Labour Commissioner Lacks Authority to direct employer to pay minimum wages During Conciliation Proceedings

HLL Life Care Limited Vs Sapthazeal Private Limited (Kerala High Court)

In the case of HLL Life Care Limited v. Sapthazeal Private Limited, the Kerala High Court addressed whether the Regional Labour Commissioner (Central) has jurisdiction to order a principal employer to pay differential wages under Section 21(4) of the Contract Labour (Regulation and Abolition) Act, 1970, during conciliation proceedings under Section 12 of the Industrial Disputes Act, 1947. The dispute arose from a housekeeping contract where the contractor allegedly failed to pay minimum wages. The Regional Labour Commissioner issued an order directing the principal employer, HLL Life Care Limited, to pay the workers. HLL challenged this order, asserting that the Commissioner exceeded his jurisdiction.

The Court held that the Commissioner lacked authority to decide wage disputes or impose liabilities on the principal employer under the cited laws. Instead, upon conciliation failure, the proper procedure requires the matter to be referred to the appropriate government for further action. Furthermore, the Court clarified that housekeeping contracts do not fall within the ambit of “contractor” as defined under the Contract Labour Act. It concluded that HLL was not liable for the contractor’s wage defaults. The ruling also left room for workers to pursue claims directly against the contractor, ensuring their legal recourse remains intact.

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

Does the Regional Labour Commissioner (Central) have the Jurisdiction to direct the principal employer to pay the differential wages payable to an employee of a contractor, under Section 21(4) of the Contract Labour (Regulation and Abolition) Act, 1970 while dealing with a conciliation proceedings under Section 12 of the Industrial Disputes Act, 1947? The answer lies intrinsically interwind under various provisions of multiple enactments.

2. M/s. HLL Life Care Limited, which is a public sector undertaking under the Ministry of Health and Family Welfare, Government of India, is before this Court against Ext.P4 order issued by the 3^rd respondent, Regional Labour Commissioner (Central), Thiruvananthapuram by which it is made liable for the alleged non-payment of minimum wages by the 1^st respondent, M/s. Sapthazeal Private Limited, under the provisions of the Contract Labour (Regulation & Abolition) Act, 1970.

3. As per Ext.P1 agreement of contract entered into between the petitioner and the 1^st respondent, the 1st respondent was entrusted with the job of providing house keeping facility at the petitioner’s factory at Peroorkkada, Thiruvananthapuram. The 2^nd respondent, which is a Trade Union and claims to be representing the workers of the 1st respondent, submitted a complaint before the 3^rd respondent stating that they have not received minimum wages notified by the Government of India. The said complaint is produced as Ext.P2. Pursuant to Ext.P2, the 3^rd respondent issued Ext.P3 notice dated 28.7.2017 calling for the petitioner and the 1st respondent for conciliation meeting under Section 12 of the Industrial Disputes Act, 1947. By Ext.P4 order dated 8.12.2017, the 3^rd respondent came to the conclusion that the petitioner is liable to pay minimum wages to the workers of the 2nd respondent Trade Union employed by the 1^st respondent on its failure to pay the same under the provisions of law. It is challenging Ext.P4 order passed by the 3^rd respondent, this writ petition is filed.

4. During the pendency of the writ petition by I.A.No.1 of 2019, other Unions, who represent similarly situated employees engaged in the work by the contractor attached to the petitioner, were also impleaded as additional respondents 4 to 6.

5. I have heard Sri. P. Ramakrishnan, learned counsel appearing for the petitioner; Sri. Thirumala P. K. Mani, learned counsel appearing for the 1^st respondent; Sri. Gopakumar R. Thaliyath, learned counsel appearing for the 2^nd respondent; and Sri. P. N. Mohanan, the learned counsel appearing for additional respondents 4 to 6.

6. While answering the question posed before this Court, necessarily the liability of the petitioner to pay the wages to the members/workers of respondents 2, 4, 5 & 6 Unions may also have to be decided.

7. Sri. P. Ramakrishnan, learned counsel appearing for the petitioner, refers to the various clauses under Ext.P1 agreement to assert before this Court that the intention behind Ext.P1 was to secure certain house keeping services at Peroorkkada factory and the packaging unit at Balaramapuram of the HLL Life Care Limited (hereinafter referred to as “HLL”, for short). Still further, it is contended that the contractor shall have no right, title or interest in the site made available by the HLL for execution of the work or in the building structures etc. The agreement also envisages that the contractor be paid the respective amounts for the work done by it and approved by the HLL. Therefore, according to the learned counsel for the petitioner, when Ext.P2 complaint was raised by the 2nd respondent Union, the specific grievance was that the 1st respondent was not paying the minimum wages. Ext.P3 is a notice issued under the provisions of Section 12 of the Industrial Disputes Act, 1947 calling for the parties for a conciliation process and further that if the conciliation did not materialise, the only option available before the 3^rd respondent was to refer the matter before the appropriate labour court on failure of the conciliation measures. Therefore, it is the specific case of the learned counsel for the petitioner that the 3^rd respondent acted beyond his jurisdiction and, therefore, Ext.P4 order is liable to be quashed.

8. On the other hand, learned counsel appearing for the 2nd respondent as well as additional respondents 4 to 6 supported the findings in Ext.P4 order and sought for dismissal of the writ petition.

9. I have considered the rival submissions raised across the bar.

10. This Court would first deal with the contention of the learned counsel for the petitioner that the 3^rd respondent acted beyond his powers conferred under the provisions of the Industrial Disputes Act, 1947 in passing Ext.P4 order. Admittedly, Ext.P3 notice is one issued under Section 12 of the Industrial Disputes Act, 1947. Sub-section (4) of Section 12 of the Industrial Disputes Act, 1947 specifically provides that if no settlement is arrived at, the conciliation officer shall, as soon as practicable after the close of investigation, send a report to the appropriate Government setting forth the steps taken by him for ascertaining the facts and circumstances relating to the dispute and for bringing about a settlement thereof, together with a full statement of such facts and circumstances, and the reasons on account of which, in his opinion, a settlement could not be arrived at. The report will be then assessed by the appropriate Government as provided under sub-Section (5) of Section 12 and if it deems fit, it may make a reference to the labour court, industrial tribunal, or national tribunal. Pertinently, the Appropriate Government is vested with power, not to make a reference based on the report.

11. Having discussed the scheme of Section 12 of Industrial Disputes Act, 1947, it becomes clear that the Regional Labour Commissioner has no power to decide the dispute on his own. Once he finds that the conciliation has failed, he is obliged to send a report to the appropriate Government which in turn may decide either to refer the dispute to the court/tribunal or decide it not to refer. The above being the scheme under the Industrial Disputes Act, 1947 and when the same is read along with the provisions of the Contract Labour (Regulation and Abolition) Act, 1970 and provisions of the Minimum Wages Act, 1948, the irresistible conclusion that is possible is that the order impugned has been passed without Jurisdiction. The 3rd respondent at best could have submitted a report on the failure of conciliation before the appropriate Government to follow the procedure under sub-Section (5) of Section 12 of the Industrial Disputes Act, 1947.

12. There is yet another reason as to why this Court is persuaded to conclude that the 3^rd respondent acted beyond his powers. Admittedly, the claim under Ext.P2 is for minimum wages. The 3^rd respondent miserably failed to address the issue as to whether he had the authority under the provisions of the Minimum Wages Act, 1948. Section 20 of the Minimum Wages Act, 1948 provides for the manner in which a claim of a workman for minimum wages should be enforced. Admittedly, it appears that the 3^rd respondent is not the appropriate authority under the Minimum Wages Act, 1948. It is pertinent to note that the claim of the members of the 2^nd respondent Union was purely under the Minimum Wages Act, 1948. Therefore, it was not open for the 3^rd respondent to have taken up the task of adjudication of an issue for which he had no power. On that count also, the order impugned is liable to be interfered.

13. Once this Court has found that the 3^rd respondent has acted without Jurisdiction, this Court under normal circumstances, has to remit the matter back to the 3rd respondent to initiate course of action under sub-Section (4) of Section 12 of the Industrial Disputes Act, 1947. However, the learned counsel for the petitioner, Sri.Ramakrishnan, would further urge before this Court that the petitioner-company can never be held liable under any circumstances, since it would fall outside the scope of Act 37 of 1970. Since the question of Jurisdiction of the 3^rd respondent qua the applicability of Act 37 of 1970 is raised, the same requires to be addressed by this Court.

14. The entitlement of the petitioner to succeed in this writ petition on the point as raised above would arise only when this Court finds that the Act 37 of 1970 will not apply to it. Before dealing with the said issue, it would be apposite to extract the definition of the term “contractor” under Section 2(1)(c) of the Contract Labour (Regulation and Abolition) Act, 1970.

“2. Definitions.-(1) In this Act, unless the context otherwise requires,-

xxx xxx xxx

(c) “contractor”, in relation to an establishment, means a person who undertakes to produce a given result for the establishment, other than a mere supply of goods or articles of manufacture to such establishment, through contract labour or who supplies contract labour for any work of the establishment and includes a sub-contractor;”

(emphasis supplied by court)

15. Section 2(1)(i) of the Contract Workers (Regulation and Abolition) Act, 1970 reads as under:

“2. Definitions.-(1) In this Act, unless the context otherwise requires,-

xxx xxx xxx

(i) “Workman” means any person employed in or in connection with the work of any establishment to do any skilled, semi­skilled or unskilled manual, supervisory, technical, or clerical work for hire or reward, whether the terms of employment be express or implied, but does not include any such person-

(A) Who is employed mainly in a managerial or administrative capacity; or

(B) Who, being employed in a supervisory capacity draws wages exceeding five hundred rupees per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature; or

(C) Who is an out-worker, that is to say, a person to whom any articles or material are given out by or on behalf of the principal employer to be made up, cleaned, washed, altered, ornamented, finished, repaired, adapted or otherwise processed for sale for the purposes of the trade or business of the principal employer and the process is to be carried out either in the home of the out-worker or in some other premises, not being premises under the control and management of the principal employer.”

16. On a combined reading of Sections 2(1)(c) and 2(1) (i), it becomes evident that a person who supplies goods or articles of manufacture to such establishments through contract labour or who supplies contract labour for any work at the establishment will not come within the definition of the term “contractor”. That be so, the 1^st respondent, who is under a contract of housekeeping, will be definitely taken out of the purview of Act 37 of 1970. It is also advantageous to note that such workers employed by the 1^st respondent will also not come within the definition of ‘workman’ under the Contract Labour (Regulation and Abolition) Act, 1970. Even assuming that the workers, employed by 1^st respondent are deemed to be the workman employed by the petitioner, even then the order impugned cannot be sustained because of lack of an adjudicatory mechanism under the Act 37 of 1970.

17. Read as it may, this Court could not find any such provision which enables the 3^rd respondent to exercise such a power. The only mechanism provided is to file a complaint under Section 27 of Act 37 of 1970 within a period of 3 months from the date of occurrence of the offence. Apparently, therefore, the 3^rd respondent misguided himself and assumed Jurisdiction over a subject which he did not have under law. Hence, while passing Ext.P4 order, the 3^rd respondent clearly exceeded his powers in directing the principal employer to pay the differential wages under sub-Section (4) of Section 21 of the Contract Labour (Regulation and Abolition) Act, 1970. Hence, the order impugned is clearly unsustainable.

18. The finding of this Court on the point of law that the Act 37 of 1970 will not apply to the petitioner when Ext.P1 contract was entered, is surely supported by the principles laid down by the Hon’ble Supreme Court of India in Workmen of Nilgiri Co-op. Mkt. Society Ltd. v. State of TN [(2004) 3 SCC 514], wherein the Hon’ble Apex Court had an occasion to consider the question as to whether the workers engaged by the marketing service society for getting works in vegetable yards done for its members through the 3^rd party contractors, would come within the definition of the term ‘workman’ of the society under Section 2(g) and 2(i) of the Contract Labour (Regulation and Abolition) Act, 1970 and held in affirmative that such workers were not workers of the society. A more or less similar issue came up before this Court in Sarovar Hotels (P) Ltd. v. State of Kerala [2022 (2) KLT 320], wherein this Court was called upon to consider the definition of a “contractor” under Section 2(1)(c) of the Contract Labour (Regulation and Abolition) Act, 1970 and it was held that the Company which is rendering service on numerous fields like running restaurants, pantry services, house keeping, front officer services etc. does not fall within the definition of “contractor” under the Act. In Sarovar Hotels (P) Ltd. (supra) though this Court was called upon primarily to test the validity of complaints filed under Section 27 of the Act 37 of 1970, this Court indeed considered the definition of a contractor under Section 2(1)(c) of the Act 37 of 1970 and concluded that a contract of housekeeping will not fall within the purview of the Act 37 of 1970.

19. Applying the principles laid down by the Apex Court and by this Court as above, to the nature of service rendered by the 1^st respondent to the petitioner, it becomes clear that the contract is not for supply of labourers, but is for housekeeping and, therefore, such contracts are taken out of the purview of Section 2(1)(c) of the Contract Labour (Regulation and Abolition) Act, 1970. Hence, the petitioner is not bound by the provisions of the Contract Labour (Regulation & Abolition) Act, 1970 and, hence, the 3^rd respondent had no authority of law to pass Ext.P4 order. Added to the above, since this Court has found that the petitioner is not liable under the provisions of Act 37 of 1970, it is only appropriate that even on setting aside Ext.P4 order, no further direction be issued to follow the procedure under sub-Sections (4) and (5) of Section 12 of Industrial Dispute Act, 1947, since the entire proceedings initiated as per Ext.P3 is without Jurisdiction.

In the result, the petitioner is entitled to succeed. Hence the Writ Petition is allowed. Ext.P4 order is quashed. It is declared that the petitioner is not liable for any payment to the workers employed by the 1^st respondent on its failure to pay their wages. However, this judgment shall not prejudice the claim of the members of the 2^nd respondent union or respondents 4 to 6 unions to raise the claim of their members against the 1^st respondent, in accordance with law. No order as to costs.