concerning the manner in which that result must be attained. The decision further emphasized that the presence of a right to control or supervise is a key indicator of a master‑servant relationship. In the present matter, the Court also relied heavily on the Madras High Court judgment in Palaniappa v. Court of Additional First‑Class Magistrate, Kulitalai (1). In that case, the petitioner owned a weaving establishment at Karur and had erected a thatched shed in which the weaving operations were undertaken. The Court’s reasoning in that earlier case was invoked to support the proposition that the presence of supervisory control over the work’s manner establishes the existence of employment within the meaning of the Factories Act.

In that case the petitioner had erected a thatched shed in which he placed a number of handlooms for the manufacture of towels and bed‑sheets. His office was staffed only by two clerks, who were permanent members of his establishment. The majority of the village residents were cultivators, but when they required additional work they would go to the petitioner’s shed. When they chose to do so, the petitioner supplied them with yarn, which they used to weave either bed‑sheets or towels, and they were paid predetermined rates for each article they produced. These villagers were free to come to the shed and leave at will, arriving and departing according to their own convenience. On the basis of these facts, Justice Balakrishna Ayyar held that the villagers could not be classified as “workers” within the meaning of the term “worker” in the Factories Act. After referring to the relevant authorities and distinguishing cases decided under the Industrial Disputes Act, the judge observed that the word “employed” carries a variable meaning and signifies different concepts in different contexts. He explained that when one says that X is employed by Y, it is normally understood that Y pays X for his services and that Y exercises some degree of control over X’s time, skill and labour, although the extent of that control may range from nominal to extensive. He further noted that between these extremes there exist countless gradations of supervision and control, but some amount of supervision is inherently implied in the notion of employment. The judge then described the relationship between the petitioner and the villagers in vivid terms, stating that the workers could arrive on any day they chose, work for as long or as short a period as they wished, and depart at any time. They could work quickly or slowly, and the petitioner could not dictate whether they should weave towels rather than bed‑sheets or vice‑versa. Moreover, the petitioner could not prevent them from supplying their labour to a competing manufacturer. Consequently, the workers could come, go, start or stop working, and choose the speed and type of work according to their own preferences. The judge concluded that such persons could not be said to be “employed” by the petitioner within the meaning of clause (1) of section 2 of the Factories Act. While the court does not need to opine on whether the learned judge’s factual conclusion was correct, it accepts the principle that a certain degree of supervision or control is necessarily implied in the concept of “employed”, a principle that this Court has previously endorsed and which is now being applied to a different factual scenario.

The matter must be decided according to its own special facts. Although the record shows some irregularity in the attendance of the workers, it cannot be said that the appellant lacks any right to supervise or control the labourers employed in the factory, nor can it be said that he fails to exercise the supervision that the nature of the work requires. Every element that the Court has previously identified as necessary to describe a person as “employed’’ is present here. The appellant hires the labourers, assigns them the task of rolling bidis to match a prescribed sample, and insists that this work be carried out inside the factory premises. He keeps detailed registers that record each worker’s absence, the quantity of tobacco supplied, and the number of bidis rolled by each individual. He authorises the gumasta and the supervisor, who are present in the factory on a regular basis, to oversee the allocation of tobacco, the granting of leaves, and the receipt of the rolled bidis. The specification of the shape and size of the bidis is clearly understood, because the rolled bidis must correspond to the sample; any bidis that do not conform are rejected, which plainly demonstrates the employer’s authority to dictate the manner in which the labourers must manufacture the product. If a worker were to use more tobacco than a bidi is meant to contain, the supervisor is fully empowered to instruct him not to do so. Likewise, if a worker were to damage the leaves in a way that is not expected, the supervisor may rebuke him and correct his conduct. The supervisor may also require the labourers to work in a particular section of the factory and may direct them to maintain order and discipline while performing their duties. The rule that the workers are not permitted to carry tobacco out of the factory without management’s permission further proves that they are subject to the employer’s supervision. Likewise, the requirement that a worker may not be absent for more than ten days without the appellant’s permission is another indication of that control. Whether a labourer is compelled to remain at work for the entire scheduled working hours is not highly relevant, because in practice a labourer will ordinarily stay for the whole day, since his wages depend on the number of bidis he rolls and he cannot roll them outside the factory. Consequently, any absence is undertaken at the worker’s own risk. For all of these reasons, the Court holds that all the ingredients of the word “employed’’ as defined by this Court are satisfied in the present case, and therefore the labourers qualify as workers within the meaning of section 2(1) of the Act. The next argument raised by counsel for the appellant was that even if the factory workers were deemed to be “workers’’ within the meaning of the Act, section 79 would not apply to them, and consequently no violation of that provision could be established.

The appellant argued that Section 79 of the Factories Act would not be applicable to the workers and, consequently, that no breach of that provision could be established. For reference, the operative part of Section 79 provides that “Every worker who has worked for a period of two hundred and forty days or more in a factory during a calendar year shall be allowed during the subsequent calendar year leave with wages for a number of days calculated at the rate of – (1) if an adult, one day for every twenty days of work performed by him during the previous calendar year …”. Section 80, on the other hand, states that “For the leave allowed to him under Section 79, a worker shall be paid at a rate equal to the daily average of his total full‑time earnings for the days on which he worked during the month immediately preceding his leave, exclusive of any overtime and bonus but inclusive of dearness allowance and the cash equivalent of the advantage accruing through the concessional sale to the worker of foodgrains and other articles”. The learned counsel contended that Sections 79 and 80 must be read together and that Section 79 could not be applied to a worker to whom Section 80 did not apply. The argument proceeded by asserting that Section 80 entitles a worker who takes leave under Section 79 to be paid at the rate described, but because the workers in the present case could choose to work either for the whole day or for part of the day, the phrase “full‑time earnings” would, in the counsel’s view, not be applicable to them. While this line of reasoning might appear plausible at first glance, a more careful examination shows it to be untenable.

The Court observed that the critical terms in Section 80(1) are “full‑time earnings” and “days”. The term “day” is defined in Section 2(e) of the Act as “a period of twenty‑four hours beginning at midnight”. The Court clarified that the expression “full‑time earnings for a day” does not mean earnings accrued over the entire twenty‑four‑hour period. Such a meaning would be inconsistent with the overall scheme of the Factories Act, which limits the number of hours that may be worked in a day. Section 51 provides that “No adult worker shall be required or allowed to work in a factory for more than forty‑eight hours in one week”, and Section 54, subject to the provisions of Section 51, stipulates that “no adult worker shall be required or allowed to work in a factory for more than nine hours in any day”. A combined reading of these two sections shows that, subject to the weekly maximum, a worker may not be required to work beyond the prescribed daily limit. Accordingly, for the purpose of computing wages during the leave period under Section 80, the “full‑time earnings for a day” must be understood as the earnings a worker receives for the normal hours of work fixed for that day in the factory, not as earnings for a full twenty‑four‑hour span. This interpretation resolves the difficulty raised by the appellant and confirms that the workers are entitled to the leave and wage benefits prescribed in Sections 79 and 80.

The Court observed that the expression “full‑time earnings for a day” can be interpreted to mean the amount a worker earns for the daily hours of work prescribed for a factory. In the case before the Court it was accepted that the factory’s working hours were fixed and that the workers were required to be present for the entire period allotted, although they could leave the factory during those hours if they wished. The workers could not be barred from working for all the hours established for the factory, and their remuneration was to be determined on the basis of the number of bidis they rolled. Consequently, the wages that the workers earned during the factory’s working hours constituted their full‑time earnings for that day.

Because the full‑time earnings for a day were thus identifiable, the Court held that the management would encounter no difficulty in calculating the rate prescribed under Section 80 of the Factories Act for payment of wages during a period of leave. Under that provision the employer must pay a rate equal to the daily average of the worker’s total full‑time earnings for the days actually worked. The factory registers, the Court noted, would contain the total full‑time earnings of each worker for each day of the month immediately preceding the worker’s leave. By taking the average of those daily earnings, the management could determine the daily average, which would serve as the basis for fixing the wages payable during the leave period.

The Court therefore concluded that Section 79 of the Act, by its effect on Section 80, did not render Section 80 inapplicable to a worker of the category under consideration. The argument to the contrary was rejected. No further questions were raised before the Court. Accordingly, the appeal was dismissed and the order of the lower court was affirmed. By a later statement the Court, however, indicated that in accordance with the majority opinion the appeal was allowed, the order of the lower court was set aside, the appellant was acquitted, and any fine that had been paid would be refunded. The appeal was therefore allowed.