2:21

MANGALORE GANESH BEED! WORKS ETC. ETC.

UNION OF INDIA ETC.

January 31, 1974.

IA. N, RAY, C.J., H. R. KHASNA, K. K. MATHEW, A. ALAGIRISWAMI

AND p, N. BHAGWATI, JJ.]

Bcedi and Cigar Workers (Condition of Employment) A.ct, 196&.:-.f.r. 3, 4, 2(g)(a), 2(g)(li), 2(m), 26, 27 and 31onstitutional validity ofon' s1#Utiou of India, 1950-Art&. 14, 19(1)(g)-Legislative competence-14.ct if falls within Entry 24 List II or Entries 22, 23 pnd 24 of List Ill, Seventh Schedule-Rules laying down the mtJximum percentage of Beedis which can

be rejected, validity of-Sec. 37(3) i/ unworkable.

Interpretation-Reports of Conimission.J and Committees-Adniissibilily i11 evidence about the prev, ailing system and condition,, of industry.

The beedi industry is widespread in the - country. Three systelns are adopted for the manufacture of becdis. First. th.: factory system in whkh the workers gather and work in a factory under the supervision Of the manttfacturer who .is the owner of factory. Secondly, the contract system of em ployment wherein the proprietor gives the middleman quantities of beedi lea ves and tobacco. The contractor manufactures beedis by employing di. eclly labourers or by distributing material amongst the home workers. The third system is that of the out workers. They roll beedis out of tobacco aBd beedi leaves suppli~ by the proprietor without the agem; y of middle man.

The special feature of the industry is the manufacture of beedis through E . contractors and by distributing work in private dwelling houses where the workers take raw-material given by the employers of contractors. The relationship between employers and employees is not well defined. The application of the Factories Act bas always met with difficulties. .The labour in the ·

industry is unorganised and is not able to look after its own interests, The industry is highly mobile, The attempts of i!IOme of the states to legislate in thi?.l behalf have not been successful. Anxiety has been expressed by several committees and commissions, appointed by the Central Government and some F of the State Government, to introduce ome regulation in the em11l .... ver-cmrloyee relatiohship and to obtain certain benefits to the employees which have been denied to them. They have reported extremely unsatisfactory and. unheu.ltby working conditions long hours of work with low wages and anrestricted emuloyment of wofnen and children. It was found that the contract

otnd bOme work systems enriched th~ nro; Jrictor <:t th! expense of 1h Woi kers and al-so deprived the worker':! of th;! b.lrgaining power in regard to conditions of labour.

G It. is in this background that the Becdi an9 Cigar Workers (Conditfoni!I. of f::mployment) Act, 1966, came into existence. The Act was passd to pro'ftde fer the welfare of workers in Beedi and Cigar establishments and to regulate

lb~ conditionc; of their work. and for matters connected therewith.

. The ne.titioner, i and the appellants, proprietors of beCdi fat!ori~' a.nd own-rs of trac!I! mark.and ome home workers. !mpl"ached the const1tuh.onahty of the Act.

They contended; (i) being a legislation for regulating "beedi .and c.igar indutry it fell under Entrv 24 Ust TI o.f the &-vf"nth Srhedul"' an~. thre .. fore .Parlj:iment had. oJegi.slative C?mpcti:ice to., enact the. mea~r~~ <!.~).Sec tions 3. and 4 of Act wh1rh required hcen~ in reo; nec;:t. of, .tn<'ftriij PTC:'

mises violate.d Art~.~.19(1).{p.) and. 14 slnc~ .. they.confrre.d ~!1{ettered pwers on the licensing p, utbority. without the rcqms1te safeguards: (111) the provu1ons.

2-954 SCI/74

SUPREME COURT REPORTS

( 1974 J 3 S.C.R.

of section 2(g)(a), 2(g)(b} and 2(m') read with section 2(c) and (f) created a totally artificial and fictional definition of employer and thereby imposed vicarious liabilities upon a manufacturer of and trader in beedies in respect of diverse matters which entailed civil and criminal liabilities and thereby imposed unreasonable restrictions on the manufacturers in their right to carry on trade ::.nd business; (iv) sec. 26 and 27, dealing with lcavo and wages. during leave pedod. cast unreasonable burden and imposed obligations which were not cap<1ble of fulfilment and thus violated Art. 19(1)(f) and (g), and, in any event. th= section'i were unenforceable with regard to hom! workers ant thciefOrc violated Art. 19(l)(f) and (g) so far as the same were applied 'to home workers; (v) Sec, 31 which provided for one month's wages in lieu of notice of dismissal was an unreasonable restriction;

(vi) Rule 37 of the Maharashtra Rules and nlle 29 of the Mysore Rules, dealing with rejection of substandard beedies, framed under s. " of the Act, imposed unreasonable restriction on the beedi and cigar manufacturers; and (vii) Sec. 37(3) which made provision for maternity benefits to women employed in an establishment

was unworkable.

HELD : (Per Ray, C.J., Khanna, Mathew, and Dhagwati, JJ) : Parlia ment has legislative competence for enacting the law and the provisions of the Act are valid and do not offend any provision of the Constitution.

Previous material in the shape of reports of commissions to review the working of the industry is adffiissible in evidence about the prevailing systen1 and conditions of industry.

Slate of Madras v. Rajagopalan, [1955} 2 S.C.R. 541, referred to.

(i) The Act does not fall within entry 24 List II or c_ntries 7 and 52 in List I. The tn1e nature and character of the legislation is for enforcing better conditions of labour amongst those Whft are engaged in the manufacture of heedis and cigars.

It, therefore, falls within entries 2, 23 and 24. in List III. The Act, in pith and substance is for welfare of labour. [233H, 234E]

(ii) Sections 3 and 4 of the Act arc not violative of Arts. 19(1)(g) and E 14.. These sections do not confer unfettered p0wers on the licensing authority without the requisite safegilards. The power to grant or refuse a licence is sufficiently controlled by necessary guidance. There are safeguards preventing the abuse of power. The right Of appeal is a great safeguard. There is machinery as weU as procedure for determining the grant or refusal of a licence,

(2358-C]

(iii) The provisions of Sections 2(g)(a), 2(g)(b) and 2(m) are constitutionally valid and do not imposo any unreasonable restriktion on the manufac F turer or trade-mark holder. There cannot be any question of unreasonableness in cases where the manufactur@ or trade-mark holders themselves emploY labour, because, there is direct relationship of master an(i servant.

When the contractors engaged Jabour for the principal employer the lia, bility flrisct: by reason of contract labour engas; ed for or on behalf of Principal cmploYcr.

Where the contractor engages labour for the manufacturer it is not unreasonable restriction to impose liability on the manufacturr for the labour engaged by the manufacurer through the contractor.

When the con- G tractor engages labour for and on his own behalf and supplies the fini<; hed product to the manufacturer )le will b~ the principal employer in relation to

sucl~ Ia9our and the: manufacturer will not be responsible for implementing the nrovisions of the Act With regard to such Jabour emoloyl"d by the contract. It will be a question of fact in each case as to who is the person for whom the contract labour is engap:ed.

If an independent Contractor em., loy! labour for himself the:· liability will attach to him as the nrincipal employer and: not to the manufacturer. The Act thus fastens liability on the t'Crson who himself engages labour or the person for whom or on whose behalf H labour ii engaged or where a person haa ultimate control over the affain of the establishment by rea.\On of advancement of money or-of substantial interest -in' the control of the affairs of thC establishment. '(2370. F:. 241A)

MANGALORE BEED! WORKS V. UNION 223

(iv) The provisions of sccti.ons 26 and 27 arc applicabl~ to home workers und workers in industrial premises and are also capable of being made applicable .wiout any reasonable. restriction on the employers. -As a matter of fact Jt. is found that borne workers can turn out 700 to 1000 beedies a day.

The minimum wages prescribed by various states for these home workers are between Rs. 2 to Rs. 4.30 'for rolling 1000 beedis. It will, therefore, not cause unrcasonabl€'. financial burden on account of leave wages. Tho home workers . will get wages for the leave period corresponding to the number of beedies manufactured by him for a particular employer. The hours of work will be immaterial because if he works for less number of hours he will obtain lesser pa_yment.

There will be no difficulty in computing was for the annual leave period. The home worker will get leave wages corresponding to his actual earnings just asi the worker in the industrial premises will get leave wages corresponding to his full-time earning, The basis of calculation of wages in the case of home workers_ is thedaily average of his total full time earnings for the days he has worked duri:'g the month immediately preceding bis .leave, [248C-DJ

(v) The provisions contained in s. 31 cannot be said to be unreasonable restrictions. Section 2(rr) of the Industrial Disputes Acts defines wages. Some aid can also be had from the definition ot wages in the Payment of Wages Act that wages include leave wages. Therefore, the word 'wages' in sec 31 of the Act will mean wages which are calculated under s. 27 of the Act.

The calculation can be made both iil respect of workers in industrial premises and home workers in establishments.

[248G]

(vi) The rules are valid on the ground that the maximum limit of 5 per cent for the rejection of Bcedis is based on experience in the industry, and, secondly, the employer can reject more than 5 per cent by raising a dispute before the appropriate authority. Rules about rejection and fixing maximum limit of S p_er cent are reasOnable and fair. The rules are intended to eliminate explqitation of illiterate workers who are mostly women.

[250A)

(vii) The reasonableness of section 37(3) hasnot been challenged. There is no difficulty with regard to the working of the Maternity Benefits Act, 1961, in regard to maternity benefits to women employer in an establishment.

[252DJ

Cllinta1nan Rao & A11r. v, The Stflte of Madhya Pradesh, [1958] S.C.R. 134,0; Birdliichand. Sharma v. Firt Civil Judge Nagput & Ors. [1961] 3 S.C.R.

161. Bl!ikuse Yamas Kshatriya (P) Ltd. v. Union of India & Anr. [19611 1 S.C.R. 860, distinguished.

Shanker Balaji Waji v. State of Maharashtra, [1962] Supp. 1 S.C.R. 249, held inapplicable.

Dewan Mahideen Saheeb v. UnitM Bidi Workers Union Salem [19641 7 S.C.R. 646 Cliintaman Rao's case: Silver Jubilee Tailoring House &: Ors. v.

Chief Inspectors of Shpps and EstAbUshment & Anr. referred to.

Syed Saheb & Sons v. State of Mysore (1972) Mysore Law Journal 450, ; ipproved.

Abdul Aue< Sahib and Sons, etc. v, The Union of India, [1973] I! M.L.J, 126, Chnablzai Purshi>ttam Patel, Beedi Manufqcturers of BllandartJ & Ors v.

State of Maharashlra, [1972) 1 L.L.J. 130; Chirukandtth Chandrastkharan v.

Union of India [1972} I L.L, J, 340, and Civil Appeals Nos, 1972 and 1968 of 1971 (Andhra Pradesh), over ruled.

AL~; GRlsWAMI, J, (concurring) : The Act is the result of a. co!llpromise between the original intentions of the Government and the od1fibon.s they H . had to make in the proposed measure as a result of cor'.cess1ons intended to

bring home worken within the scope of the Act, The original intention was not to permit becdi rolling in private homes which ":'ill involve thounds of

labourers in thousands of far-fiung homes and the difficulty of applying the

[ 1974 J 3 S.C.R.

provisions of the measure to them. ThC result is an Act which is likely to give . rise to . many difficulties in its actual working.

It is obvious on a reading of the measure that its purpose is to rope in every possible person whO. Could be brought in as an employer.

But the result of the definition.• 1I'L thC Act is that everybody w-0uld be a principal employer and contractor ahd every labour will be contract labour.

[252H] Clause 2(g)(b) is intended to cover cases where a person runs business Bcnami. There can be no objection to such a provision. But merely because a person lends or advances money or supplies goods he cannot be called an employer.

The words in.cl. 2(g)(b) "who has by reason of his advancing

1noney~ supplying goods or otherwise a substantial interest in the control of affairs of any establishment" should be struck down, When section 26 pro vides that every employee in an establishment should be allowed in a calendar year leave with wages at the rate of 1 day for every 20 days of work per.; formed by him during the previous calendar year it leads to real difficulty.

The question is what i~ the \Vage which has to be paid to him during the period of leave.

A home worker might work for 1 hour on one day, 8 hours on ;.1nother day and not at all for a number of days, What would be the wages payable to him? The difficulty of applying the Maternity Benefit Act is\again apparent How can the provisions be applied to women who cannot be said to employed continuously for ;.i certain period before the confinement?

Under section 31, no employer shall dispense with the services of an employee

who has been employed for a period of 6 months or more except for a rea sonable cause and without giving such employees at least one month's notice or wages in lieu of such notice. It is not clear as to who will be the employer competent to dispense with the ervices of the employee.

[254A.

2SSC, c56BI

While Courts should give effect to the intentions of the legislature it can be' -done only if that is possible without doing violence to the actual language. tiI the statute. The various definitions plainly soek to rope in everybody who has anything to do with the manufacture of beedies and while trying to give effect to the penal provisions in the statute considerable difficulties will

arc._ There will on the one hand be the actual occupier of the inctustrial premises. There will be on the other hand a person who might have advanced 1noncy to him anti supplied goods to him and therefore may be substantially interested in its control. The actual occupier himself might be" a contractor nnd in .that case he as well as a person on whose behalf beedis are manufactured would be liable. Who in that C3Se, would b~ actually liable ?

[254C] The objection is not to an)' of the provisions on the i::rounds of unreason-

~1blcness or unconstitutionality. Nobody can dispute the ne'ed for setting right

the evils. But, good intentions should not result in a legislation which v:ould become ineffective and lead to a lot of fruitless litigation over the years.

If has to be held in agreement with the majority of the High Courts that r-cctions 26. 27. 31 and 37(3) do not apply to the home workers.

It woul<l be ood in the interest of all concerned if the Act is amended as early as

pcsible to remove all ·.ihe lacunae and th-e difficulties pointed out. The diftl~ c111ties have arisen bccauSe of an attempt blindly to apply t_he provision. .. which \Viii be quite workable if ther :ire applied to conditions where the Factory Act woril<l be applic::ble.

[256FJ

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1553, 1614- 1618, 1769.of 1971and1131-1133 and 1440 of 1972. ·

<From the Judgment and Order dated. the 24th June, 1971.of the Mysore High Court at Bangalore in Writ Petitions Nos. 806, 837, 1152, 1486, 1592, 1638, 1896, 159, 4152 and 3W of 1970 and 1456 of

1971).

H Civil Appeals Nos. 2516-2523, 2560, 2569, 2661-2164 of 1912 and 66-69, 72-75, 1307, 854-856, 857-859, 1203 and t204 of 1973.

MANGALOltE lll!mX WORICS v. UNION 225

.. ·(Frem tile iuclgment and O!Qci: .dated .the $th September, 1972 of the Madias High Court in Writ Peiitiolis No&. 227, 4tZ, 2631 of 1969, 2692,2693,2695,2696,2698of1968,2680,2683,2688;2689,2691, 34n, 3478 of 1968, 531, 849, 1065 of 1969, 2681; 3480 o{ 1968, 40, 169 of 1969, 2854, 2856, 2855 of 1968, 4~8 of 1969, 2847, 2849, 2850, 2853 of 1968, 3268 of 1968, 211. 231, 276 of 1969, 2701, 2797 of B i968, 212 of 1969, 2684 and 2763 of 1968). · ·

Writ Petitions Nos. 127-132 of 1972 •.

(Under Article 32 of the Constitution for the enforcement of fundamental rights). ·

Civil Appeals Nos. 307-311 of 1972.

(AilJleals by Special Leave from the Judgment 'lllld Order dated the 30th November, 1971 of the Bombay High Court in Special Civil Application Nos. 2501 of 1968, 78~, 2848, 2845 and 2846 of 1969) ..

Civil Appeal No. 585 of 1971:

(Frblil the Judgment and order dated the 14th/15th October, 1970 D of the. (JUjata! High Court at Ahmedabad in Special Civil Application No'. 872 of 1968). ·.

Civil Appeals Nos. 1864-1873 of 1971 and 173 of 1973:

(From the Judgment and order dated the 16th/17th July, 1970 of the Bombay High Court (Nagpur Bench at Nagpur} iin Special Ovil

AppHcationJlNos. 391 to 393 of 1969, 409 of 1968, 451, 453, 513, and 514 of 1969 and 453 of 1969). Civil Appeals Nos. 1972-1988 of 1971.

(From. the Judgment and Order dated the 26th August, 1970 of the Andl\ra Piadl'Sh High Court at Hyderabad in Writ Petitions Nos. 2587, 2818, 3007, 3009, 3058, 3156 3254, 31>18, 3776, 3824; 3825, 3826, 1 4364, 4'53, 5013, 5J74 of 1963 and 1235 of 1969).

Mr .. Soll Sorabjee with Mis M: Ramachahdran, Salindra Swarup, I ... B. Dadachanii, 0. C. Mathur 4c Ravinder Narain for the Appellan.t

(in CAs: 1553171) & for Petitioners.

. M/s M. Ramochandran, Salindra Swarup, I. B. Dadachanji, 0. C.

G Mathur 4c Ravinder Narain for the Appellant (in CA 1769171).

Mr. K. N. Bhat, for the Appellant (iii CA. 1614171).

Mis D. V. Ptitel (m C.A. 1615).and S. V. Gupte (in C.A. 1616). with Mis M. Ramachahdran, T. S.l'ai and A. S. Nambiar for the Appellants' (in CA'S. 1615 & 1616171).

'lflk T. S~ Pai, M. Ramachahdrait and A. S. Nambiar for the Aplf pellants (in CAs. 1617-1618171). ·

Mi.~. Jl'tintit!P'~ wlih Mr. A.$, Namb/r fot m Amilants (in Ch. 266t-Cl411Z, 66'69/73 lllld857-859; 12<13' Ii 1204173)':

[ 1974 J 3 S.C.R.

Mr. Vineet Kumar for the Appellant (in CAs. 1131-1133 & 1440/ 72 and for Appellants (in CA 585/71).

Mr. K. K. Venugopal with Mrs. S. Gopalakrishnart for the Appellant (in CAs. 2516-23/72).

Mr. K. K. Venugopal with K. R. Nambiar for the Appellant in CAs. 2560-69/72 & 72 75/73).

Mr. Niren De with Mr. P. Paramashwara Rao for Respondent No. 1.

Mr. Niren De with Mis R. N. Sachthey and S. P. Nayar for Respondent No. 1 (in CAS. 1614, 1616-1618/71, 1131-1133 & 1440/72 and for Respondent No. 2 (in CA 1615/71).

Mr. M. Veerappa, for Respondent No. 1 (in CAs. 1553, 1614, 1616,

1769) and for Respondents No. 1, 3, 4 and 5 (in CA. 1615), for Respondent Nos. 2 to 5 (in CAs. 1617-18) for Respondent (in CAs. 1131, 1132 & 1440), for respondent Nos. 2-3 (In CA. 1133) and for Respondent No. 2 (In WPs. 127-128172).

Mr. S. Govind Swaminadhan with Mr. A. V. Rangam and Miss A.

Subhashini for Respondent No. 2 (in CAs. 2516-23 2560-69, 2661- 64, 66-69, 72-75, 854-59 & 1203-1204) and for Respondent (in CA. 1307/73).

Mr. K. S. Ramamurthy with Mr. A. T. M. SamjJath for the Appellant (in CA. 1307).

M/s. K. s~ Ramamurthy and Mr. Y. S. Chitale with Mis T. s: Pai E and A. S. Nambiar for the Petitioner in (WP. 127).

Mr. Y. S. Chitale with M/s M. Ramchandran, T. S. Pai and A. S.

Nambiar for t)lc Petitioner (in WP. 128).

Mis M. Ra111achandran, T. S. Pai and A. S. Nambiar for the Petitioner (in WP. 129).

Mr. A. S. Na111biar for the Petitioner (in WP. 130).

Mr. Niren De with Mis P. Parameshwara Rao, R. N. Sachthey, and S. P. Nayar for the Appellants (in CAs. 1972-88/71) and for Respondent No. I (in WP. 127-128).

Mr. D. V. Patel with Mr. P. H. Parekh and Mrs. Sunanda Bhandar~

for the Appellants (in CA. 307-311172).

Mr. Niren De and Mr. M. C. Bhandare (for the State of Maharashtra in CA. 307 & 311) with Mis R. N. Sachthey and S. P. Nayar for Respondents Nos. 1-4 (in CAs. 307-308).

Mr. Niren De with Miss S. Chakravarthy and Mr. R. H. Dhebar (for the State of Gujarat, Mis R. N. Sachthey and S. P. Nayar for Respondent Nos. 1-3 (in CA. 585).

Mr. Niren De (For Union, of India in CA. 1864171), Mr. M~C.

Bhandare, (for the State-of-Maharashtra in CAs. 1864-1873), with Mis

MANGALORE BEED! WORKS V. UNION {Ray, CJ.) .2 21 .

R. N. Sachthey, and S. P. Nayar for the Appellants (in CA. 1864 to 1873/71) and for Respondent No. 2 {in CA. 173/73).

Mr. M. N. Phadke with Mr. Rameshwar Nath for Respondents Nos. 1-2 (in CA. 1871) and for Appellant (in CA. 173).

Mr. Rameshwar Nath, for Respondents No. 1 (in CAs. 18~9) B and for Respondents Nos. 3, 5-9, 1.1-13, 15-17 and 20 (in CA. 1871).

Mr. M. Krishna Rao with Mr. B. Kant<1 Rao for Respondent No. 7.

Mis Narayan Nttttr and Ram Shtsh for the Intervenrs-Dharwar Distt. Beedi Workers' Union, Hubli and Anr. (in CA. 1553).

Mr. R. P. Kapoor for Mr. /. N. Shroff for Interv., ner-Statc of c Madhya Pradesh (in CA. 1769).

Mis S. R. Bommai, I. B. Dadachanji and P. C. Bhartari for lntervener-Puttappa Veerappa etc. (in CA. 1553),

Mr. Rameshwar Nath for Intervener (in CA. 1864).

The Judgment ct A. N. RAY, C.J., H. R. KHANNA, K. K. MATHEW and P. N. BHAGWATI, JJ. was delivered by RAY C.J. A. ALAGIRISWAMY, J. aave a separate Opinion.

RAY, C.J. The provisions of the Beedi and Cigar Workers (Conditoin of Employment) Act, 1966 refemid to as the Act are impeached as unconstitutional in these petitions and appeals.

Broadly stated, the Act is challenged on these grounds. First, Parliament has DCI legislative competence to enact this measure. It is a legislation for regulating beedi and cigar industry.

Therefore, it falls under Entry 24 in State List II. Second, the restrictions imposed by the Act violate freedom of trade and business guaranteed under Article 19(i)(g.).

The Act imposes unreasonable burdens in cases where a manufacturec or trade mark holder of beedi has no master and servant relationship and no effective control . on independent cyllltractors or home-workers. The manufacturer or trade mark holder ; s rendered liable as the principal employer of contract labour. Third, section 4 of the Act imposes conditions which are arbitrary, excessive extraneous.

Fourth, Section 7(i)(c) regarding entry into industrial premises, sections 26, 27 regarding annual leave with wages, section 31 regarping ohe months's wages in lieu of notice, section 37 regarding application of Maternity Benefits Act, 1961 and the rules for rejection of beedis are unconstitutional. These provisions are unreasonable restrictions on the freedclm of trade and business.

The petitioners and the appellants are of two characters. The majority are proprietors of beedi factories s¢ owners trade mark registered under the Trade Marks Act in relation to heedis. Some are home WCll'kers.

The bccdi industry is widespread in this Country, The manufacture of bc:ecli is done in ~. The tobacco is blended often y.oith some other ingredient. A small quantity of it is put .on the bcedi leaf which

228 Sl!PllEME COUll.T Rl!POllTS

. [ 1974 J 3. S.C, R.

is previously wet to render it llex.ible to prevent any Crushing of leaf and is also cut to si~. .TU .. beedi leaf is then rolled keepilig the . tobacco within it and its ends are then closed. . The beedis thus rolled are collected and warmed or roasted after which they are ready for packing, labelling and sale. Where the proprietor owns a trade mark, the 11rade mark labels are affixed to the individual beedis as also on the packel!J.

The work of wetting and cutting of the wrappec leaves is one of the items of work in the process. Pciwer is seldom employed for the purpo6e. The industry depends entirely upon human labour. If more than 20 workers are employed in a particular place for the manufacture of beedis, the provisions of the Factories Act; 1940 will apply to the premises.

Three systems are adopted in the manufacture of beedis.

First, is the factc.ry system. There the manufacture is an owner of the factory.

Workers gather and work under his supervision as his emplo; yees.

Second is the contract system of employment. That is the most prevalent form.

Under this sys1em, the propriettor gives to the middlemen quantities of beedi leaves and tobacco. The contractor on receiving the materials manufactures beedis (i) by employing directly labourers and manufacturing beedis or (ii) by distributing the material& amongst lhe home workers, as they are called, mostly women who mnaufactllre beedis in their own homes with the assistani:e of other members of their family including children. The third system is that the outworkers. They roll beedis out of the tobacco and heedi leaves supplied by the proprietor himself without the agency of middlemen. The beedis thus supplied whether by the outviorkers or contractors are roasted, labelled and. packed by the proprietor and sold to the public.

Under these systems, the contractor engages labourers less than the statutory number to escape the application of the Factories Act .. Theze is a fragmentation of the place of manufacture of beedis with a view

to evading the factory legislation. Sometimes there is no definite F relatictnship of master and servant between the actual worker and the ultimate proprietor.

Branch managers of contractors are often men of straw. The proprietor will not be answerable for the wages of the outworkers because there is no privily of contract between them. A large body of actual workers are illiterate women who could with impunity be exploited by the proprietoPS and Contractors. There is in this background an indiscriminate and undetectable employment of G child labour. The contractor being himself dependent on the proprietor has little means to have any organized system. Women and inllrm persons can earn something by rolling beedis.

The dependence of these people particularlv the women shows that they have little bargaining power against powerful prpprietnrs or contractors.

A typical contractor agrees with the proprietor to purcha_.e tobacoo H and to pay fcir it at the ruling rate and to supply the proprietor with such quantlty of beedis 8S will be llxed. by the proprietor. Re also unchetalccs not to use any tObiicoo odler than that supplied by the '

MANGALORE BEED! WORICS V. UNION (Ray, C.J.) 229

proprietor.

The proprietor has the authority to send his representative to inspect the place or places of manufacture.

The contractor undertakes not to enter into any agreement of similar nature with any. o!J:!er concern to make beedis,. The agreement stipulates that the contractor

wilrbe'the sole employer answerable in.regard to the disputes raised by the workers.

There was a Royal Commission on Labour in India in 193 l. The findings were these. The making of beedi is an industry widely spread over the country. It is partly carried on in the home but mainly in the workshops in the bigger cities and towns.

Every type of building is used, but small workshops preponderate. It is there that the graver problems mainly raise. Many of these places are small airless boxes.

There are no windows where workers are crowded.

There are dark semi basements with lamp and floors. Sanitary conveniences and arrangements for removal of refuses are practically absent. Payment is by piece rate. The hours are unregulated. Many smaller workshops are open day and night. There are no intervals for meals. There are no weekly holidays.

In 1944, the Government of India appointed a Ccltnmittee under the Chairmanship of Shri D. V. Rege to investigate conditions of industrial labour. The report referred to the contract system whereby the factory owner engaged a large number of middlemen supplied them with raw materials and purchased finished products from them.

The report found that unhealthy working conditions, long hours of work, employment of women and children, deduction from wages and tho sub-contract system of organisation required immediate attention.

It was desirable to abolish outworker system and to encourage establishment of big industries if protective labour legislation was to be enforced with success.

In 1946, the Government of Madras appointed a Court of Inquiry into Jabour conditions in beedi, cigar, snuffcuring and tanning industries.

There were 90,000 workers depending on beedi industry in Madras.

Of these, 26,500 workers were women.

Employment of children in the Industry was universal. 2/5ths of the total workers were children. Home workers were predominant. . There were fulltime wor.kers but they were paid less than fair wages.

Working conditions were extremely unsatisfactory from the standpoint of floor space, sanitation, ventilation and lighting.

In 1954, the Government of India appointed Shri Natraj Inspector. of Factories to assess the situation with a view to affording maximum legislative protection to the workers.

The Report was as follows.

Although the number of workers engaged in the manufacture of beedi exceeded one lakh, only 17,544 were employed in factories.

The contract and home work systems enriched proprietor at .the expense of the worker and also deprived the latter of his bargaining power in regard to conditions of labour.

The poverty as well as illiteracy of. the workers was taken advantage of by the employers.

There were long hours of.work with low wages, deplorable working conditions and unrestricted employment of women and children.

[ 1974] 3 S.C.R.

The entire beedi industry was unorganiscd and scattered over the entire state, employing a large force of women. It called for radical reforms in the organisation.

There was reluctance of the manufacturer to provide certain amenities to the workers such as rest sheds. canteens, creches, ambulance room, etc. Under the indirect employment system conditions obtaining in the industry were still worse. The middlemen contractors did not observe any higher standards in the premises than in those under the manufacturers.

The Payment of Wages Act applied to factories, but it was difficult to detect violations of the Act because the prescribed registers were not maintained.

The Madras Maternity Benefit Act which applied to factories was rendered practically ineffective as far as petty industry was concerned because there was no record to prove that women were employed.

The Report stated that the employers succeeded in organised circumvention of all existing legislation by resorting to splitting up of their factories into smaller units run by contractors who had no knowledge in respect of

workin!! places .

. The conditions in working places were bad.

The Report suggested licensing of premises to fix responsibility of the employer for maintenance of minimum standards of ventilation, lighting and sanitation in working places.

The employment of women and children, wai:es and wage structure in the industry were all considered by the Committee.

The Committee recommended solution of unhealthy working conditions under miserable environments, long working hours with its attendant evils. unregulated employment of women and children and deduction from wages.

The contract of home work system of employment was found to be designed solely for the promotion of trade but not the industry of which the labour forms the integral part. It was, therefore, expected that the beedi industry should carry the labour along with it as it developed and was organised in such manner that it discharged its social and moral responsibilities towards the workers.

It is in. this background that the Act came into existence.

In Srate of Madras v. Rajagopalan, [19551 2 SCR 541 this Court held that the previous material in the shape of Reports of Commissions of review the working of the industry was admissible in evidence about the prevailing system and conditions of industry.

The Beedi and Cigar Workers (Conditions of Employment) Act, .J 966 is an Act to provide for the welfare of the workers in beedi and cigar establishments and to regulate the conditions of their work and for matters connected therewith. The special feature of the industry was the manufacture of beedis through contractors and by distributing work in the private dwelling house, where the worker.s took raw materials given by the employers of contractors.

The relationship between employers and employees was not well defined. The application of the factories Act met with difficulties.

The labour in the industry was unorganised and was not able to look after its own interests.

The industry was highly mobile.

The attempt of some of the States . to legislate in this behalf was not successful.

The necessity for central

MANGALORE BEED! WOUS V. UNION (Ray, C.J.) 231

legislation was felt.

A bill was mooted to provide for the regulation of the contract system of work, licensing of beedi and cigar industrial premises and matter like health, hours of work, spread over, rest periods, over time, annual leave with pay, distribution of raw materials cic.

The anxiety was expressed by several Committees to introduce some regulation in the employer-employee relationship and to obtain certain benefits to the employees which were denied to them.

The so-called contractor or the employer as styled by the employees has been a matter of some concern to the employees as well as to the State. There were certain good and bad points about the systems that were prevalent in the manufacture of beedi. The contractor was very often a man of straw. He was said to be the.creation of the principal employer who put him forward on many occasions as a screen to avoid his own responsibility towards the employees.

Another broad grievance was that there was double c.hecking and rejection of beedis or double cbbat, out of which the second chhat at the principal employer's place was invariably in the absence of the employee.

This chhat was alleged to be most irrational and depending upon the whim of the employer.

As far as the house work system was concerned there was an advantage to the employee with some kind of disadvantage to the employer.

Persons who could spare time in their houses but could not move out for the purpose of employment got ready employment and could supplement their income from agriculture or other sources.

They were in a position to work as and when leisure was available. and like a factory employee there was no dgour of attending the factory or work at stated time and fur stated number of hours. It appeared that pilfering was a vice of this industry.

By pilfering tobacco which is the most valuable ingredient, the employees were able to earn' some income by again rolling it into bcedis and selling them.

The relationship bctwee11 the proprietor, middlemen and outworkcrs came up for consideration in this Court in Chintaman Rao & Anr.

v. The .State of Madhya Pradesh [19581 SCR 1340. The proprietor of a beedi factory was prosecuted under the Factories Act for noncompliance with the provisions of that Act.

The proprietor pleaded that the workers were not under his employment.

The contention was that the sattedars who were found in the factory were independent contractors and not workers.

The management issued tobacco and sometimes beedi leaves to sattedars who manufactured beedis in their own factories or by an arrangement with a third party.

The sattedars collected the beedis thus made and supplied to the factories for a consideration_. It was held that the sattedars were independent contractors and not the agents.

The enforcement of factory and labour legislation could be rendered impossible by adopting the simple device of disintegrating what normally will be a factory.

The legislature wanted to regulate the contract system.

The legislation did not want to stop the contract system.

The provisions in the Act recognised the contractor as a part and parcel of the boedi industry.

The contractor is referred to where the terms 'contract labour' or 'principal employer' of 'employer' have been defined.

Several functions which the employer. has to perform are also performed by the contractor. He delivers tobacco and leaves to the home worker and collects the rolled beedis

"Z3-2 SUPREME COURT Rl!PORTS

[ 1974 J 3 S.C.R.

, after application of cbhat.

He makes payment to them. Therefore, the contractor has been retained as an integral part though the attempt is to eliminate the vices which crept into the industry.

The Madras High Court in M/s. K. Abdul Azeez Sahib and Sons, .Four Horse Beedi Manufacturers, Vellore-4 and Ors. v. The Union of .India (1973) II M.L.J. 126 held the definitions of employer and prin- .cipal employer in Section 2 (g) (a) and 2(m) of the Acfto be valid but held that sections. 26 and 27 of the Act are wholly unnforceablc .against tho trade mark holders whether with reference tel" Mme work- .ers or with referenoe to employees .working in any industrial premises.

The Madras High Court held that since a worker in a beedi intlustry is not required to work regularly for any prescribed period of hours in a day or even day after day for any date specified period, from the very nature of the case, the provisions in the Maternity Benefit Act, 1961 are unworkable with regard to such home workers, a:iid, therefore, they will have no application to them.

The Madras High Court held that section 7(1) (c), 7(2), 26, 27,.31, and 37 (3) in so far . as they relate to home workers are ultra. vires and illegal and unenforceable against trade mark holders in beedis and contractors in the manufacture of beedis.

The Madras High Court held that section 7(1)(c), 7(2). 26 and 27 are ultra vires and illegal and unenforceable against the ptitioiJer who are manufacturers .of cigar or .cigar rollers.

The Bombay High Court in Mis. Chotabhai Purushottam Pate/ ..

Beedi Manufacturers of Bhandara & Ors. v. slate of Maharashtra by Secretary, Industries and Labour Department, Sachivalaya, Bombay & Ors. (1"972) I L.L.J., 130 held that the provisions of section 2(g) (a) and 2(m) of the Act are invalid t0 be in exc., ss of the requirements -of the situation because if the principal .employer is fared with the proposition of bearing all the civil and criminal responsibilities of omission .and. commission of contractors under him the inevitable result will be that the manufacturer will give up the Gharkata system and may think of some other system less onerous under the Act. The Bombay High Court also said that the words "in relation to other labour" contained in section 2(g) (b) are to be deleted.

The Bombay High Court further held that the provisions of sections 26 and 27 of the Act will not apply to home workers at all.

The Mysore High Court in P. Syeii Saheb & Svns. v. State of Mysore (1972) Mysore Law Journal 4~0 held that sections 3 and 4 of the Act are constitutional and not violative of Articles .14 and 19 (l)(g) of the Constitution. Section 3 of the Act prohibitS establishment of an industrial premfaes without obtainin~ a licence grantee! under the Act.

Section 4 of the Act provides for the procedure for the issue. renewal and cancellation of a licence.

The Mysore High Court further held that sections 26 and 27 of the Act are not unreasonable restrictions and it is possible to find out whether a home worker has. qualified himself for annual leave and it is possible to make up for the lost wages.

The Mysore High Court also held that section 31 of the Act is valid and Rule 29 does not impose tinreasonable restrii:' tion by' compelling the employer to aceept be'edis when they are sub'

MANGALORE BEED! WORKS V. UNION (Ray, C.J.) 233'

standard and the sub stand.ard beedis and cigars exceed 5 per cent. If

the employer finds that the sub standard beedis and ci2ars are above 5 per cent then he has to refer the matter to the Inspector.

The Kerala High Court in Chirukandeth Chandrasekharan v. Unionc of India (1972) 1 L.L.J. 340 held that the provisions of sections. 2(g)(a), 2(m) 3, 4, 21, 26 and 27 of the Act impose unreasonable restrictions on business or trade and are violative of Article 19 ( 1 )(J()

of the Constitution.

The Kerala High Court held that the words "in relation to .other labour" occurring in section 2(g) (b) have also to. he deleted.

The Kerala High Court held sections 3 and 4 to be valid.

The Kerala-High Court held that sections 26 and 27 will not apply to home workers. The Kerala High Court struck down rule 29 of the Kerala Rules on the ground that imposition of 5 per cent on the maximum amount of rejection is an arbitrary percentage.; Kerala Rule 29 stated that no employer shall ordinarily reject more than 2-5 per cent.

The provision states that there can be rejection up to 5 per cent for reasons recorded. in writing.

This imposition of 5 per cent limit in the proviso was contrued by the Kerala High Court to be unreasonable in.as much as the quality•of beedis would go down if the workers are assured that more than 5 per cent will not be rejected.

The Andhra Pradesh High Court in Civil Appeals Nos. 1972 and 1988 of 1971, hekl. that sections 3 and 4 of the Act offend Articles 14 and 19 ( 1) (g) of the Constitution and are, therefore, void ..

The Andhr<t Pradesh High Court came to the conclusion that the provisions contained in sections 3 to 27 of the Act do not apply to home workers.

The High Court held that the Act is applicable to an in- E . dependent contractor where he is employing labour for and on his own behalf. There he is the principle employer. No artificial relationship of master and servant arises as a result of the operation of the. definitions in section 2(g) (a) (b) and 2(m) of the Act. The Gujarat High Court, in Civil Appeal No. 585 of 1971, upheld the provisions of the Act to be constitutional.

The first contention on behalf of the petitioners and the appellants is that the Act of 1966 is invalid on the ground of lack of legislative competence.

The High Courts of Madras, Kerala, Gujarat, Mysore and Andhra Pradesh have rightly beld the Act to have constitutional competence. Counsel on .behalf of the petitioners contended that entry 24 in list fl is the only legislative Entry for the piece of Legislation.

Entry 24 speaks of industries subject to the provisions of Entries 7 and 52 of list J. Entry 7 in List I speaks of Industries declared by

Parliament .by .law to be necessary. for the purpose of defence or for the prosection of war. Entry 52 in List I speaks of Jndusfries the control of which by the Union is declared by Parliame.nt by law to be expedient in the public interest. The legislation in. the present case

does_n0t fall within Entry 24.in .List II or Entries 7 and 52 fu List.I.

Entry 24 in List III. speaks of Labour including conditions of work, provident funds, employers' libiljty, workmen's .compensation, . invali-. dity and old:age .pension~ and maternity benefits. The .Act is for welfare of.lal>our. It is not an.Act.f-Or, indqstries.

The.tru~ !)llture \Ind. character of the legislation, -how.s that it is for enforcing better-

234 sunEME COURT REPORTS

[ 1974 J 3 S.C.R.

1.::onditiorts of labour amongst those who are engaged in the manufacture of beedis and cigars.

The scheme of the Act relates to provisions regarding health and welfare, conditions of employment, leave with wages, extension of benefits by applying other Act to Labour.

To illustrate section 28 of the Act extends benefits of the Payment of Wages Act to industrial premises, Section 31 of the Act provides for security of service, Section 37 of the Act extends the benefit of Industrial Standing Orders Act, 1946. Again, section 37 (3) of the Act makes provisions of the Maternity Benefit Act applicable to every establishment.

Section 3 8 ( 1) of the Act applies the safety provisions contained in Chapter IV of the Factories Act to industrial premises.

Section 39(1) of the Act makes the Industrial Disputes Act, 194 7 applicable to matters arising in respect of every industrial premises.

Section 39(2) of the Act provides thai disputes between an employee and an employer in relation to issue of raw materials, rejection of beedis and cigars, payment of wages for the beedis and cigars rejected by the employer, shall be settled by such authority as the State Government may specify. An Appeal is provided to the appellate authority whose decision is final.

Section 39(1) of the Act applies to industrial premises.

Section 39(2) of the Act applies to every establishment.

The Act speaks of licensing of industrial premises.

The benefits under the Act are extended to both industrial premises and establishments.

Establishments mean also places where home workers work.

The pith and substance of this Act is regulation of conditions of employment in the beedi and cigar industry.

The Act deals with particular subject matter as regards the establishments and industrial premises.

These matters are regulation of conditions of employment in the industry and the industrial relations between the employer and the employee.

Entries 22 to 24 in List III are wide enough to cover this piece of labour welfaJ:e measure.

Entry 22 deals with labour welfare.

Entry 23 deals with social security, employment and unemployment.

Entry 24 deals with welfare of labour including conditions of work, provident funds, employer's liability, workmen's compensation, invalidity and old age pensions and maternity benefits. The Act. is valid and falls within Entries 22, 23, and 24 of List III.

Sections 3 and 4 of the Act were challenged as violative of Article 19 ( 1) (g) and Article 14 on account of procedural unreasonableness and conferment of unfettered powers on the licensing authority without the requisite safeguards.

These two. sections require licence in respect of industrial premises.

Th_e provisions are applicable both to trade mark holders as well as contractors.

There is no difficulty with regard to manufacturers to obtain licence in respect of industrial premises.

If contractors are employers of. Jabour for and on their own behalf, the contractors will have to obtain licences for manufacture of beedis in industrial premises.

The relevant authorities have to refer to certain matters in the grant of refusal of a licence.

These matters as set out in section 4 of the Act are (a) suitabilityof.tbe place of premises which is proposed to be used for the manufacture of beedi .or cigar or both (b) the previous experience of the applicant, (c) the

E .

MANGALOl\E BEEDI WORKS V. UNION (Ray, C.l.) 235

financial resources of the applicant including his. financial capacity to meet the demands arising out of the provision of the laws for the time being in force relating to the welfare of labour (d) whether the application is made bonafide on behalf of, the applicant himself or aoy other person and ( e) welfare of the labour for the locality in the interest of the public generally and such other matters as may be prescribed.

The licensing authority is required to communicate. his reason in writing when he refuses to grant a licence.

Section 5 of the Act provides an appeal to the appellate authority against such order.

The power to grant or refuse a licence is sufficiently controlled by necessary guidance. There are safeguards preventing the abuse of power. The right to appeal is a great safeguard.

The various matters indicated in ; ection 4 in regard to the grant of licence indicate not only the various features which are to be considered but also rule out any arbitrary act.

There is machinery as well as procedure for determining the grant of refusal of a licence.

The application for grant of a licence is. to be determined on objective consideration as laid down in the section. There ts :neither unfairness nor unreasonableness in sections 3 and 4 of the Act.

D The validity of the Act was challenged on the principal ground that the Act imposed unreasonable restrictions on the manufacturers in their right to carry on trade and business in the manufacture of beedis and cigars.

The unreasonable restriction was said to be the imposition of vicarious liability on the manufacturers for acts and omissions in case of independent contractors through whom they get beedis and cigars and over whose employees they do not have any control and with whom they do not come in contract. The provisions of section 2(g) (a) and 2(m) read with sections 2(e) and (f) of the Act are said to create a totally artificial and fictional definition of employer and thereby to cast vicarious liabilities upon a manufacturer of and trader in beedis in respect of diverse matters which entail civil aod criminal liabilities. Liabilities are imposed on manufacturer or trader in beedis in respect of home workers whom it is said, they cannot control.

The home workers are in thousaods. It is impossible for a manufacturer to have aoy idea of the identity of the persons rolling beedis or the premises where they work.

Raw materials are delivered to workers to do the work of rolling the beedis himself and not having done by any other person. It is, therefore, said there is no rational basis for iQlposing vicarious liability. Though liabilities and obligations are great in relation to contract labour there ;, said to be no corresponding creation of rights which normally exist in employer in respect of his employees. The cumulative effect aod.impact of the various provisions of the Act imposing liability on the manufacturer is said to render it impossible for the maoufacturer or trader to carry on his business. From a commercial pc!int of view, the restrictions are said to be drastic and unreasonable.

The Act defines in section 2(e) contract labour meaoing aoy per- H son engaged or employed in any premises by or through a contractor with or without the knowledge of the employer in any manufacturing process. Section 2(f) of the Act defines employee to mean a person employed directly or through any agency whether for wages or not in

236 51JPB.l!ME COUllT llEl'Dllts

[19741 3 S.C:R.

any establishment to do any work skilled and unskilled and includes A . (i) any labonr who is given raw materials by an employer or a contractor for bemg made into beedi and cigar or bolh at home (hereinafter referred to in this Act as 'home worker' and (ii) any person not employed by an employer or a contractor but working with the pennission of, or under agreement with, the employer or contractor.

Section 2(g) of the Act defines "employer" to mean (a) in relation to contract lat>our the principal employer, and ( o J in telation to other B labour,. the person who has the ultimate control over the affairs of any establishment or who has, by reason of his advancing money, supplying goods or otherwise, a sub.stantial interest in the control of the affairs of any establishment, and includes any other person to whom the affairs of the establishment are entrusted, whether such other person is called the managing agent, manager, superintendent or by a .. 1 other name.

Section 2(m) of the Act defines 'principal employer' to mean C a person for whom or on whose behaH any contract labour is engaged or employed in an establishment. section 2(h) of the Act defines 'establishment' to mean any place or premises including the precincts thereof in which or in any part of which any manufactnring process connected with the. making of beedi or cigar or both is being or is ordinarily, carried cin and includes an industrial premise...

Section 2(i) of the Act defines 'industrial premises' to mean any place or premises in which any industry or manufacturing process connected with the making of beedi or cigar or both is being or is ordinarily, carried on with or without the aid of power. ·

These definitions indicate these features.

First, there are workers in industrial pren'tises and workers in establishment.

Second, the Act recognises home workers.

Third, the Act recognises contract labour by or through contractor.

Fourth, .. any person who is given raw materfals by an .employer or a contractor is an empl0y, e ... Ag•in. any person thougll not employed by an employer or a contractor but working with the permission or. under agreement with the employer or a contractor is an employee .. Fifth, in relation to .:ontract labour the principal employer is a person for whom and on whose beh'lf labour is engaged or e, mployed in an establishment.

Sixth, the employer in relation to other labour is a person who has ultim1te con(rol over the

affair~ of any establishment or who has by reason of advancing money, 5Uj>ply goods. or otherwise a substantial interest in the affairs Of ar, y establishment.

The two classes of employers are broadly defined as the employer and the prindpal employer.' The first kind is the manufacturer who di.r"<; tlV employs. labour. mob a manufacurer becomes. an employer w1thm tho moanmg Of SectJon ~(g)(b) '?f ~e Act ;>y ongag1ng l1bour.

The econd class of employer 1s ·(he prmc1pal employer who through a C<, Jutractcr as defined in section 2(a) of the Act engages labour whh is J.; nown. •s contract lab:our.

This hbour <s engaged by. or, on !)<; half 9f !11~ ma.r, i; factµter whobecomesJho principal .employer • .ThC

third. cate~<iry of employer Js. a contractor. who engages !"hour .for exec.iti, rtg, work for and GI). his own behalf.· Such a cont!actor. may undertake work from a manufacturer or a .trade mark holder but he

ii "' '

MANGALORE BEED! WORKS V. UNION (Ray, C.l.) 237

becomes the principal employer in relation to contract labour on the ground that the labour is engaged for and on his own behalf.

The fourth class of employer is where a contractor becomes what is known as sub-contractor, of a contractor. A contractor in such a case would ask the sub-contractor to engage labour for and on behalf ,, f the contractor. Jn such a case the contractor would be the principal employer because the sub-Contractor is engaging contract labour for and on behalf of the contractor who is the principal empluyer.

The fifth class of employer is where a person by reason of advancing money or supplying goods or otherwise having a substantial interest in the control of any establishment becomes the employor of labour.

To illustrate, a mortgagee in possession of an industrial premises, a hypo• thecatce of goods manufactured ip industdal premises or in a.ny establishment,· a financier in relation to a manufacturer or a contractor or a sub-contractor may become employer by reason of such consideration mentioned in the Act.

Iii cases where the manufacturer or trade mark holder himself employs labour there is direct relationship of master and servant and therefore liability is attracted by reason of that relationship.

There cannot be any question of unreasonableness in such a case.

In the second category the manufacturer of trade mark bolder engages contract labour through a contractor and he becomes the princ; pal employer.

Though such labour may be engaged by a contractor with or without the knowledge of the manufacturer or trade mark holder, this contract labour is engaged for the principal employer who happens to be the trade mark holder or the manufacturer. The liability arises by reason of coptract labour engaged for or on behaH of the principal employer.

Jn tlie tHird category, the contractor becomes the principal employer because the contractor engages labour for or on his own behalf. Where the contractor engages labour for the manufacturer it is not unreasonable restriction to impose liability on the rr.ar.ufacturer fer the labour .engaged by the manufacturer through the contractor.

It is important to notice that the Act fastens liability on the person who himself engages labour or the person for whom and on whose behalf Jabour is engaged or where a person has ultimate control over the affairs of the establishment by reason of advancement of money or of substantial interest in the control of the affairs of the establishment. ·

Therefore, the manufacturers or trade mark hoidcrs have liability in respect o! workers who are directly employed by them or who are employed by them through contractor>.

Workers at the indu>trial premises do not present any problem.

The m 1aufacturer or trade mark holder will observe all the provisions of the Act by reason of employing .such labour in the industrial premises.

When the rnamxfacturer engages labour through the contractor the labour is engaged on behalf of the manufacturer, and the latter has therefore liability to such contract labour. It is only when the contractor engages labour for or on his own behalf and supplies the finisheJ product to the

mmufacturer that he will be the principal employer in relation to such labour and the manufacturer will not be responsible for implementinJ

3-954SCin4

[ 19741 3 S.C.R.

the provisions of the Act with regard to such labour employed by the contractor. If the right of rejection rests with the manufacturer or trade mark holder, in such a case the contractor who will prepare b(ledis through the contract Jabour will find it difficult to establish that he is the independent contractor. If it is a genuine sale transaction by the contractor to the manufacturer or trade mark holder it will point in the direction of an independent contractor.

This Court in Dewan Mohideen Sahib v. United Bidi Workers' Union Salem, [19641 7 S.C.R. 646 said that the so called independent contractor in that case was supplied with tobac;:o and leaves and was paid certain amounts for the wages of the workers employed and for his own tr.ouble.

The so called independent contractor was merely an employee or an agent of the appellant in that case. The so called independent contractor had no independence at all. The proprietor could at his own choice supply raw niatcrial or refuse to do so. . The contractor had no rigbt tg_ insist on supply of raw materials to him.

The work was distributed between a number of so called i11dependent contractors, who were told to employ not more than 9 persons at one place to avoid regulations under the Factories Act.

This Court held that the relationship of master and servant between the appellant and the employees employed by the indep, ndent contractor was established in that case. If it is found that manufacturers or trade mark holders are not responsible_ on the ground that the person with whom they are dealing are really independent contractors then such independent contractors will have tu be consideroo as principal employers within the meaning of the At ..

The contention on behalf of the petitioners and the appellants is that in common law a person cannot be made respqnsible fDr actions oi an independent contractor and that he should not be penalised for the contravention of any law by an independent contractor is to be examined in view of the language employed in defining the expressions cqntract labour, contract, establishment, employer and principal employer. It was particularly said that when home workers were given tobacco and leaves directly by the manufacturers the home workers would not be under their control and the manufacturers should not be made responsible for providing any amenities or .leave facilities for those home workers.

This Court in Silver Jubilee Tailoring House & Ors. v.

Chief Inspector of Shops and Establishments & Anr. (Civil Appeal No.

1706 o( 1969 decided on 25th September, 1973) discussed the question as to whether employer employee relationship existed between the tailoring house and the workers in that case. The definition of a person employed in that case was a person wholly or principally employed therein in connection with the business of the shop.

The workers were paid on piece rate basis.

They attended the shops if there was work.

The rate of wages paid to the workers was not uniform.

The rate depended upon the skill of the worker and the nature f the work.· .Th~ workers were given cloth for stitching. They1 were to, d how the slttchmg was to be done.

If they did not stitch it

MANGALORE BEED! WORKS V. UNION (Ray, C.J.) 2 39

according to the instructions, the employer rejected the work.

The worker was asked to re-stitch. If the work was not done according to the instruction no further work was given to a worker.

A worker did not have to make an application for leave if he did not come to the shop on a day. If there was no work, the employee was free to leave the shop. All the workers worked in the shop.

Some worker< could take cloth for stitching to their homes.

Mathew, J. speaking tor the Court referred to the dedsions of this Court and English and American decisions and came t<) these conclusions. First, in recent years the control test as traditionally formulated has not been treated as an exclusive test. Control is an important factor. Second, the organisation test, viz., that the workers attend the shop and work there is a relevant factor. If the employer provides the equipment this is some indication that the contract is a contract of service. If the other party provides the equipment this is some evidence that he is an independent contractor. No sensible inference can be drawn from the factor of equipment where it is customary for servants to provide for their own equipment.

Little weight can today be put upon the provisions of -tools of minor character as opposed to plant and equipment on a large scale.

Third, if the employer has a right to reject the end product if it does not conform to the instructions of the employer and direct the worker to re-stitch it, the element of control and supervision as formulated in the decisions of this Court is also present.

Fourth, a person can be a servant of more than one employer. A servant need not be

under the exclusive control of one master. He can be employed under more than one employer.

Fifth, that the \mrkers are not obliged to work for the whole day in the shop is not very material. In the .. ultimate analysis it would depend on the facts and circumstances of each case in determining the relatioship of master and servant.

The present legislation is intended to achieve welfare benefits and amenities for the labour. That is why the manufacturer or trade marks holder becomes the principal employer though he engages contact labour through the contractor. He cannot escape liability imposed on him by the statute by stating that he has engaged the Jabour through a contractor to do the work and therefore he is not responsible for the labour. The contractor in such a case employs the Jabour only for and on behalf of the principal employer.

The contractor being an agent of the principal employer for manufacturing beedis is amenable to the control of principal employer. That is why the statute says that even if the contract engages labour without the knowledge of the m ployer the principal employer is answerable for such labour because the labour is engaged for or on his behalf. The act and the Rules thereunder prescribe maintenance of Jog books and registers, Where the manufacturer or the trade mark holder engages labour directly, the manufacturer maintains registers and Jog books. Where the manufacturer engages contract labour through a contractor the manufacturer will require the contract or to maintain such log books of the contract labour and through such books and registers Will keep control over not only the contractors but also the labour.

240 SUPREM]l COURT REPORTS

[ 19741 3 S.C.R.

The principal employer is the real master of the business. He has real control of the business.

He is held liable because he exercises supervision and control over the labour employed for and on his behalf by contractor.

The benefits of the welfare measure reach the workmen only by direct responsibility of the principal employer.

The basis of the welfare measure is in the interest of the workers with regard to their health,. safety and wages including benefits of leave am! family life.

The Bombay High Court and the Kerala High Court struck down the provisions contained in sections 2(g) (a) and 2(m) of the Act in regard to the principal employer being liable for contract labour as an unreasonable restriction o-:i. the manufacurer's right to carry on business.

This view proceeds on the basis that the principal employer is liable for acts of the independent contractor. The Act does not define an independent contractor, nor mention the independent contractor.

The Act speaks of the principal employer in relation to contract labour and employer in relation to other labour.

When a contractor engages labour for or on behalf of another person that other person becomes the principal employer.

The Attorney General rightly said that if it were established on the facts of any particul.ar case that a porson engaged labour for himself he would be the principal employer of contract labour. In such an instance there is no question of agency on behalf of another person.

In cases where an industrial manufacturer finds it convenient to give work on contract rather than do it employing his own man he cannot have the advantages of employing the labour without corresponding obligations. If the contractors could be made responsible for the working conditions of labour or their wages or their leave or their other benefits than no question would arise.

It is not uncommon for labourers to work for a contractor on terms which are designed to satisfy the law that they are not servants but independent contractors.

In the present case, it is not material to find out as to who can be called an independent contractor. It can be said that independent contractors are those who employ labour for and on behalf of themselves in so far as the present Act is concerned.

The only scope for inquiry is whether a person has employed labour for and on his own behalf. If the answer be in the affirmative then such a contractor would be a principal employer within the meaning of section 2(g) (a).

ft appears that the principal employer or the employer, as the case may be, is liable on the ground that the labour is employed for or on behalf of the principal employer or the employer.

In relation to contract labour the principal employer is the person for whom or on whose behalf any contract labour is engaged in any establishment. An employer in relation to other labour is the person who has the ultimate control over the affairs of any establishment or has a substantial interest in the control of the affairs of any establishment as defined in section 2(g) (b) of the act.

There is no vicarious liability in the case of the principal employer or in the case of employer The Act does not define an independeni contractor.

The Act does not prevent an independent contractor from being the principal employer in relation to contract labour.

It will , bo a question o( fact in each case as to

MANGALORE BEED! WORKS v. UNION (Ray, C./.) 241

who is the person for whom or on whose behalf contract labour is engaged. If such a contractor who is referred to as an independent contractor employs labour for himself the liability will attach to him as the principal employer and not to the manufacturer or trade mark holder.

There is no restriction on the right of the manufacturer or the trade mark holder to carry on business.

They are liable under the Act for contract labour employed for or on behalf of them.

For the foregoing reasons the provisions of the Act in particular contained in sections 2(g) (a), 2(g) (b) and 2(m) are constitutionally valid and do not impose any unreasonable restriction on the manufacturer or trade mark holder.

On behalf of the petitioners and the appellants, it is said that section 26 of the Act gives substantive rights with regard to leave and section 27 of the Act is the procedural part in computing wages.

The contention advanced was that section 26 of the Act speaks of employees in an establishment and, therefore, these sections do not apply to home workers.

The contentions are that sections 26 and 27 of the Act cast an unreasonable burden and impose obligations which are not practically capable of fulfilment and are thus violative of Articles 19 (I)

(f) and (g) of the Constitution.

In any event sections 26 and 27 of the Act are said to bo unenforceable in regard to home workors and are, therefore, violative of Articles 19(1) (f) and (g) so far as the same are applicable to home workers.

These two sections deal with leave and wages during leave period.

Broadly stated, section 26 allows leave at the rate of one day for every 20 days of work performed by an adult omployee during the previous calender year. In the case of a young person 1eave is at the rate ot one day for very 15 days of work during the previous calender year.

There are provisions as to calculation of leave which are not material in the present case.

Under section 27 of the Act an employee shall be paid at the rate equal to the daily everage of his full time earning for the days on which he had worked during the month immediately preceding his leave exclusive of any overtime earnings and bonus but inclusive of darness and other allowances.

There are two explanations.

The first explanation states that the expression "total full time earning" includes cash equivalent to the advantage accruing through the concessional sale to employeei of foodgrains and other articles, as the employee is for the time being entitled to, but does not include bonus.

The second explanation states that for the purpose of determining the wages payable to a home worker during leave period or for the purpose of payment of maternity benefit to a woman home worker "day" shall mean any period during \Yhich such home worker was employed, during a period of twenty four hours commencing at midnight, for making beedi or cigar or both.

The word "establishment" is defined in section 2(h) of the Act to mean any place or premises including the the precincts in which or in any part of which any manufacturing process connected with the making of beedis or cigars or both is carried on and it includes an industrial premises.

Section 2(i) of the Act defines "industrial premises" to 1mean any place or premises not being a private dwelling house where

[ 19741 3 S.C.R.

the industry or manufacturing process of making beedis or cigar is carried on.

An Employee is defined in section 2(f) of the Act to mean any person employed directly or through any angency in any establishment and include any labour who is given raw materials by an employer or a contractor at home referred to as the home worker and person employed by an em.iloyer or a contractor but working at the premises with the employer or contractor.

Therefore, the words 'employed in an establishment' in section 26 of the Act are refe.rable to borne workers as well. The second explanation to section 27 of the Act also speaks of determination of wages payable to borne worker during leave period.

It was said that the words "total full time earnings" occurring in section 27 of the Act were inapplicable to home workers for these reasons.

First a home worker with the assistance of his family members could collect large earnings in a month preceding the month in which he would take leave.

This was said to be an unreasonable restriction on an employer inasmuch as a home worker would not work hard or perhaps at all for a considerable period of time and would work only in the month preceding which he would take leave.

It is not possible for a home worker to increase his earnings because the employer will have control over raw materials supplied to home worker as also on the daily turnover.

An employer is in a position to prevent malpractices or abuse of taking more materials to make a higher income.

It is also reasonable to hold that an employer will not allow an employee on increasing the income.

It was secondly said that section 27 of the Act did not prescribe the minimum number of days an employee should work before he was entitled to annual leave wages.

Reference was made to section 79 (I) of the Factories Act 1948 which provides for 240 days of work as minimum for entitlement of annual leave.

The provisions in section 26 of the Act is that for every 20 days one day's leave is allowed.· If any worker does not work hard one will not be entitled to leave as conteplated in the Act.

The basis of calculating one day's leave for every 20 days of work is also adopted in the case of Government servants. (See Central Civil Service Leave Rules, 1972 Rules 26 and 2(m).

Instead of being unreasonable it can be said to be an impetus to a servant to put in the maximum of work in order to obtain the maximum amount of leave.

The entitlement to leave under section 27 of the Act is based on the number of days of actual work. It is, therefore, not an unreasonable restriction on the employer.

Thirdly it is said that the payment of leave wages at the rate equal to the daily average of his total full time earnings in the case of home workers is unreasonable.

Reference is made to section 22 of the Act which speaks of notice of periods of work in industrial premises. ec tion 22 of the Act is not applicable to home workers. In the case of home workers it is said that they are free to do work at any time and for any length of time in a day even for 24 hours a day. It is, therefore said . that it will be difficult to calculate the total full time earnings of home workers.

MANGALORE BEEDI WORKS V. UNION (Ray, C.J.) 243

The works in section 27 of the Act are "total full time earnings".

One meaning of the words in the case of home workers wiII be daily average hours of work done by home worker during the last month be fore leave provided such average does not exceed the daily period of work as prescribed in a notice under section 22 of the Act.

Such a construction would give not only full meaning to the words "full time earnings" but would also place home workers and workers in industrial premises in the same position with regard to their leave wages.

It wiII not cast unreasonable burden on the employer in the form of leave wage> disproportionate to the amount of work done by the home w<lrkers.

Another meaning is that the total full time earnings would be the actual total earnings as far as the workers in industrial premises as well as home workers are concerned.

With regard to the second meaning the words "full time" wiII not have any restriction as to hours of work.

The result may be that a home worker may have lqnger hours of work and larger income compared with the worker in the industrial premises, but such longer hours of work can be controlled by an employer both with regard to giving raw materials and allowing longer hours of work.

As a matter of fact it is found that home workers can turn out 700 to 1000 pieces a day.

That is the view expressed in the Report of the Royal Commission on labour in India 1931 as also the Labour Investigation Committee Report 1944 and the Report of the Court of Enquiry appointed by the Government of Madras, 194 7.

The minimum wages prescribed by various states for these home workers are between Rs. 2 to 4.30 for rolling 1000 pieces.

Therefore, the Financial burden on account of leave wages will not be higher to constitute any unrea>onable restriction.

The Bombay High Court in the present appeals said that the provisions of sections 26 and 27 of the Act constitute unreasonable restriction not only with regard to home workers but also with regard to employees in industrial establishment.

The reason given is that if employees in industrial premises do not choose to work for all days for the full hours notified it will be equally impossible to determine what his full time earnings will be and what his daily average of the full time earnings for the days on which he worked during the preceding month will be.

The Mysore High Court in the present appeal correctly said that the home workers will get wages for the leave period corresponding to the number of beedis manufactured by him for a particular employer.

The hours of work will in that case be immaterial, because if he worked for less number of hours he would obtain lesser payment.

There will thus be no difficulty in computing wages payable for the annual leave period.

The Jwme worker will get leave wages corresponding to his actual earn ing just as the worker in the industrial premises will get leave wages corresponding to his full time earnings.

The Andhra Pradesh High Court in the present appeal said that home workers carry on their rolling work at homes which are neither establishments nor industrial premises.

The word ''establishment" as defined in section 2(h) of the Act , relates to home workers as well. It

SUPREME COURT REPORTS I 1974 I 3 s.C.ll.

is only industrial premises as defined in section 2(i) of the Act which excludes private dwelling houses.

The home workers are not required to work for a specified number of hours a day.

The fact that sections 17 to 23 of the Act can have no application to home workers but only to persons employed in industrial premises does not tender sections 26 and 27 of the Act inapplicable to home workers.

The express language of section• 26 and 27 of the Act is relateable to home workers.

They work in establishments. The daily average of total full time earnings for the days worked during the month immediately preceding the leave is applicable to home workers. l t is because payment to home workers is made at piece rate, viz., for the number of beed'is rolled. The Madras High Court sai<\ that sections 26 and 27 of the Act have imposed unreasonable restrictions on manufacturers in regard to employees rn industrial premises.

The Madra.

High Court held that for working 11 days a worker would be entitled to one day as annual leave with wages.

The Act does not say so.

The Act provides that any fraction of leave for half a day or more will be treated as one day's iull leave.

Therefore, if on a calculation of entire leave at the rate of one day for every 20 days of work, there is any fraction of more than one day's leave so calculated or earned it would be treated as one day.

It is only where there is fraction of leave earned that for such 11 days work one day's leave is to be given. It is not same as providing one day's leave for working only 11 days in all cases.

The entitlement under the Act to one day's leave for every 20 days show; that the period of 20 days is a minimum period prescribed for earning one day's leave.

The structure of sections 26 and 27 of the Act is two-fold.

First, so far as workers employed in industrial premises are concerned they are entitled to annual leave with wages provided they work for at least 20 days a year, for full hours work specified in the notice.

Tl1erefore, sections 26 and 27 of the Act will not apply to workers in industrial premises who have not worked for full working hours according to the notice for 20 days a year.

Second, sections 26 and 27 of the Act will apply to home workers who work at least 20 days a year and the day within the expression 20 days will mean any period of day because there is no notified hours of work.

In view of the fact that the two sections are applicable both to workers in industrial premises and home workers the expression "'total fu11 time earnings" occurs in section 27 of the Act.

Section 11 deals with working hours.

Section 22 speaks of notice of periods of work.

Sections I 7 and 22 refer to industrial premises and are therefore not applicable to home workers.

The total full time earning; for workers in industrial premises will attract the specified periods of work conten1plated in section 22 of the Act.

With regard to a home worker the wages during leave period will be calculated with reference to the daily average of his total full time earnings for the days on which he had worked during the preceeding month.

In the case of home workers it will be the average of 30 days earnings.

To illustrate, if the worker has earned different sums on different days during the month the sums will be added for the purpose of arriving at an average.

The computation

MAlloALORE BEED! WORKS V. UNION (Ray, C.J.) 245

in the case of home workers will be first with reference to the total earning during the month and full time earning' is the average thereof.

The second explanation to section 27 of the Act shows that for the purpose of determining the wages payable to home worker during leave period day sball mean any period during which such home worker, was employed during any period of 24 hours.

Therefore, so far as the home worker is concerned day shall mean a.ny period.

The manner in which leave wages for workers in industrial premises and home workers are to be calculated may be illustrated with reference to the beedis and Cigar workers (Conditions of Employment) Mysore Rules, 1969.

Section 44(2) of the Act provides that the State Government my make rules inter alia for the records and reister they shall maintain in establishments in compliance with the provISions of the Act and the rulos thereunder.

Establishment means both industrial premiaes .and any private house where the home workers carry on their work, Rule 33 of the Mysore Rules framed under the Act speaks of maintenani:e of records and registers in Form No. XIIJ. Form No.

XIII has 8 columns as the muster roll of employees in industrial premises. Rule 33 (2) of the Mysore Rules speaks of records for home workers in Form No. XIV.

There are four columns showing the date, whether work was done, number of beedis manufactured and the wages received.

At tl!e foot of Form XIV it shows the total number of days worked in the month.

Therefore, in the case of home workers wages are calculated on the basis of these records, namely, the number of days worked and second the amount of wages received.

In the case of home worker hours of work are not necessary. In the 'case of employee industrial premises columns 8 and 9 show)nter alia the group, relay, shift number and period work.

With regard to home workers payment is made at the rate of 1000 pieces of beedis.

Leave with wages in the case of home workers is on that basis of payment. The log book is a form of guarantee and security for both the employer and the worker in regard to quality of work and relative payment.

Reference was made to four earlier decisions of this Court for the F purp6se of showing that sections 26 and 27 are inapplicable to home workers.

reference to the Factories Act.

Sections 79 and 80 of the Factories Act were considered there.

These two sections are in similar language to section 26 and 27 of the Act.

The only difference is that unlike section 79 of the Factories Act, in section 26 of the Act there is no requirement of working for 240 days a calendar year for entitlement to annual

!ave and further thafin section 26 of the Act the words used are "employee" in place of the word 'worker' and the word "establishment" in place of the word "factory" in the Factories Act.

In Chintaman Rao (supra) case this Court held that the three ingredients and concepts of employment are, first there must be an employer, second, there must be an employee and the third, there must

[ 1974 J 3 S.C.R.

be a contract of employment, In Chintaman Rao case (supra) certain A independent contractors known as Sattedars supplied beedis to the Manager of a beedi factory.

The Sattedars manufactured the beedis in their own factories or they entrusted t)ie work to third parties. The Inspector of Factories found in the beedUactory certain sattedars who came to deliver beedis manufactured by them. The owner of the factory was prosecuted for violation of sections 62 and 63 of the Factories Act for failure to maintain the register of adult workers. It was held B that the Sattedars and their "coolies (sic) were not workers within the definition of section 2(1) of the Factories Act.

The ratio was that the Sattedars were not under the control of the factory management and could manufacture beedis wherever they pleased. Further the 'coolies'

(sic) were not employed by the management through the Sattedars.

'Jn Birdhichand Sharma case (supra) the appellant employed C workmen in factory.

The workmen were not at liberty to work at their houses.

Payment was made for piece rates according to the amount of work done. The workmen applied for leave for 15 days. The appellants did not pay their wages.

The appellant contended that the workmen were not workmen within the meaning of the Factories Act. It was held that the workmen could not be said to be independent C!Jnlractors but were workmen within the meaning of section 2(1) of the Facto- D ries Act.

A distinction was sought to be drawn between workmen and independent contractors. It was heldthat the workmen could come and go when they liked, they were piece rate workers within the meaning of the Factories Act. If the worker did not reach factory before midday he would be given no work.

He was ti:> work at the factory.

He could not work elsewhere.

He would be removed if he was absent for 8 days.

His attendance was noted. If his work did not come up to E the standard the pieces prepared would be rejected.

The leave provided under section 79 of the Factories Act was held to be a matter of right when a worker had put in a minimum number. of working days.

In Shankar Ba/aji Waje case csupra) it was held that the labourers who used to roll beedis in the factory were not workers within the meaning of the Factories Act.

Birdhichand Sharma case (supra) was distinguished on the facts.

The minority view was that the workers in F Shanker Balaji Waje case (supra) were of the same type as Birdhichand Sharma case (supra). In Shankar Ba/aji Waje case (supra) the majority view was that there was contracts of service.

The worker ' was not bound to attend the factory for any fixed hours.

He could be absent from the work any day he liked and for ten days without informing the appellant.

He had to take permission if he was to be absent for more than 10 days.

The worker was not bound to roll G beedis ot the factory.

He could do so at home with the permission of the appellant.

There was no actual supervision.

Beedis not up to the standard could be rejected.

Workers were paid at fixed rates.

In Bhikuse Yamase case (supra) this Court had to consider whether a notification under section 85 of the Factories Act giving the beedi rollers benefits provided to workers in the Fectories Act was valid.

H Beedi rollers were refused benefits by the owners of beedi manufacturing establishments. Therefore, the State Government issued notification under section 85 of the Factories Act Section 85 of the Factories Act

MANGALORB BEED! WORKS V. UNION (Ray, C./.) 247

prO\ "ko Jiat the State Governm, .it may declare that all or any of the provisc•>ns of the Act shall apply to any place where a manufacturing process is carried on notwithstanding that the number of persons employed therein is Jess than the number specified in the definition of factory or where the persons working therein are not omployed by the owner but are working with the permission of, or under agreement with, such owner. The State Government designated certain places to be deemed factory and t!te persons working there to be deemed workers.

This Court said that extension of the benefits of the Factories Act to premises and workers not falling strictly within the purview of the Factories Act is intended to serve the same purpose. On this reasoning the provisions for the benefit of deemed workers were held to be reasonable within the meaning of Article 19(1) (g) of the Constitution.

These four decisions were relied on liy counsel for the petitioners and the appellants fo show that home workers would not be entitled to leave on the ground that sections 26 and 27 of the Act were unworkable In regard to home workers and constituted unreasonable restrictions.

The imposition of liability to afford to home workers benefits like annual leave with wages cannot be said to be unreasonable restriction on the right of the owner to carry on his business. In the Act, the word

"employee" includes a home worker .. The word "establishment" applies to a private house.

The second explanation to section 27 of the Act indicates that a home worker is dealt with by the section. Sections 26 and 27 of the Act are to be read together.

Jn Birdhichand Sharma case (supra) this Court held that if a worker had put in a number of working days he would be entitled to leave.

This Court did not go into a question as to what the meaning of the word "day of work" would be to entitle a worker annual leave under section 79 of the Factories Act in Birdhichand Sharma case (supra).

Jn the present case the Act contemplates that ho ce workers are at liberty to work at any time and for any number of h"urs a day. The Act cannot be said to be not applicable to home worlcers. The Act has made a distinction between the two types of workers and has made the Act applicable to both the types of workers. Even with regard to workers in industrial premises where period of work is notified it is not obligatory on the part of the employer to allow an employee to work in the industrial premises for the whole of the notified period of work ..

The employee can be asked to work for the whole of the notified period of work which will not exceed 9 hours a day or 48 hours a week as provided in section 17 of the Act.

In Shankar Ba/aji Waje case (Supra) the majority view was that the expression "total fnll time earnings" mean earnings in a day by working full time on that day and full time was to be in accordance with the period given in the notice displayed in the factory for the particular day.

On that ground the workers in Shankar Ba/aji Waje case (supra) were held not be entitled to wages for the leave period because such wages could not be calculated when t!1e terms of work were such that they could come andgo when they Jiked and no period of work was mentioned with respect to workers., The majority view in Shanker Balaji Waje case (Supra) will not apply to sections 26 and 27 of the Act because the home workers are entitled to wages during the leave period and such wages do not in the case of home workers depend upon the consideration

[ 1974 J 3 S.C.R,

whether a particular home worker woks for a whole of the notified period of work. The basis of calculation of wages in the case of home workers is the daily average of his total full time earnings for the days on which he haq worked during the month immediately preceding his leave. If a home workers does full time work by rolling out 1000 piecei he will get corresponding amount of wages. Both the factory workers in industrial premises and home workers in establishments are similarly placed by proper control over or regulation of .supply of raw materials to home workers. Just as the total fu11 time earnings of the worker in an industrial premises are calculated with eference to hours of work each day, similarly the full time earnings of the home workers are calculated by the earnings of each day which are kept under control by supply of measured raw materials to produce the requisite number of beedis which a worker can produce a day within his hours of work in the establishment. So far as home workers are concerned, the payment is made at piece rate and it is not material in their case about specifi"d hoers of work because they will get lesser payment if they will not work for the same number of hours as worker in industrial premises.

The provisions of sections 26 and 27 are applicable to home workers and workers in industrial premises are also capable of being made applicable without any reasonable restrictions on employers.

It has been contended that section 31 of the Act which provides one month's notice in lieu of notice of dismissal was an unreasonable restriction.

The reason advanced was that the Act has not dfined the word "wages" and therefore it is not possible to calculate wages. Section 27 of tl:e Act prescribed the rate for calculating wages during the period of leave.

Section 39 (I) of the Industrial Disputes Act applies to matters in respect of every industrial premises.

Section 2(rr) of the Industrial Disputes Act defines wages. The defination of wages in the Industrial disputes Act applies to workers in industrial premises contemplated by the Act.

Home workers are not included in industrial preuises because they work in private dwelling house which are establishments. The defination of wages in the Industrial Disputes Act will apply to workers who are paid on monthly basis. Section 28 ( 1) of the Act empowers the State Government to direct that the provisions of tlie Payment of Wage_s Act, 1936 shall apply to employees in establishments to which the Act applies. Section 2(6) of the payment of wages Act defines "wages" tq include inter alia any remuneration to which the person employed is entitled in respect of any leave period.

Some aid may be had from the definition of wages in the Payment of Wages Act. viz. wages include leave wages.

Therefore, the word "wages" in section 31 of the Act will mean wages which are calculated under section 27 of the Act . This can be calculated both in the cases of workers in industtial premises and home workerSin establishments.

Therefore, the proivsions contained in section 31 of the Act cannot be •.aid to be unreasonable restrictions.

The Petitioners and the appellants next contended that Rule 37 of the Maharasthra Rules and Rule 29 of the Mysore Rules framed under section 44 of the Act imposed unreasonable restrictons on the beedi an~ cigar manufacturers.

Rule 37 of the Maharashtra Rules

MANGALORE BEEDI WORKS V. UNION (Ray, C.J.) 249

provides that no employer or contractor shall ordinarily reject as substandard or chhat or otherwise more than 5 percent of the beedis or cigars of both received from the worker including a home worker. Rule 37(2) of the Maharashatra Rules further provides that where any beedi or cigar ls rejected as sub-standard or chhat or otherwise on any ground other than the ground of wilful negligence of the worker, the worker shall be paid wages for the pieces so rejected at one half of the rates at which wages are payable to him for the beedis or cigars or both which have not been so rejected. ·

Rule 29 of the Mysore Rules provides that no employer or contractor shaR ordinarily reject an sub-standard or chhat or otherwise more than 2 per cent of the beedis or cigars or both received from the worker including a home worker. It is also provided there that the employer or contractor may effect such rejection upto 5 per cent for reasons to be recorded and communicated in writing to the worker.

Rule 29 of the Kerala Rules is identical to Rule 29 of the Mysore Rules except that instead of 2 per cent it provides for 2.5 per cent as a limit for rejection.

The Kerala High Court held that Kerala rule 29 fixes arbitrary percentage and is not in the interest of the general public. The inpos1tion of 5 per cent by the proviso to Rule 29 was said by the Kerala High Court to be arbitrary. It was said that the percentage of rejection might be higher than 5 per cent but the fixed limit of 5 per cent would have this bad consequence. It is that quality of beedis would go dewn if the workers were assured that more than 5 per cent would not be rejected.

The Mysore High Court rejected the contention that Mysore Rule 29 imposes an unreasonable restriction. The reason given by that High Court was as follows. The argument that sub-standard beedis or cigar; in excess of 5 per cent cannot be rejected by the employer is unsound.

Ordinarily 2 per cent rejection is permitted. Rejection upto 5 per cent is permissible only after recording reasons therefore. But if the employer finds that the quantity of sub-standard beedis is about 5 per cent, the matter is to be referred to the Inspector. Therefore, Rule 29 does not compel the employer to accept sub-standard becdis when the rejection is above 5 per cent.

The Bombay High Court upheld Rule" 37 of the Maharashtra Rules which allows rejection of more than 5 .per cent. The 5 per cent reje:tion is said by the Bombay High Court to he an outer limit.

It does not mean according to the Bombay High Court that the rejection mu1t b' 5 per cent. It is said that the contractors by reason of their experieRce will find 5 per cent rejection to be reasonable. The experience suggests that the outer limit of 5 per cent is fairly reasonable. It is difticult to imagine that no limit should be fixed. The Bombay High Courrfurther found that even for sub-standard beedis there is a market though at a lesser rate.

The Bombay High Court further found that pilfering of tobacco was an accepted vice of the industry. Inspi\e of .that melollv rejection in the industry hardly exceeded 3 per cent. The Bombay High Court found 5 per cent rejection to be reasonable.

250 SUPRE~1 E C't1 '.

REPORTS

[ 19741 3 S.C.R.

The maximum limit of 5 per cent for the rejection of beedis is therefore, based on experience in tl1c industry and secondly the employe; ca!' reject m?re than 5 per cent by raising a dispute before the appropnate authonty.

On behalf of the petitioners and the appellants it was said that the word "sub-standard" by itself would offet no guidance for rejection and confer arbitrary power. Section 39(1) of the Act provides that the provisions of the Industrial Disputes Act shall apply to matters arising in respect of every industrial premises and section 39(2) (~) 'of the Act provides that notwithstanding any thing contained in sub-section (1) a dispute between an employer and employee relating to the payment of wages for beedi or cigar or both rejected by an employer shall be settled by such authority and in such manner as the State Government may by Rules specify in that behalf.

Section 44(2) (r) of the Act provides for making of rules with regard to the manner in which sorting or rejection of beedi or cigar or both and disposal of rejected beedi or cigar or both shall be carried out.

The Mysore Rule 27 provides that any dispute between an employer and employee in relation to rejection by the employer of beedi or cigar or both make by an empfoyee may be referred in writing by the employer or the employee or employees to the Inspector for the area who shall after making such enquiry as he may consider necessary and after giving the parties an opportunity to represent their respective cases, decide the dispute and record the proceedings in form X.

For01 X relates to record of decision of Order. Various particu-' Jars, inter alia, are substance of the dispute, substance of the evidence taken and findings and statement of the reasons therefor.

There is also a rihgt of appeal from the decision of the Inspector to the Chief lnspector: It therefore apears that the Rules about rejection and fixing maximum limit of 5 per cent are reasonable and fair. First, experience in the industry as recorded in the Report of Minimum Wages Committee supports such limit of 5 per cent as normal and regular. Second, inspite of 5 per cent maximum limit it is permissible to the employer to reject more than 5 per cent. For that a dispute is raised before the appropriate authorities set up under the Rules. The State Government under Sections 44(2) (r) and (s) of the Act is empowered to make Rules in respect of the manner in which sorting or rejection of beedi or cigar or both and disposal of rejected beedi or cigar or both shall be carried ollt and the fixation of maximum limit of rejection of beedi or cigar or both manufactured by an employee. Section 39(2) of the Act provides that a dispute between an employer and employee relatin~ inter alia to rejection by the employer of beedi or cigar or bo)h made by an employee and the payment of wages for beedi or cigar rejected by the employer shall be settled by such authority and in such manner as the State Goverment may by Rules specify in that behalf.

Rule 27 of the Mysore Rules as well as Rule 27 of the Kerafa Rules provide that a disoute hetweon an employer and employee or employees in relation to rejection by the employer of beedi or cigar or the payment of wages for the becdi or cigar rejected by the employer may be referred in writing by the employer or employee to the Iaspector for the area.

The Inspector after hearing the parties shall decide the issue. The aggrieved party has the right of Apeal to the Chief Ipector.

MANGAWRE BEED! WORJ:S v. UNION (Ray, CJ,) 251

Under Rule 29 of the Mysore Rules rejection of more than 2 per cent and upto 5 per cent is required to be for reasons in writing. Rule 37 of the Maharashtra Rules provides for rejection upto 5 per cent without any obligation to give reasons. It was said by the petitioners that the Mysore and Kerala Rules fixed the limit for rejection but the Maharashtra Rule did not do so. Both the Rules fixed 5 per cent as the maximum limit for rejection. The Mysore and the Kerala Rules have nothing corresponding to Maharashtra Rule 37(2) requiring payment at half the rates for beedis rejected as sub-standard, if. the same was not due to the wilful negligence of the employee. It was, ther<"lore,

said that either up to 5 per cent rejection under Maharashtra Rllle 37 or rejection of more than 5 per cent the employer was under an abligation to make payment at half of the rate as rejected beedis if such rejection was not due to the willuI negligence of the employee.

It has, therofore, to be ascertained as to whether the Rules prohibit employer from rejecting more than 5 per cent even ; r they are {ound to be sub-standard l!_nci seconclly whether the requirement to pay wages at one half of the rate for the rejected beedis is a reasonable restriction.

The Rules provide tor rejection upto 5 per cent. The Rules

further used the word 'ordinarily' in regard to such rejection.

In case of rejection of more than 5 per cent Rule 27 of the Mysore Rules and Rule 3 7 of the Maharashtra Rules provide for raising of a dispute in regard to such rejection. The dispute contemplated is in relation to rejection of beedis and the payment of wages for the rejected beedis.

The word "rejection" and "rejected" indicate that the dispute is raised because of the rejection of beedis. The contention advanced on behalf of the Petitioner that before a dispute is raised on rejection is possible is erroneous. The dispute arises because of rejection.

Therefore, Rules 27 and 29 of the Mysore Rules and Rule 27 of the Kerala Rules do not impose any unreasonable restricton on the right of rejection.

Maharashtra Rule 27 also permits rejection of more than 5 per cent and raising of disputes. The contention on behalf of the petitioners that the Maharashtra Rule which requires payment at one .half of the rate for the rejected beedis on any ground other than the ground of wilful negligence of the worker is an unreasonable restriction is not correct.

The Bombay High Court correctly held that the experience in the industry is that there is a market for sub-standard beedis. It is also reasonable to hold that home workers will be interested in seeing that the beedis are not sub-standard because in the process home workers would be earning less.

The Maharashtra Rule is intended to eliminate exploitation of illiterate workers who are mostly women.

The Rules with regard to rejection are, therefore, reasonable. It is also open to the employers to raise dispute for rejection above 5 per cent,

The Petitioners and the appellants challenged section 37(3) of the Act as unworkable. That sub-section provides that the provisions of the Maternity Benefit. Act, 1961 shall' apply to every establishment as if such establishment were an establishment to which the said 1961 Act had been applied by notification unde.r section 2(i) of 'he said 1961 Act. The proviso to section 3 7 ( 3) of the Act states thal Maternity Benefit Act in its application to a home worker shall apply subject

.~.

[ 1974 J 3 S.C.R.

to certain modifications.

The Madras High Court upheld the contention and said that since a worker in a beedi industry is not required to w.ork regularly for any prescribed perio:I of hours in a day or even day after day for any specified period, from the very nature of the case, provisions of the said l % l Act are unworkable with regard to such home workers. It may.be stated that the reasonableness of section 37(3) of the Act was not challenged.

An argument which was submitted was !hat it was difficult to locate home workers.

That argument was not pressed in this Court.

The provisions of the said 1961 Act in sections -4 &nd 5 thereof deal with prohibition of employment of, or work by, women, prohibited during certain peri":I and right of payment of maternity benefit Section 4 of the 1961 .Act does not present any difficulty because it speaks of prohibition of work by a women in any establishment during .six months immediately following the day of her delivery.

Further, section 4 provjdes that on a request being made by a pregnant woman she will not be required to do work of an arduous nature or work which involves long hours of standing and that period is one month immediately precedi~ the period of six weeks before the date of her expected delivery.

Section 5(2) of the said 1961 Act provides that no women shall be en.titled to maternity benefit unless she has actually worked in any establishment f6r a period of not less than 160 days, in the twelve months immediately preceding the date of her expected deJivery.

There is no difficulty with regard to working of these sections in regard to maternity benefits to women employed in an establishment.

For these reasons, we hold that Parliament had legislative compe- 4 .tence in making this Act and the provisions of the Act are valid and do not offend any provisions of the Constitution.

The Writ Petitions Nos. 127-132 of 1972 are dismissed.

The Judgments of the Madras High Court, Bombay High Court and the Andhra Pradesh High Court are set aside, and Civil Appeals Nos. 2516-23, 2560-69, 2661-64 of 1972, 66-69, 72-75, 1307, 854-56 • . 857-59, 1203 and 1204 of 1973, 307-311 of 1972 and 173 of 1973 are dismissed.

The State of Maharashtra and the Union of India F appeals against the judgements of the Bombay High Court and the Andhra Pradesh High Court being Civil Appeals Nos. 1864-73/ l 9 71 and 1972-86/1971 respectively are accepted.

The appeals from the Judgement of the Gujarat High Court and Mysore High Courts being Civil Appeals Nos. 585/1971 and 1553, 1614-18, 1769/1971, 1131- 33 and 1440 of 1972 respectively are dismissed. The parties will pay and bear their own costs.

ALAGIRISW AMI, J .-I am substantially in agreement with the judgment delivered by my Lord, the Chief Justice, but I think it is necessery to add a few words to clarify certain matters in view of the complications that are likely to arise .otherwise. The Act is the result of a compromise between the original intcQtions of the Government and the modifications they had to make in the proposed measure as a result of eoo<:asions intended to bring the home workers within the scope Ii the Act. The original intention wa~ not to permit beedi rolling in private homes which will involve thousands of labourers in thousands

MANGALORE BEEl:'I WORKS v. UNION (Alagiriswpmi, /.) 253

A of far-flung homes and the difficulty of applying the provisions of the measure to them. The result is an Act which is likely to give rise to many difficulties in its actual working. It is obvious on a reading of the measure that its purpose is to rope in every possible person who could be brought in as an employer. But the resuft of the definitions in the Act is that every body would be a principal employer, e!l'ployer

and contractor and every labour will be contract labour.

Take the definition of the word "contractor". In so far as it says that -it means "a person who, in relation to a manufactt.tring process, undertakes to produce a given result by executing the work" it is not objectionable and refers to a contractor ordinarily understood.

But when the words "through contract labour" are added it leads to complications. "Contract labour" is defined as "any person engaged or employed in any premises by or through a contractor". Therefore, all labour employed by a contractor is contract labour. If any manufac- ·

turer employs any person through a contractor, the labour would be contract labour .. Then again "contractor" alsoeans "a person who engages labour for any manufacturing process in a private dwelling house". In such a case even a principal employer who engages labour for any manufacturing process would be a contractor. The further definition of the word "contractor" includes a sub-contractor, agent, munshi, thekedar or sattedar. These are obviously included to cover a class of persons dealt With by this Court in certain decisions including Chintaman Rao's Case (1958 SCR 1340). An "employer" is defined to .be, in relation to contract labour, the principal employer.

I have already pointed out that contract labour would include labour employed even by the manufacturer himself direct. "Principal employer" is defined as "a Jl!'rson for whom or on whose behalf any contract labour is engaged or employed in art establishment". Therefore, when contract labour is employed for a person he is principal employer. When contractlabour is engaged or employed on behalf of a person he is also a principal employer. What distinction could be made between the two is a little difficult to understand. However, in the second part of definition of "employer" in relation to labour other than the contract labour in clause 2(g) (li)-though in view of what I have said earlier it is difficult to see what that other labour could be-there can be no objection to the person who has the ultimate control over the affairs of any establishment being considered the employer, as also any person to whom the affairs of the establishment are entrusted, whether such other person is called 'the managing agent, manager, superintendent, or by any other name. But to call a person who has, by reason of his advancing

money, supplying goods or otherwise, a substantial interest in the control of the affairs of any establishment, also an employer is very difficult to justify. It is apparently intended to cover cases where a person runs business benami i.e. in another's name. There can be no objection to such a provision.

But merely because a person lends or advances money or supplies goods he cannot be called an employer. He may have a substantial interest in the control of-the affairs of the manufacturing establishment in the sense that the security for the money ad

mnced depends upon the manufacturing establishment being run properly or even in the sense that a person supplying goods might also be 4-l954Sup .C.L /74

( 19741 3 S.C.R.

interested in the control-of the affairs because he may be supplying good; on credit. I think the words "or who has, by reason of his advancing money, supplying goods or otherwise, a substantial il)terest in the control or the affairs of any establishment" should be struck down.

The interpretation placed upon the expression "employer" by me learned Attorney General does not really flow from the various definitions in the Act. I think it is not without significance that the learned Attorney General put forward this interpretation because it is only on that basis that the Act could be workable at all. While I realise that courts should give effect to the intentions of the legislature, it can be done only if that is possible without doing violence to th.e actual language of the statute. The various definitions plainly seek to rope in everybody who has anything to do with the manufacture of beedies and while trying to give effect to the penal provisions in the statute considerable difficulties will arise. There will on the one hand be the actual occupier of the industrial premises. There will be on the other hand a person who might have advanced money to him and supplied goods to him and therefore may be substantially interested in its control. The actual occupier himself might be a contractor and in that case he as well as the person on whose behalf beedies are manufactured would b~

liable. Who, in that case, would be actually liable? I do not agree with the view taken by the Bombay High Court that the Act exhibits an intention to retain the system of contractors. It only takes notice of the existence of the system of contractors and it appears to me that by making the principal employer responsible in every case it is actually trying to force the principal employer to undertake the work of manufacture himself rather than give it to contractors because in any case he would be ultimately liable financially and otherwise to everyone of the workmen employed.

Quite possibly if an independent contractor is one of the type envisaged by the Madras High Court in its judgment in Abdul Aziz Sahib & Sons v. Union of India (1973 2 MLJ 126) that is, of a person buying the materials from the person whom it calls the trade mark holder and then selling the beedies to him, he could be called an independent contractor. But he is actually a manufacturer himself in that case. He may be selling the beedies manufactured by him not to one person but to many persons. The conditions in the beedi indu'- try being that the actual person who ultimately sells the beedies to the public emp1oys various n1eans by which he does not take any responsibility for the welfare of the workers employed in the industry, the Act proceeds on the basis rhar he must be n1ade responsible. I find it difficult to accept the contention of the learned Attorney General that tho criterion adopted by the Madras High Court is both wide as well as re5trictive.

It can h.: said to be \vide or restricted, as one choose to call it, only if one cavisa~s a situation like the one in Dewall Mohitken's cave (1964 7 SCR 646). But then if the so called contractor

is really a benami for the manufacturer there is no difficulty in holding the manufacturer rrponsible.

The main cor.tenlions put forward on behalf of the various appellants are rearding the provisions of ss. 26. 27, 29, 31 and 37 of the Act and Rule 37 of the Maharashtra Rules and the corresponding rules

MANGALORE BEED! WORKS v. UNION (A/agirisw(lmi, J.) 255

made by the various other States.

The very convincing reasons and the criticism made by the various appellants were not met by the argu-· meats advanced by the learned Attorney General. It is now well established from the Chintama11 Rao"s case (supra), Shankar Balaji's case (1962 Supp. I SCR 249) and Bhikuse's case (1964 1 SCR 860)

that in this industry even people working in factories belonging to manufacturers come as they like, go as they like, work on some days even for one hour a day, and there are no fixed hours of work.

This sort of situation exists mainly due to the fact that the payment is made to the worker on a piece rate, and the work is also carried on as a parttinie occupation. What applies to them applies with greater force to the home workers. Therefore when section 26 provides that every employee in an establishment (which will include a dwelling house) shall be allowed in a calendar year leave with wages at the rate of one day for every twenty days of work performed by him during the previous calendar year, it leads to real difficulty. There may not be much point in the criticism that whereas the Factories Act provides for annual leave only for person who had worked for 240 days in a year this Act provides for one day's leave for every 20 days during which they have worked. It may be possible for the contractor to know on how many days the home worker has worked from the log book maintained by him.

But what is the wage which has to be paid to him during the period of leave ? That term is not defined in the Act and it is not permissible to refer to other Acts in order to understand the meaning of that term. Even if we take it to be what it means in popular ufage

it is not possible to say what arc the wages in the case of a home worker. A home worker might work for one hour on one day, eight hours on another day and not at all for a number of days. What would be the wages payable to him ? I am not canvassing the reasonableness of this provision but of the difficulty in giving effect to the provision. The same criticism applies to various other provisions contained in that section. Section 27 provides that for the leave allowed to an emplovee under section 26 he shall be paid at the rate equal to the daily average of liis total full-time earnings for the days on which he had worked during the month immediately preceding his leave exclusive of any overtime earnings and bonus but inclusive. of dearness and other aUowances.

The term "Full-time earnings" has been interpreted in Shankar Balaii"s anti Bhikuse"s cases. If it is not applicable to an emolovee of the tv, e of Pandurang in Shunkar Balaji's

ca" surelv it cannot apply to a home worker. This difficulty is not got over by Explanation fl which describes a "day" as any period

durin~ which the home worker was employed during a period of twenty-four hours.

That does not help in calculating the full-time earnings.

Again. what meaning arc \VC to give to the term 'fuiltimc earnings when there is no perio/J of work at all and there ore no fixed hours of working in the case of a home worker ? J am not satisfied with the learned Attorny General's interpretation of section 23 that h is not permissible after this Act came into. force for anv worker of the type of Pandurarig in Shankar Balaji's case to work under the conditions described iri that case. If a person should not be employed in an industrial premises except in accordance with the notice of work displayed in the premises under section 22, it

SUPREME COURT REP OR TS [ 1974 l 3 S.C.ll.

does not mean that he cannot work for less than the period mentioned in th~ notice of work. -bnli if he is employed for a longe~ tilill' than that mentioned in the notice of work would the occupier of the industrial premises make himself liable to-be proceeded against.

Jn anv case even if that interpretation is correct that cannot apply tO a home worker.

The difficulty of applying the provisions of the Maternity Benefits Act is again apparent.

The very. purpose of allowrng . the home workers to work in their homes bemg that the work $l! rolling beed1es is light work, which men and women can do in their homes during their spare hours, the provision of the Maternity Benefits Act r""

garding women not being allowed to do at.duous labour for a certain period before deliverv arld after de_livery is not apparent. And how can the provision be applied to women who cannot be said to be, so to say, employed continuousy for a certain period before the confinement.

Under section 31 no employer shall dispense with the services of an employee who has be.en employed for a period of six mo)lths or more, except for a reasonable cause, and without giving such employees at least one month's notice or wages in lieu of such notice.

Is it enoueh that the emplo.yee has been employed for a period of six months if he has been working for one or two days every month during those six months, and in any case how are his wages in lieu

of notice to be determined ?

And who would be the "employer competent to dispense with the services of the employee"? If a contractor dispenses :with the services of an employee in contravention of section 31 and is convicted utiler section 33 for the first time, would the principal employer be liable to imprisonment if there is a second prosecution?

These are some of the problems which are likely to arise in actual working of the Act.

I must make it clear that my oojectiott is not to any of the provisions on the ground of their -Im-reasonableness or constitutionality.

The long abstracts which the learned Attorney General read from the Report of the Royal Commission on Labour, the Rege Committee Report, and the Reports of Dr. B. V. N. Naidu and Mr. M. A.

Natarajan depict the miserable conklitions in which the workers int the industry work.

Nobody can dispute the need !or setting right those evils.

But good il!(enti<; ms should not result in a legislation which would become ineffective a.nd lead to a lot of fruitless litiga"

tion over the years. I think it Js necessary to utter a word of caution lest the fact that we upholkl the vafidity of the Act as such should be interpteted by various courts §.nd tribunals as sanctioning one interpretation or the other of the various provisions.

That would be opening up the pandora's box of litigation.

I would therefore hold in a2rcement with the maiority of the High Courts that sections 26, 27. 31 and 37(3) do not apply to home workers.

And finallv as re£ards Rule 37 of the Maharashtra Rules, it was accepted by the appellants as reasonable if it is interpreted as mean-

MANGALORE BEED! WORKS v. UNION (A/agiriswami, J.) 257

in2 that ordinarily chhat up tQ five per cent could be rejected, but hiRher thaa that is. rejected it woo1tl be subject to a decision by the

Inspector.

It was said that_ to make the rejection of chhat in excess of five per cent. to depend uori the decision by the Inspector would make all those beedies usless becatlse they have got .to be heated immediately so that the beedies may not be spoilt because of the moisture.

I think that interpretation is correct and the other States mav amend . the RUies so as to bring it in line with the Mabarashtra Rule.

I have tried to interpret the various provisions of the Act not in order to consider the; irconstitutionality or the reasonableneS6 of the restrictions as reflecting on the constitutionality, but of thefr interprtation in so far as they'ar~ likely to lead to difficulties in actual application of the provisio_ns of the Act.

I think it would be good in the interest of all concerned if the Act is amended as early as possible to remove all the lacunae and the , difficulties pointed out above. These difficulties have arisen oecause of an attempt blindly 10 apply the provisions, w)lich would be quite workable if they are applied to conditions wh•e the Factories Act would \je applicable, where the Jabour is regular in its attendance every day as well as over a period, to conditions f work which are vastly tlifferent as: well as to people who work at home without, a conscious attempi to mould them to suit those conditions.

The sooner that is done the better for all concerned.

P.H.P.

Appeals dismissed.

21

MANGALORE GANESH BEED! WORKS ETC. ETC.

UNION OF INDIA ETC

RAY, C.J.

K. K. MATHEW

A. ALAGIRISWAMI

N. BHAGWATI, JJ.

Seventh Schedule

Sec. 37(3)

Factories Act

Central Government

section 2(g)(a), 2(g)(b} and 2(m')

section 2(c)

sec. 26 and 27

Art. 19(1)(f)

Art. 19(l)(f)

Sec. 37(3)

Ray

Khanna

Mathew

Dhagwati

Sections 3 and 4

Arts. 19(1)(g)

Sections 2(g)(a), 2(g)(b) and 2(m)

MANGALORE BEED

s. 31

Section 2(rr)

sec 31

s. 27

section 37(3)

Cllinta1nan Rao

[1961] 3 S.C.R.

161

GRlsWAMI

Clause 2(g)(b)

cl. 2(g)(b)

section 26

Maternity Benefit Act

section 31

MANGALOltE

Article 32

Bombay High Court (Nagpur Bench at Nagpur

Soll Sorabjee

Salindra Swarup

B. Dadachanii

Ravinder Narain

M. Ramochandran

M/s M. Ramochandran, Salindra Swarup, I. B. Dadachanji, 0.

I. B. Dadachanji

K. N. Bhat

Mr. K. N. Bhat, for the Appellant (iii CA.

Mis D. V. Ptitel

Mis D. V. Ptitel (m C.A. 1615).and S. V. Gupte (in C.A. 1616).

S. V. Gupte

Mis M. Ramachahdran

T. S.l'ai

A. S. Nambiar

S. 1615 & 1616171

lflk T. S~ Pai

M. Ramachahdrait

A.$

Mi.~. Jl'tintit!P'~ wlih Mr. A.$, Namb/r fot m Amilants (in Ch.

Vineet Kumar

K. K. Venugopal

S. Gopalakrishnart

K. R. Nambiar

Mr. K. K. Venugopal with K. R. Nambiar for the Appellant in CAs.

Niren De

Mr. Niren De with Mr. P. Paramashwara Rao for Respondent No.

P. Paramashwara Rao

Mis R. N. Sachthey

Mr. Niren De with Mis R. N. Sachthey and S. P. Nayar for Respondent No.

S. P. Nayar

M. Veerappa

S. Govind Swaminadhan

A. V. Rangam

A.

Subhashini

K. S. Ramamurthy

A. T. M. SamjJath

K. s~ Ramamurthy

Y. S. Chitale

M. Ramchandran

T. S. Pai

A. S.

Nambiar

Mis M. Ra111achandran

A. S. Na111biar

Mr. A. S. Na111biar for the Petitioner (in WP.

Mis P. Parameshwara Rao

R. N. Sachthey

D. V. Patel

P. H. Parekh

Sunanda Bhandar~

M. C. Bhandare

Mr. Niren De and Mr. M. C. Bhandare (for the State of Maharashtra in CA.

S. Chakravarthy

R. H. Dhebar

M~C.

Bhandare

1864171), Mr. M~C.

Bhandare, (for the State-of-Maharashtra in CAs.

M. N. Phadke

Mr. M. N. Phadke with Mr. Rameshwar Nath for Respondents Nos.

Rameshwar Nath

M. Krishna Rao

Mr. M. Krishna Rao with Mr. B. Kant<1 Rao for Respondent No.

B. Kant<1 Rao

Mis Narayan Nttttr

Mis Narayan Nttttr and Ram Shtsh for the Intervenrs-Dharwar Distt.

Ram Shtsh

R. P. Kapoor

Mr. R. P. Kapoor for Mr. /. N. Shroff for Interv.,

N. Shroff

Mis S. R. Bommai

P. C. Bhartari

A. N. RAY

H. R. KHANNA

P. N. BHAGWATI

RAY

was delivered by RAY C.J. A. ALAGIRISWAMY, J. aave a separate Opinion.

C.J. A. ALAGIRISWAMY

Parliament

First, Parliament has DCI legislative competence to enact this measure.

Article 19(i)(g.)

section 4

Section 7(i)(c)

sections 26, 27

section 31

section 37

Maternity Benefits Act, 1961

Trade Marks Act

Pciwer

Pciwer is seldom employed for the purpo6e.

Factories Act

Factories Act

Government of India

D. V. Rege

Government of Madras

Madras

There were 90,000 workers depending on beedi industry in Madras.

Natraj

In 1954, the Government of India appointed Shri Natraj Inspector.

Payment of Wages Act

Maternity Benefit Act

Beedi and Cigar Workers (Conditions of Employment) Act

factories Act

Chintaman Rao

Factories Act

Madras High Court

Section 2

Maternity Benefit Act, 1961

section 7(1)

section 7(1)(c), 7(2)

Bombay High Court

Chotabhai Purushottam Pate/

Chotabhai Purushottam Pate/ ..

Beedi Manufacturers of Bhandara & Ors.

section 2(g)

section 2(g)

sections 26 and 27

sections 3 and 4

Section 3

Section 4

Mysore High Court

sections 26 and 27

section 31

Kerala High Court

Article 19

section 2(g)

sections 3 and 4

Kerala-High Court

sections 26 and 27

Andhra Pradesh High Court

The Andhra Pradesh High Court in Civil Appeals Nos.

sections 3 and 4

Articles 14 and 19

Pradesh High Court

sections 3 to 27

section 2(g)

Gujarat High Court

The Gujarat High Court, in Civil Appeal No.

Mysore and Andhra Pradesh have rightly beld the Act

section 28

Payment of Wages Act

Section 31

Section 37

Act extends the benefit of Industrial Standing Orders Act, 1946

section 37

the Act extends the benefit of Industrial Standing Orders Act, 1946

the Act extends the benefit of Industrial Standing Orders Act, 1946

Maternity Benefit Act

Section 3

Factories Act

Section 39(1)

Industrial Disputes Act

Section 39(2)

Section 39(1)

Section 39(2)

Sections 3 and 4

Article 19

Article 14

section 4

Section 5

sections 3 and 4

section 2(g)

sections 2(e)

section 2(e)

Section 2(f)

Section 2(g)

Section 2(m)

section 2(h)

Section 2(i)

section 2(a)

Jabour

Factories Act

25th September, 1973

sections 2(g)

section 2(g)

section 2(g)

sections 2(g)

section 26

section 27

section 26

sections 26 and 27

Articles 19

sections 26 and 27

Articles 19(1)

section 26

section 27

section 2(h)

Section 2(i)

section 2(f)

section 26

section 27

section 27

section 27

section 79

Factories Act 1948

section 26

See Central Civil Service Leave Rules, 1972

section 27

See Central Civil Service Leave Rules, 1972

See Central Civil Service Leave Rules, 1972

section 22

section 27

section 22

India

sections 26 and 27

section 2(h)

SUPREME COURT REPORTS I 1974 I 3 s.C.ll.

It

SUPREME COURT REPORTS I 1974 I 3 s.C.ll.

section 2(i)

sections 17 to 23

sections 26 and 27

sections 26 and 27

Madra.

High Court

sections 26 and 27

sections 26 and 27

sections 26 and 27

section 27

Section 11

Section 22

section 22

section 27

Mysore Rules, 1969

Section 44(2)

sections 26 and 27

Factories Act

Sections 79 and 80

Factories Act

section 26 and 27

section 79

Factories Act

section 26

section 26

Factories Act

sections 62 and 63

Factories Act

section 2(1)

Factories Act

Jn Birdhichand Sharma

Factories Act

section 2(1)

Factories Act

section 79

Factories Act

Shankar Ba/aji Waje

Factories Act

Birdhichand Sharma

Birdhichand Sharma case (supra) was distinguished on the facts.

F Shanker Balaji Waje

Bhikuse Yamase

section 85

Factories Act

section 85

Factories Act

Section 85

Factories Act

MANGALORB BEED

Factories Act

Factories Act

Article 19(1)

sections 26 and 27

section 27

Sections 26 and 27

section 79

Factories Act

section 17

Shanker Balaji Waje

sections 26 and 27

sections 26 and 27

section 31

Section 27

Section 39

Industrial Disputes Act

Section 2(rr)

Industrial Disputes Act

Industrial disputes Act

Industrial Disputes Act

Section 28

Section 2(6)

payment of wages Act

section 31

section 27

section 31

section 44

Kerala

Bombay High Courrfurther

Section 39(1)

Industrial Disputes Act

section 39(2)

Section 44(2)

Sections 44(2)

Section 39(2)

MANGAWRE BEED! WORJ:S v. UNION

Mysore

section 37(3)

section 2(i)

section 3

Maternity Benefit Act

section 37(3)

Section 4

section 4

Section 5(2)

Union of India

ALAGIRISW AMI

clause 2(g)

Dewall Mohitken

(1964 7 SCR 646

ss. 26

Chintama11 Rao"s

Shankar Balaji

Bhikuse

(1964 1 SCR 860

section 26

may not be much point in the criticism that whereas the Factories Act

Section 27

section 26

Shankar Balaii"s

Pandurang

Shunkar Balaji

section 23

section 22

SUPREME COURT REP OR TS [ 1974 l 3 S.C.ll

section 31

section 31

section 33

B. V. N. Naidu

M. A.

Natarajan

sections 26, 27

Factories Act