Basti Sugar Mills Ltd vs Ram Ujagar And Others

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 225 of 1963

Decision Date: 4 April 1963

Coram: K.C. Das Gupta, P.B. Gajendragadkar, K.N. Wanchoo, J.C. Shah, N. Rajagopala Ayyangar

In the case Basti Sugar Mills Ltd v Ram Ujagar and Others decided on 4 April 1963, the Supreme Court of India heard a petition filed by Basti Sugar Mills Ltd against Ram Ujagar and others. The judgment was authored by Justice K C Das Gupta and the bench included Justices P B Gajendragadkar, K N Wanchoo, J C Shah, N Rajagopala Ayyangar. The official citation of the decision is 1964 AIR 355 and 1964 SCR (2) 838. The case is also reported in the citator as F 1972 SC1598 (15) and R 1973 SC2297 (9,10). The dispute arose under the Uttar Pradesh Industrial Disputes Act, 1947 (U P XXVIII of 1947) and concerned the meaning of the terms “employer” and “workman”, as well as an alleged infringement of the constitutional right to carry on trade guaranteed by Article 19 (1) (g). The industrial dispute involved two principal questions: first, whether the appellant had lawfully terminated the services of the respondents; and second, whether the respondents had been paid a wage lower than the prescribed minimum of Rs 55 per month, which was the rate fixed for workmen in vacuum‑pan sugar factories of Uttar Pradesh by the Standing Orders dated 3 October 1958 issued by the State Government. The matter had been referred to the Labour Court. The appellant argued that the work of removing press mud had been assigned to a contractor and that the respondents were employed by that contractor; consequently, the appellant contended that it was not the “employer” within the meaning of the Uttar Pradesh Industrial Disputes Act. The respondents obtained a favorable award from the Labour Court and the appellant appealed that decision. The Supreme Court held that the respondents qualified as “workmen” within the meaning of section 2 (Z) of the Act because they were persons employed in the industry to perform manual work for reward. The Court further held that the appellant was the “employer” within sub‑clause (iv) of section 2 (i) because the workman had been employed by a contractor with whom the appellant had a contract to carry out the removal of press mud, a task ordinarily part of the industry. The Court also concluded that the restriction imposed on the appellant’s right to trade by defining it as an employer under sub‑clause (iv) of section 2 (i) served the public interest and therefore did not violate the appellant’s fundamental right under Article 19 (1) (g). Finally, the Court explained that, in the ordinary grammatical sense, the phrase “employed by a factory” appearing in the definition of “workmen” in the Standing Orders was broad enough to include persons employed by contractors of the factory, thereby encompassing the respondents within the definition of workmen.

The Court observed that the appellant could not introduce a fresh claim that had not been raised earlier in this proceeding and referred to the decision in Mahalakshmi Sugar Mills Company v. Their Workmen, 1961 (II) L. L.J. 623. The matter concerned Civil Appeal No. 225 of 1963, filed by special leave against the award dated 26 November 1962 of the Labour Court, Lucknow, in Adjudication Case No. 68 of 1962. Counsel for the appellant were C.S. Pathak and D.N. Mukherjee, and counsel for the respondents were M. Rajagopalan and K. R. Chaudhuri. The judgment was delivered on 4 April 1963 by Justice Das Gupta.

The twenty‑one respondents in this appeal had been engaged by the appellant from 21 November 1958 until 5 February 1959 to carry out the removal of press‑mud at the appellant’s sugar factory. Their employment was terminated on 6 February 1959. Evidence showed that during the period of work, i.e., from 21 November 1958 to 5 February 1959, they received wages at rates below Rs 55 per month, which was the minimum wage prescribed for workmen in vacuum‑pan sugar factories of Uttar Pradesh under the Standing Orders dated 3 October 1958 issued by the Government of Uttar Pradesh.

On 31 July 1962, the Governor of Uttar Pradesh referred the dispute between these respondents and Basti Sugar Mills Ltd. to the Labour Court, Lucknow. In the reference, Basti Sugar Mills Ltd. was described as the employer and the respondents as its workmen. The reference listed two questions for adjudication: (1) whether the termination of the services of the workmen named in the annexure, effective from 6 February 1959, was lawful or justified, and if not, what relief the workmen were entitled to; and (2) whether the employer’s payment of wages to the workmen at rates lower than the minimum prescribed wage of Rs 55 per month for the period from 21 November 1958 to 5 February 1959 was legal or justified, and if not, what relief the workmen were entitled to and on what terms.

The appellant asserted that the twenty‑one workmen were not employed by the sugar mill’s management. According to the appellant, the task of removing press‑mud had been subcontracted to a contractor named Banarsi Das, and those twenty‑one men were employed by that contractor to perform the work. The appellant claimed that the mill’s management had no direct relationship with the men, and that Banarsi Das ceased the work on 6 February 1959, at which time he terminated the services of the workmen. The respondents, represented through their union, countered that they had been employed directly by the mill’s management. After evaluating the evidence, the Labour Court accepted the appellant’s version that the removal of press‑mud had been carried out through the contractor Banarsi Das and that the workmen were employed by him.

After reviewing the evidence, the Labour Court concluded that twenty‑one individuals had been employed for the removal of press‑mud. The Court then examined the definition of “employer” contained in sub‑clause (iv) of section 2(i) of the Uttar Pradesh Industrial Disputes Act, 1947, and held that, pursuant to that definition, the appellant company was legally the employer of those twenty‑one persons. Consequently, the Court determined that the workers were entitled to the protections contained in the Standing Orders, including the provision of a minimum wage, and that they also possessed a right to be reinstated in their former positions. Acting on this conclusion, the Labour Court issued three separate orders. First, it directed that each workman receive a wage of Rs 551 per month beginning on 6 February 1959 and continuing until the end of the 1958‑59 crushing season. Second, it ordered that any of the workmen who had not yet been re‑engaged by the company be reinstated during the crushing season of 1962‑63. Third, it ordered that the workers be paid the wage differential for the period from 21 November 1958 to 5 February 1959, calculated at Rs 55 per month and Re 1 per day in the case of Ram Ujagar, and at 14 annas per day for the other workmen. The Company filed an appeal against this order, obtaining special leave to challenge the decision before this Court.

In support of the appeal, counsel for the Company raised three distinct points. The first point asserted that the definition of “employer” in sub‑clause (iv) of section 2(i) of the Act does not, in fact, make the appellant the employer of the twenty‑one workmen. The second point, presented rather tentatively, argued that if the definition were construed so as to treat the contractor’s labourers as the company’s workmen, such an interpretation would infringe the freedom of trade guaranteed by article 19(1)(g) of the Constitution. The third point contended that, irrespective of the definition, the respondents could not claim the benefit of the Standing Orders that fixed the minimum wage for employees of the Vacuum Pan Sugar Factories of Uttar Pradesh. The Court observed that section 2(i) of the Act provides an inclusive definition of “employer.” According to the language of sub‑clause (iv), when the owner of an industry, for the purpose of conducting that industry, contracts with any person to perform all or part of work that is normally part of the industry, the owner is deemed to be an employer within the meaning of the Act. Counsel’s suggestion that this provision would render the owner merely the employer of the contractor, rather than of the contractor’s workers, was described by the Court as untenable and even fanciful. The Court explained that the clear intention behind the expanded definition is to treat the industry owner, in the circumstances described in the sub‑clause, as the employer of workers who are engaged through a contract. The wording of the sub‑clause, the Court held, sufficiently accomplishes this purpose. While acknowledging counsel’s observation that the definition of “workmen” does not explicitly mention contract labour, the Court noted that this omission does not alter the effect of the employer definition, a point that will be further considered in the subsequent discussion.

The Court observed that the definition of “workmen” in section 2(z) of the Act uses the language “any person (including an apprentice) employed in any industry to do any skilled or unskilled, manual, supervisory, technical or clerical work for hire or reward, whether the terms of employment be express or implied.” Those words, the Court held, are by themselves broad enough to encompass persons who perform work in an industry regardless of whether their employment is directly with the management of the industry or through a contractor engaged by that management. The Court added that if the definition of “employer” did not extend to include the management of the industry even when the employment relationship is with a contractor, then workmen engaged by contractors would be unable to invoke the protections of the Act because any dispute between them and the management would not qualify as an industrial dispute between “employer” and “workmen.” To remedy this difficulty, sub‑clause (iv) of section 2(i) expands the definition of “employer” to treat the owner of the industry as the employer of workmen who are engaged through a contractor for work that is ordinarily a part of the industry.

Applying this construction, the Court stated the position as follows: first, the respondents fall within the meaning of “workmen” under section 2(z) because they are persons employed in the industry to perform manual work for reward; second, they were employed by a contractor with whom the appellant company had contracted for the specific task of removing press‑mud, a task that is customarily part of the appellant’s industrial operations. Consequently, when section 2(z) is read together with sub‑clause (iv) of section 2(i), the respondents are deemed workmen of the appellant company, and the appellant company is deemed their employer. The Court therefore found no merit in the first argument advanced by counsel for the appellant.

The Court then turned to the second argument, which alleged that the expanded definition of “employer” infringed the appellant’s fundamental right under Article 19(1)(g). The Court dismissed this contention as unfounded. Even assuming that the definition imposes some limitation on the appellant’s freedom to carry on trade or business, the Court said there can be no doubt that such limitation serves the public interest. The public interest, the Court explained, lies in preventing owners of industrial enterprises from using contractors to perform work that is ordinarily part of the industry as a means of evading the provisions of the Industrial Disputes Act. The Court noted that this public‑interest rationale behind the provisions of the Act has never been contested. Accordingly, the Court concluded that the impugned definition, which extends the benefits of the Act to contract‑engaged workmen performing ordinary industrial work, must also be regarded as serving the public interest. The Court indicated that this reasoning leads to the principal point raised by counsel for the respondent.

The respondents argued that they do not fall within the definition of “workmen” under the Standing Orders and therefore cannot claim the minimum wage prescribed therein. The Standing Orders define “workmen” as any person, including an apprentice, employed by a factory to perform any skilled or unskilled manual, supervisory, technical or clerical work for hire or reward, whether the terms of employment are express or implied, and expressly exclude persons mentioned in clauses (i) and (ii), which are not relevant to the present dispute. Counsel for the petitioner contended that, on a reasonable construction, the phrase “employed by a factory” should be read narrowly to refer only to individuals employed directly by the factory’s management, thereby excluding those engaged by a contractor. He further observed that the definition of “workmen” in the Act uses the words “employed in any industry,” whereas the Standing Orders employ “by a factory,” suggesting a deliberate intention to limit the scope. The Court found that neither grammatical analysis nor logical reasoning supports this narrow reading, because the ordinary grammatical meaning of “employed by a factory” embraces every person employed to perform the factory’s work. The use of the preposition “by” does not determine who makes the appointment; rather, it appears to ensure that any person doing factory work, whether inside or outside the premises, receives the Order’s benefits. The Court observed no reason to think that the Government, in issuing the Standing Orders, intended to deny to any class of workers who qualify as “workmen” under the Act the advantage of the minimum‑wage provision. The Standing Orders were issued under section 3(b) of the Act, which empowers the State Government to prescribe that employers, workmen, or both observe such terms and conditions of employment as may be specified. The purpose of the Orders was clearly to bind employers to certain conditions applicable to their workmen as defined in the Act, making it unlikely that the government would carve out an exception. Having found no justification for an exclusion, the Court concluded that the expression “employed by a factory” is sufficiently broad to

The Court observed that the phrase “employed by a factory” was intended to cover workmen who were employed by contractors of the factory as well. Counsel for the appellant, Mr. Pathak, then attempted to introduce a fresh argument based on clause (K) of the Standing Orders. Clause (K) stipulated that a seasonal workman who had actually worked, or who would have worked but for illness or any other unavoidable cause, for the entire second half of the immediately preceding season was to be taken on by the factory for the current season. Relying on this provision, Mr. Pathak contended that it would be difficult for the appellant to comply with the order of reinstating the twenty‑one workmen, because such reinstatement would require the dismissal of at least some persons who, under clause (K), were legally entitled to be employed by the factory. The Court noted that, had the factual record reflected the situation described by counsel, it would have been obliged to consider clause (K) and might have fashioned an order similar to the one rendered in Mahalakshmi Sugar Mills Company Ltd. v. Their Workmen, 1961 (II) L.L.J. 623. In that precedent, the Court had directed that the twenty‑one workmen be re‑employed during the crushing season of 1962‑63 only to the extent that doing so would not violate the provisions of clause (K). However, the Court found that the materials placed before it did not contain any evidence showing how many of the workmen already engaged by the company in the crushing season of 1962‑63 had actually performed work in the latter half of the 1961‑62 season. Moreover, the written statement filed by the company made no reference to any difficulty in reinstating any of the twenty‑one workmen on the ground of clause (K). In view of the absence of any record to substantiate the new plea, the Court declined to allow Mr. Pathak to raise this argument for the first time at this stage. Consequently, because all the grounds advanced in the appeal were found to be untenable, the appeal was dismissed with costs against the appellant. The appeal was therefore dismissed.