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Central Leather Research Institute v/s Lipika Mondal & Others

    W.P. 7960(W) of 2015

    Decided On, 01 March 2017

    At, High Court of Judicature at Calcutta

    By, THE HONOURABLE MR. JUSTICE SUBRATA TALUKDAR

    For the Petitioner: Pulakesh Bajpayee, Advocate. For the Respondents: R1, Lipika Mondal, Advocate.



Judgment Text

Subrata Talukdar, J.

1. In this writ petition the short point of challenge is thrown by the Central Leather Research Institute (for short CLRI), Regional Office to the Award dated 12th November, 2014 passed by the Ld. Presiding Officer of the Central Government Industrial Tribunal at Kolkata in Reference Case No. 11 of 2008 (for short the Award, the Tribunal and the Reference respectively).

2. By the Award, the workman, being the present private respondent No.1, was directed to be reinstated in the service of CLRI with full back wages since the Tribunal held the termination of the private respondent No.1 to be illegal.

3. Mr. Pulakesh Bajpayee, Ld. Counsel appearing for CLRI submits that the Award is jurisdictionally flawed since the Tribunal did not consider at all whether CLRI is an 'Industry' within the meaning of the Industrial Disputes Act, 1947 (for short the 1947 Act).

4. The second issue argued by Mr. Bajpayee is that the private respondent No.1 was only associated with different projects of the CLRI as a Research Assistant and, therefore could not qualify to be a regular workman under the 1947 Act.

5. The private respondent No.1, Ms. Lipika Mondal, appears in person and supports the impugned Award.

6. Answering the first question raised by Mr. Bajpayee on the point whether CLRI qualifies to be an 'Industry' or not, this Court is required to notice the long-standing judicial view on the subject. The definition of 'Industry' within the meaning of Section 2(j) of the 1947 Act came up for consideration before a Constitution Bench of the Hon'ble Apex Court In Re: Bangalore Water Supply and Sewerage Board v. A. Rajappa and Ors. along with analogous matters which were decided by a common judgment reported in 1978 (2) SCC 213. To the understanding of this Court In Re: Bangalore Water Supply applied three tests for any entity to qualify within the meaning of 'Industry'. The three tests in a nutshell are systematic activity, cooperation between employer and employee and, production of goods and services. In the overall view of the Hon'ble Bench in the event an entity qualifies to be within the three tests as above, such entity, irrespective of the fact whether it is a club, a charitable institution, educational institution, research institution and the like shall be an 'Industry' within the meaning of the 1947 Act.

7. The Hon'ble Bench, however, excluded from the purview of 'Industry' an entity which is solely connected with the discharge of the sovereign functions of a State.

8. In the context of the above noted discussion the following paragraphs of In Re: Bangalore Water Supply are relevant, to the mind of this Court, to the facts of this case:-

"36. All the indicia of 'industry' are packed into the judgment which condenses the conclusion tersely to hold that 'industries' will cover 'branches of work that can be said to be analogous to the carrying out of a trade or business'. The case, read as a whole, contributes to industrial jurisprudence, with special reference to the Act, a few positive facets and knocks down a few negative fixations. Governments and municipal and statutory bodies may run enterprises which do not for that reason cease to be industries. Charitable activities may also be industries. Undertakings, sans profit motive, may well be industries. Professions and not ipso facto out of the pale of industries. Any operation carried on in a manner analogous to trade or business may legitimately be statutory 'industry'. The popular limitations on the concept of industry do not amputate the ambit of legislative generosity in Section 2(j). Industrial peace and the smooth supply to the community are among the aims and objects the Legislature had in view, as also the nature, variety range and areas of disputes between employers and employees. These factors must inform the construction of the provision.

37. The limiting role of Banerji (supra) must also be noticed so that a total view is gained. For instance, 'analogous to trade or business' cuts down 'undertaking', a word of fantastic sweep. Spiritual undertakings, casual undertakings, domestic undertakings, war waging, policing, justicing, legislating, tax collecting and the like are, prima facie, pushed out. Wars are not merchantable, nor justice saleable, nor divine grace marketable. So, the problem shifts to what is "analogous to trade or business". As we proceed to the next set of cases we come upon the annotation of other expressions like 'calling' and get to grips with the specific organisations which call for identification in the several appeals before us.

38. At this stage, a close-up of the content and contours of the controversial words 'analogous etc.', which have consumed considerable time of counsel, may be taken. To be fair to Banerji (supra), the path-finding decision which conditioned and canalised and fertilised subsequent juristic-humanistic ideation, we must show fidelity to the terminological exactitude of the seminal expression used and search carefully for its import. The prescient words are : branches of work that can be said to be analogous to the carrying out of a 'trade or business'. The same judgment has negatived the necessity for profit-motive and included charity impliedly, has virtually equated private sector and public sector operations and has even perilously hinted at 'professions' being 'trade'. In this perspective, the comprehensive reach of 'analogous' activities must be measured. The similarity stressed relates to 'branches of work'; and more; the analogy with trade or business is in the 'carrying out' of the economic adventure. So, the parity is in the modus operandi, in the working-not in the purpose of the project nor in the disposal of the proceeds but in the Organisation of the venture, including the relations between the two limbs viz. labour and management. If the mutual relations, the 2 38 method of employment and the process of co-operation in the carrying out of the work bear close resemblance to the organization method remuneration, relationship of employer and employee and the like then it is industry otherwise not. This is the kernel of the decision. An activity oriented, but motive based, analysis.

53. The true test, according to the Learned Judge, was concisely expressed by Isaacs J., in his dissenting judgment in the Federated State School Teachers' Association of Australia v. State of Victoria: The material question is : What is the nature of, the actual function assumed-is it a service that the State could have left to private enterprise, and, if so, fulfilled, could such a dispute be 'industrial' ? Thus the nature of actual function and of the pattern of organised activity is decisive. We will revert to this aspect a little later.

54. It is useful to remember that the Court rejected the test attempted by counsel in the case :

It is said that unless there is a quid pro quo for the service it cannot be an industry. This is the same argument, namely, that the service must be in the nature of trade in a different garb.

We agree with this observation and with the further observation that there is no merit in the plea that unless the public who are benefited by the services pay in cash, the services so rendered cannot be industry. Indeed, the signal service rendered by the Corporation of Nagpur is to dispel the idea of profit-making. Relying on Australian cases which held that profit-making may be important from the income tax point of view but irrelevant from an industrial dispute point of view, the Court approved of a critical passage in the dissenting judgment of Isaacs J., in the School Teachers' Association case (supra) :

The contention sounds like an echo from the dark ages, of industry and political economy.......... Such disputes are not simply a claim to share the material wealth (and concluded):

Monetary considerations for service is, therefore, not essential Characteristic of industry in a modern State.

63. The substantial break-through achieved by this decision in laying bare the fundamentals of 'industry' in its wider sense deserves mention. The ruling tests are clear. The 'analogous' species of quasi-trade qualify for becoming 'industry' if the nature of the organized activity implicit in a trade or business is shared by them. (See p. 960. the entire organisational activity). It is not necessary to 'equate the other activities with trade or business'. The pith and substance of the matter is that the structural, organisational engineering aspect, the crucial industrial relations like wages, leave and other service conditions as well as characteristic business methods (not motives) in running the enterprise, govern the conclusion. Presence of profit motive is expressly negated as a criterion. Even the quid pro quo theory -- which is the same monetary object in a milder version - has been dismissed. The subtle distinction, drawn in lovely lines and pressed with emphatic effect by Sri Tarkunde, between gain and profit, between no profit no loss basis having different results in the private and public sectors, is fascinating but, in the rough and tumble, and sound and fury of industrial life, such nuances break down and nice refinements defeat. For the same reason, we are disinclined to chase the differential ambits of the first and the second parts of Section 2(j). Both read together and each viewed from the angle of employer or employee and applied in its sphere, as the learned Attorney General pointed out, will make sense. If the nature of the activity is para-trade or quasi-business, it is of no moment that it is undertaken in the private sector, joint sector, public sector, philanthropic sector or labour sector it is 'industry'. It is the human sector, the way the employer-employee relations are set up and processed that gives rise to claims, demands, tensions, adjudications, settlements truce and peace in industry. That is the raison d' etre of industrial law itself.

113. Does research involve collaboration between employer and employee ? It does. The employer is the institution, the employees are the scientists, para-scientists and other personnel. Is scientific research service ? Undoubtedly it is. Its discoveries are valuable contributions to the wealth of the nation. Such discoveries may be sold for a heavy price in the industrial or other markets. Technology has to be plate for and technological inventions and innovations may be patented and sold. In our scientific and technological age nothing has more cash value, as intangible goods and invaluable services, than discoveries. For instance, the discoveries of Thomas Alva Edison made him fabulously rich. It has been said that his brain had the highest cash value in history for he made the world vibrate with the miraculous discovery of recorded, sound. Unlike most inventors, he did not have to wait to get his reward in heaven; he received it munificently on this gratified and grateful earth, thanks to conversion of his inventions into, money a plenty. Research benefits industry. Even though a research institute may be a separate entity disconnected from the many industries which funded the institute itself, it can be regarded as an Organisation, propelled by systematic activity, modeled on cooperation between employer and employee and calculated to throw up discoveries and inventions and useful solutions which benefit individual industries and the nation in terms of goods and services and wealth. It follows that research institutes, albeit run without profit-motive, are industries.

140. 'Industry', as defined in Section 2 (j) and explained in Banerji (supra), has a wide import.

(a) Where (i) systematic activity, (ii) organized by cooperation between employer and employee, (the direct and substantial element is chimerical) (iii) for the production and/or distribution of goods and services calculated to satisfy human wants and wishes (not spiritual or religious but inclusive of material things or services geared to, celestial bliss e.g. making, on a large scale, prasad or food), prima facie, there is an 'industry' in that enterprise.

(b) Absence of profit motive or gainful objective is irrelevant, be the venture in the public, joint private or other sector.

(c) The true focus is functional and the decisive test is the nature of the activity with special emphasis on the employer-employee relations.

(d) If the Organisation is a trade or business, it does not cease to, be one because of philanthropy animating the undertaking.

141. Although section 2(j) uses words of the widest amplitude in its two limbs, their meaning cannot be magnified to overreach itself. (a) 'Undertaking' must suffer a contextual and associational shrinkage as explained in Banerji (supra) and in this judgment, so also, service, calling and the like. This yields the inference that all organized activity possessing the triple elements in I (supra), although not trade or business, may still be 'industry' (provided the nature of the activity, viz. the employer-employee basis, bears resemblance to what we find in trade or business. This takes into the- fold of 'industry' undertakings, callings and services adventure 'analogous to the carrying on of trade or business'. All features, other than the methodology of carrying on the activity viz. in organizing the co-operation between employer and employee may be dissimilar. It does not matter, if off the employment terms there is analogy.

142. Application of these guidelines should not stop short of their logical reach by invocation of creeds, cults or inner sense of incongruity or other sense of motivation for or resultant of the economic operations. The ideology of the Act being industrial peace, regulation and resolution of industrial disputes between employer and workmen, the range of this statutory ideology must inform the reach of the statutory definition. Nothing less, nothing more.

(a) The consequences are (i) professions, (ii) Clubs (iii) educational institutions (iiia) co-operatives, (iv) research institutes (v) charitable projects and (vi) other kindred adventures, if they fulfil the triple tests listed in I (supra), cannot be exempted from the scope of section 2 (j).

(b) A restricted category of professions, clubs, cooperatives and even Gurukulas and little research labs, may qualify for exemption if 283 in simple ventures substantially and going by the dominant nature criterion substantatively, no employees are entertained but in minimal matters, marginal employees are hired without destroying the non-employee character of the unit.

(c) If in a pious or altruistic mission many employ themselves, free or for small honoraria, or likely return mainly by sharing in the purpose or cause, such as lawyers volunteering to run a free legal services clinic or doctors serving in their spare hours in a free medical centre or ashramites working at the bidding of the holiness, divinity or like central personality and the services are supplied free or at nominal cost and those who serve are not engaged for remuneration or on the basis of master and servant, relationship, then, the institution is not an industry even if stray servants, manual or technical, are hired. Such eleemosynary or like undertakings alone are exempt-not other generosity, compassion, developmental passion or project.

143. The dominant nature test :

(a) where a complex of activities, some of which qualify for exemption others not, involves employees on the total undertaking, some of whom are not 'workmen' as in the University of Delhi Case or some departments are not productive of goods and services if isolated, even then, the predominant nature of the services and the integrated nature of the departments as explained in the Corporation of Nagpur, will be true test. The whole, undertaking will be 'industry' although those who are not 'workmen' by definition may not benefit by the status.

(b) Notwithstanding the previous clauses, sovereign functions, strictly understood, alone qualify for exemption, not the welfare activities or economic adventures undertaken by government or statutory bodies.

(c) Even in departments discharging sovereign functions, if there are units which are industries and they are Substantially severable, then they can be considered to come within Section 2(j).

(d) Constitutional and competently enacted legislative provisions may well remove from the scope of the Act categories which otherwise may be covered thereby."

9. Now, further answering Mr. Bajpayee's argument that CLRI does not qualify to be an 'Industry' this Court must take notice of the averments at Paragraphs 1 and 2 of the writ petition which are as follows:-

"1. Your petitioner is the one of constituent unit of Council of Scientific and Industrial Research established at Chennai having its Regional Offices in different parts of India including Calcutta for the purpose of seek excellance in research of field of Biological, Chemical and Engineering Sciences so as to serve the national Apex Body in the areas of Leather and related products and to provide education and training in leather and allied sciences as National and International level and to render technical assistance to Leather Industry. The Research Organisation which caters to the needs of the nation for the new invention and further research and is distinctly different from industry.

2. The Central Leather Research Institute (hereinafter referred to as the said Institute) in the process of its research work accepts products from different State Governments and other Central or State Organization related to the work performed by the Institute. For the purpose of appropriate functioning of such projects, the Institute sometimes engaged contractual employee as Research Assistant and such engagement is purely temporary and is terminated as and when the Project work is over."

10. It is also relevant for the present discussion to take note of a subsequent decision of the Hon'ble Apex Court in the matter of Physical Research Laboratory (for short PRL) v. K.G. Sharma reported in 1997 (4) SCC 257. Paragraphs 12 and 13 of the said decision are relevant for distinguishing it from the facts of the present case. They read as follows:-

"12. PRL is an institution under the Government of India's Department of Space. It is engaged in pure research work is already stated earlier. The purpose of the research is to acquire knowledge about the formation and evolution of the universe but the knowledge thus acquired is not intended for sale. The Labour Court has recorded a categorical finding that the research work carried on by PRL is not connected with production supply or distribution of material goods or services. The material on record further discloses that PRL is conducting research not for the benefit or use of others. Though the results of the research work done by it are occasionally published they have never been sold. There is no material to show that the knowledge so acquired by PRL is marketable or has any commercial value. IT has not been pointed out how the knowledge acquired by PRL or the results of the research occasionally published by it will be useful to persons other than discloses that the object type of study. The material discloses that the object with which the research activity is undertaken by PRL is to obtain knowledge for the benefit of the Department of Space. Its object is not to render services to others nor in fact it does so expect in an indirect manner.

13. It is nobody's that PRL is engaged in an activity which can be called business trade or manufacture. Neither from the nature of its organisation nor from the nature and character of the activity carried on by it, it can be said to be an 'undertaking' analogous to business or trade. It is not engaged in a commercial industrial activity and it cannot be described as an economic venture or a commercial enterprise as it is not its object to produce and distribute services which would satisfy wants and needs of the consumer community. It is more an institution discharging Governmental functions and a domestic enterprise than a commercial enterprise. We are, therefore, of the opinion that PRL is not an industry even though it is carrying on the activity of research in a systematic manner with the help of its employees as it lacks that element which would make it an organisation carrying on an activity which can be said to be analogous to the carrying on of a trade or business because it is not producing and distributing services which are intended or meant for satisfying human wants and needs, as ordinarily understood."

11. Therefore, answering Mr. Bajpayee's contention that CLRI is not an 'Industry', this Court notices that CLRI fulfils the triple tests as laid down In Re: Bangalore Water Supply (supra). For the sake of recapitulation the triple tests are (a) systematic activity; (b) employer and employee relationship; and (c) production of goods and services.

12. The averments at Paragraphs 1 and 2 of the writ petition (supra) leave no room for doubt that CLRI renders research assistance which caters to the needs of the Leather Industry. In such view of the matter the research work of CLRI directly relates to production of goods which are relevant for the leather Industry in terms of its excellence, expansion and related business activity. Such excellence and expansion contribute to the national and global markets for leather products.

13. This Court must therefore notice, in the backdrop of the above noted discussion, that research in leather products beneficial to the Leather Industry cannot qualify to be a sovereign function of the State. This Court adds that at Paragraphs 12 and 13 of In Re: Physical Research Laboratory (supra), the content of the research undertaken by PRL is categorically different from the research content of CLRI since, the latter is directly connected to the production and distribution of material goods. The further categorical difference between the two research institutes is that the research content of CLRI, unlike that of PRL, is intended to cause benefits in terms of material growth to a manufacturing/processing industry dealing with tangible leather goods.

14. It is further evident from the nature of the activities undertaken by CLRI as averred in the writ petition and, read in the light of the appointment letters issued in favour of the private respondent No.1 on the recommendations of its Selection Committee, that an employer-employee relationship stands established in an organization carrying on systematic research activities in marketable goods. In such view of the matter it would not be far from inaccurate to ascribe to CLRI the colour of an economic venture in the nature of an 'Industry' within the meaning of the 1947 Act.

15. Therefore, the first issue raised by Mr. Bajpayee that CLRI is not an 'Industry' stands answered in the negative.

16. The second issue placed for consideration of this Court is the status of the private respondent No.1 as an employee of CLRI.

17. In this connection this Court finds that the private respondent No.1 was continuously engaged for 12 years, i.e. from 1995 to 2007, till such engagement was abruptly terminated without notice or, with reasons, thereby causing the reference.

18. It is not disputed that CLRI failed to substantiate its case before the Tribunal by contesting the reference upon adducing evidence. CLRI did not file any documents along with its written statement and the evidence of the workman/private respondent No. 1 remained unchallenged.

19. Admittedly, this Court cannot be automatically equated with the fact finding responsibilities on evidence of the first Court/forum of facts, viz. the Tribunal. However, even assuming, but not admitting for the sake of argument Mr. Bajpayee's contention that no employer-employee relationship exists between CLRI and the private respondent No.1 this Court is required to pierce the veil in appropriate circumstances.

20. This Court respectfully notices that in Workmen of Nilgiri Coop. Mkt. Society Ltd. v. State of Tamil Nadu and Ors. reported in 2004 (3) SCC 514, the Hon'ble Apex Court had the occasion to deal with the issue. The Court pronounced as follows:-

"37. The control test and the organization test, therefore, are not the only factors which can be said to decisive. With a view of elicit the answer, the court is required to consider several factors which would have a bearing on the result : (a) who is appointing authority; (b) who is the pay master; (c) who can dismiss; (d) how long alternative service lasts; e) the extent of control and supervision; (f) the nature of the job, e.g. whether, it is professional or skilled work; (g) nature of establishment; (h) the right to reject.

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

41. If the provisions of the contract as a whole are inconsistent with its being a contract of service, it will be some other kind of contract and the person doing the work will not be a servant.

47. It is a well-settled principle of law that the person who sets up a plea of existence of relationship of employer and employee, the burden would be upon him.

50. The question whether the relationship between the parties is one of the employer and employee is a pure question of fact and ordinarily the High Court while exercising its power of judicial review shall not interfere therewith unless the finding is manifestly or obviously erroneous or perverse.

65. Employment and non-employment indisputably is a matter which is specified in the Second and the Third Schedules of the Industrial Disputes Act. The concept of employment involves three ingredients, which are :

(i) Employer - one who employs, i.e. engages the services of other persons;

(ii) Employee - one who works for another for hire; and

(iii) Contract of employment - the contract of service between the employer and the employee where-under the employee agrees to serve the employer subject to his control and supervision. On the other hand, non-employment being negative of the expression "employment" would ordinarily mean a dispute when the workmen is out of service. When non-employment is referable to an employment which at one point of time was existing would be a matter required to be dealt with differently than a situation where non-employment would mean a contemplated employment.

66. The question of non-employment in the later category would arise only when the employer refuses to give work to a person who pleads and proves to the satisfaction of the management that he was entitled thereto. However, the dispute regarding the refusal to employ the persons who were promised to be employed is not connected with the employment or non-employment within the meaning of Section 2(k) of the Act.

68. Whether a contract is a sham or camouflage is not a question of law which can be arrived at having regard to the provisions of Contract Labour (Regulation and Abolition) Act, 1970. It is for the industrial adjudicator to decide the said question keeping in view the evidences brought on records.

94. There cannot be any doubt whatsoever that where a person is engaged through an intermediary or otherwise for getting a job done, a question may arise as the appointment of an intermediary was merely sham and nominal and rather than camouflage where a definite plea is raised in Industrial Tribunal or the Labour Court, as the case may be, and in that event, it would be entitled to pierce the veil and arrive at a finding that the justification relating to appointment of a contractor is sham or nominal and in effect and substance there exists a direct relationship of employer and employee between the principa

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l employer and the workman. The decision of this Court in Hussainbhai, Calicut v. The Allath Factory Thezhilali Union, Kozhikode and Others will fall in that category." 21. In Re: Hussainbhai, Calicut v. The Alath Factory Thezhilali Union, Kozhikode and Ors. reported in 1978 (4) SCC 257, the Hon'ble Apex Court, inter alia, held as follows:- "5. The true test may, with brevity, be indicated once again. Where a worker or group of workers labours to produce goods or services and these goods or services are for the business of another, that other is, in fact, the employer. He has economic control over the workers' subsistence, skill, and continued employment. If he, for any reason, chokes off, the worker is, virtually, laid off. The presence of intermediate contractors with whom alone the workers have immediate or direct relationship ex contract is of no consequence when, on lifting the veil or looking at the conspectus of factors governing employment, we discern the naked truth, though draped in different perfect paper arrangement, that the real employer is the Management, not the immediate contractor. Myriad devices, half-hidden in fold after fold of legal form depending on the degree of concealment needed, the type of industry, the local conditions and the like, may be resorted to when labour legislation casts welfare obligations on the real employer, based on Articles 38, 39, 42, 43 and 43-A of the Constitution. The court must be astute to avoid mischief and achieve the purpose of the law and not be misled by the maya of legal appearances. 6. If the livelihood of the workmen substantially depends on labour rendered to produce goods and services for the benefits and satisfaction of an enterprise, the absence of direct relationship or the presence of dubious intermediaries or the make-believe trappings of detachment from the Management cannot snap the real-life bond. The story may vary but the inference defies ingenuity. The liability cannot be shaken off. 7. Of course, if there is total dissociation in fact between the disowning management and the aggrieved workmen, the employment is, in substance and in real-life terms, by another. The Management's adventitious connections cannot ripen into real employment." 22. In the backdrop of the above discussion, this Court is led to the inescapable conclusion that the private respondent No.1 provided assistance (emphasis supplied) to the activities of CLRI under a contract of service. For reasons best known to the management, the contract, as observed In Re: Hussainbhai (supra), was choked off and the private respondent abruptly laid off. 23. The writ petitioner can be therefore extended no relief. 24. The Award stands accordingly affirmed. 25. WP 7960(W) of 2015 stands dismissed. 26. There will be, however, no order as to costs. 27. Registry is directed to communicate this order both to the writ petitioner and to the private respondent. 28. Urgent Xerox certified photocopies of this judgment, if applied for, be given to the parties upon compliance of all requisite formalities. Petition Dismissed.
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