1. These are tea petitions filed by various types of persons connected with the beedi industry who could be described in the language of the impugned Act as principal employers, contractors and employees. For the various reasons detailed in the petitions, all of themseek a writ of mandamus prohibiting the respondents Nos. 1 to 4 from giving effect to the provisions of the Beedi and Cigar Workers (Conditions of Employment) Act, 1966 (No. 32 of 1966) (hereinafter referred to as the Act), and further seek a declaration that the provisions of the Act and the Rules made thereunder are void, ineffective and beyond the legislative compe tense of the Legislature and interfering unreasonably with fundamental rights of the petitioners.
2. Out of these petitioners, the petitioners in Special Civil Application Nos. 391. 392, 393 of 1969, No. 409 of 1968, and Nos. 451 and 453 of 1969, as also those in Special Civil Applications Nos. 513 and 514 of 1069 are the beedi manufacturers who could be appropriately described as principal employers in the language of the Act; the petitioner in Special Civil Application No. 410 of 1968 is a contractor, and the petitioner in Special Civil Application No, 411 of 1968 is an employee.
3. The provisions of the Act are impugned mainly on two grounds. It is urged that there was no legislative compe tense in Parliament in the matter of enacting this law and it is also urged that its provisions interfere with the freedom of contract and trade of the petitioners in a manner which is beyond the scope permitted by the reasonable restrictions in Clause (6) of Article 19 of the Constitution. It is also argued that assuming that the restrictions were to be considered as reasonable they are not in the interests of the general public. A faint attack is also made on the ground of infringement of Article 14, inasmuch as the provisions of the Act are styled as arbitrary, unreasonable, oppressive and discriminatory.
4. Before we go to the provisions of the Act and the attack of the petitioners against the general or specific provisions thereof, it may be noted that there seems to be a long history behind the dispute between the beedi manufacturers and the workers who arc employed in this industry. The attempts made by the authorities till now to give some benefit to the workers of this industry have proved abortive. This measure on an all India basis is therefore enacted with a view to provide for the welfare of the workers in the beedi and cigar establishments and to regulate the conditions of their work and for other matters connected therewith. This being so, it would be necessary, in our view, to make a brief resume of the history or this dispute, as also to notice the peculiar working conditions that seem to exist in this industry, for the purpose of understanding the provisions of the Act, as also the attack that is made against it. The history relating to the dispute, as also the facts that constitute the present nature of the working of that Industry, have to be gathered from judicial decisions. So far as the pleadings are concerned, they were not particularly helpful from that point of view. When arguments progressed in that behalf it was conceded at the Bar that the prior history relevant to the background of this litigation and the provisions relating to the welfare of beedi workers may be gathered from judicial decisions. At a later stage, the learned Assistant Government Pleader made available to us a report of the Minimum Wages Committee appointed by the Government of Maharashtra for inquiring into the conditions of employment in any tobacco manufactory including beedi-making. This was a tripartite Committee in which the manufacturers, the labour and the State were represented.
5. Though beedi industry may exist all over this country, it seems to be in exis tense on a very large scale in the States of Madras, Andhra Pradesh, Maharashtra and Madhya Pradesh. So far as the actual process of manufacture is concerned, it appears to be a very simple one. Bundles of wrapper leaves are soaked in water to soften them and then they are cut with a pair of scissors into rectangular shape of average dimensions. The dimensions, however, vary from quality to quality and the brand of the manufacturer. Generally it appears that it is somewhere between 3' to 3.2' in length and 1.5' to L.8' in breadth. On occasion, an improvised tin plate of the proper shape and size is provided to enable the workers to cut leaves into an appropriate size. The wrapper leaves are mainly obtained from the tendu plants which grow in the wild forests of Chanda and Bhandara districts in the Vidarbha Region of this State. It appears that so far as Maharashtra is concerned, the tobacco which is popular is Nipani and Gujarati varieties. In order to cheapen the cost of production, the manufacturers are also known to mix inferior quality of tobacco with this tobacco. A small quantity of tobacco is put on the leaf and then it is rolled into a triangular manner between the fingers and the palms of the hand into a conical shape and the top of the broad end is closed by bending it over the wrapper with the finders. The other tip is tied with a piece of thread of varying colour according to the choice of the manufacturer. The quality of the beedi depends upon the quality of the wrapper leaf, the quantity of tobacco, and the nature of the mixture, with of course proper rolling. Though there are three different ways in which the manufacture of beedi is done, in all those modes a common factor is that the worker is given leaves at home for the purpose of wetting and cutting, and the quantity of leaves as well as tobacco are issued to each worker on the basis of the mixture and leaves which may be required for winding 1000 beedis. This is the general mode, but the actual Issue to each worker consists ofthe quantity given on the basis of his capacity to be able to roll his beedis.
6. The three broad manners In which the manufacturer carries on this industry are (1) Factory or Sadar system, (2) Contract or Thekedari system, and (3) Khep or Gharkhata system. There also appears to be a fourth system known as seller-buyer system, but the experience relating to this system and the studies made by the Committee show that this is more or less a theka or contract system, though it is given the form of sale and purchase. Investigations conducted regarding the accounts maintained by such manufacturers show that though an entry of sale of mixture of tobacco and leaves is made in the account, no cash is ever paid. While showing the purchase of beedis, what is paid is only the difference between the two. For the purpose of understanding the present dispute, this variation in the system is not strictly relevant and it would be enough to note the manner in which the three broad systems indicated above work.
7. In the factory system, a worker attends the factory between stated hours when tobacco is issued to him. He is supposed to have brought the wetted and cut leaves with him for the purpose of rolling beedis by sitting in the factory premises of the employer. He is paid, however, on a piece-rate basis on the strength of the beedis rolled by him during the day. Even in the matter of factory system, where the factory has some definite hours of work during the day so far as individual workers are concerned, there are no rigid working hours. The worker seems to be free to come and go at any time he likes but he is obliged to be present in the factory within stated hours when the issue of raw materials takes place.
8. Under the contract system, which is also the Thekedari system, the Thekedar is generally an experienced beedi roller who takes the work or getting beedis rolled by other workers. He agrees to produce a certain result, namely, the preparation of stated number of beedis within a stated period, and for this work he is given some margin or commission. The contractor engages workers who prepare beedis either at their own residence or in any working place appointed for that purpose by the contractor. The workers prepare beedis in the same manner as in the factory and deliver to him the rolled beedis at the end of the day. The contractor examines them and such of them as he thinks are sub-standard are rejected and this is known as chhat. All the beedis so collected by the contractor after deducting the chhat are sent to the principal employer, who in most of the cases, has a second round of inspection and rejection. The double chhat is one of the grievances made in the industry and is being complained against by the workers. The principal employer pays thecontractor at the stated rate, and after he collects this money after settling his account with the principal employer, the contractorpays the wages to the labourers engaged by him.
9. In the Gharkhata system, the worker takes the tobacco and beedi leaves home, cuts the beedi leaves at his residence, and delivers the prepared beedis at the work-place or the shop or the stock factory of the employer. In this system also, the contractor may intervene and do the work of distribution on behalf of the principal employer. It has been found by the Minimum Wages Committee appointed by the State of Maharashtra in their report published in 1964 that in all these systems the beedi leaves are almost invariably cut by the workers at their residence and this work takes about 1 1/2 to 2 1/2 hours. The Committee of course noted only one exception of a manufacturer at Pandharpur who was getting the work of cutting the leaves from male workers also in the factory and during the factory hours. If this solitary exception is excluded, the normal manner of working appears to be that wetting and cutting is done at home and rolling is done either in the place provided by the contractor or in the factory of the principal employer. In the Gharkhata system both the process of wetting and cutting and rolling are conducted in the private house of the beedi roller.
10. It was found that the conditions of work of most of the workers in this industry were most unhygeinic and payments were extremely low. Attempt was therefore made in the erstwhile State of Bombay to fix the minimum wages by a notification under the Minimum Wages Act in the year 1951, which Order came into force from 31st March, 1952. The rates in the erstwhile State of Bombay were again revised in the year 1955. The rates in the Vidarbha Region were revised in June 1958 and in the Marathwada Region in July, 1959. However, the notification fixing the revised rates of wages in the Vidarbha Region did not have smooth sailing, and though the rates were fixed by the notification dated 11-6-1958, they came into force on 1-7-1958. However, these rates were not actually paid to the employees by the employers of Bhandara District and a large majority of the beedi factories in Bhandara District came to be closed as a protest against the alleged unduly high rates of wages. The notification then came to be challenged and Clauses 3 to 7 of that notification were struck down by the Supreme Court in Bidi, Bidi Leaves and Tobacco Merchant's Association v. Bombay State : (1961)IILLJ663SC . It was held that Clauses 8 to 7 of the notification were ultra vires of the Minimum Wages Act but the rates fixed were valid and legal. It was assumed at that time that the Factories Act applied to the beedi industry and the Manager of a factory was prosecuted for violation of Section 79(11) read with Section 92 of the Factories Act, 1948. The trial Court convicted him but in the revision application filed in the Court of Session the Sessions Judge took the view that he was not a worker within the meaning of the Factories Act. He therefore, made a reference to the High Court, but the High Court rejected the reference and confirmed the conviction. The Supreme Court, however, after entertaining tho appeal with special leave, held that the employee in the beedi industry was not a worker and the benefits of the Factories Act could not be extended to him. A notification was then issued by the State Government under Section 85 of the Factories Act extending the provisions thereof specifically to this industry. Even then the employee could not get any benefit as the Supreme Court again held in Bhikusa Yamasa Kshatriya v. Union of India : (1963)ILLJ270SC that the employee may be a worker under the Factories Act but he was still not entitled to the benefits of the Act as the provisions of Sections 79 and 80 of that Act required that a worker should be paid for the leave allowed to him at the rate equal to the daily average wage of his total full time earnings for the days on which he worked during the month immediately preceding his leave exclusive of any overtime and bonus but inclusive of dearness allowance and cash equivalent of the advantage accruing through the concessional sale to the worker of foodgrains and other articles. It has been held in that judgment that order that the benefits of leave with wages may accrue, two things are necessary. The worker must work for a day, and during that day he must put in full-time work, so that the average wage of his total full-time earning could be calculated. Since in the beedi industry, there was no such time to be found for work either in the contract or in the statute, it was impossible to calculate the daily average wage on the basis of total full-time earnings. It is in this manner that the employees again failed to get any benefit whatsoever. It is against this background that the Committee was set up for investigation, and one of the recommendations of the Committee was that a comprehensive legislation seems to be necessary in order to provide better amenities for the workers of this industry. This therefore is the background against which the present Act has been drafted and it seeks to take into account not only what had taken place till now but also declares the object with which this piece of legislation has been undertaken by Parliament.
11. We were referred to the Statement of Objects and Reasons of this Act during the arguments at the Bar. It is true that for interpreting the provisions of a statute, the Statement of Objects and Reasons could not be strictly relevant, nor could it influence or decide the meaning of the provisions of the Act. However, it is equally awell-known method of trying to interpret a statute to see what is the mischief that was prevalent which was sought to be eradicated and what was the object in view of the Legislature, and to examine whether in the provisions we find in the statute that object has been carried out. It is only from that point of view that we have looked at the Statement of Objects and Reasons which is reproduced at page 1353, Part II, Section 2, of the Gazette of India Extraordinary:
'STATEMENT OF OBJECTS AND REASONS
1. The working conditions prevailing in the beedi and Cigar establishments are unsatisfactory. Though at present the Factories Act, 1948, applies to such establishments, there has been a tendency on the part of employers to split their concerns into smaller units and thus escape from the provisions oS the said Act. A special feature of the industry is the manufacture of beedis through contractors and by distributing work in the private dwelling houses where the workers take the raw materials given by the employers or the contractors Employer-employee relationship not being well defined the application of the Factories Act has met with difficulties. The labour is unorganised and not able to look after its interests.
2. One or two State Governments passed special Acts to regulate the conditions of work of these workers but found themselves unable to enforce the law owing to the fact that the industry is highly mobile and tended to move on to an area where no such restrictive laws prevailed. It became necessary therefore to have Central legislation on the subject. The Bill seeks to provide for the regulation of the contract system of work, licensing of beedi and cigar industrial premises and matters like health, hours of world spread over, rest periods overtime, annual leave with pay, distribution of raw materials, etc.
3. The main provisions of the Bill have been explained in the notes on clauses.'
The above quotation shows, that the Legislature was aware of the fact that the extension of the provisions of the Factories Act to the establishments of Beedi industry resulted invariably in splitting up the concerns into smaller units. The Legislature was also aware of the fact that special feature of the industry was that manufacture of beedis through contractors and by distributing work in the private dwelling houses where the workers take the raw materials given by the employers or the contractors. There is also further awareness that employer-employee relationship was not well-defined and therefore the application of the Factories Act met with difficulties, and that the labour in this industry was unorganised and was not able to look after its own interests. It was also noted that the attempt of some of the States to legislate in thisbehalf was not successful as the industry was found to be highly mobile. Under all these circumstances, the necessity for Central legislation was felt and a Bill was mooted to provide for the regulation of the contract system of work, licencing of beedi and cigar industrial premises and matters like health, hours of work, spread-over, rest periods, overtime, annual leave with pay, distribution of raw materials etc.
12. It may therefore, be noted that so far as the avowed object of this legislation, as seen from the Statement of Objects and Reasons, is concerned, it is to preserve the industry with all its component parts working in the manner they do but the anxiety is to introduce some regulation in the employer-employee relationship and to obtain certain benefits to the employees which were hitherto denied to them. We are particularly pointing out at this preliminary stage this background because the so-called contractor or the middle-man is styled by the employees have been a matter of some concern to the employees as well as to the State who wishes to look after the welfare of the employees. The judgments which we have referred to by way of historical background also indicate that there are certain good and bad points about the systems that are prevalent in the manufacture of beedis. The contractor, it is urged, is very often a man of straw. In fact, he is the creation of the principal employer who puts him forward on many occasions as a screen to avoid his own responsibility towards the employees. Another broad grievance was that there is double checking and rejection of beedis or double chhat, out of which the second chhat at the principal manufacturer's place is invariably in the absence of the employee. This chhat was alleged to be most irrational and depending upon the whim of the employer. The judgments also show that so far as the housework or the Gharkhata system is concerned, there was an advantage to the employees with some land of disadvantage to the employer. Persons who could spare time in their own houses but could not move out for the purpose of employment get ready employment and can supplement their income from agriculture on other sources. They were in a position to work as and when leisure was available and like a factory employee there was no rigour of attending the factory or the work at stated time and for stated number of hours. As against this, the judgments again indicate, as also the report of the Committee shows, that pilfering was a vice of this industry and was reckoned as an existing factor. By pilfering the tobacco which is the most valuable ingredient, the employees were able to earn some income by again rolling it into beedis and selling them.
13. With all these factors known to the Legislature, an attempt is not made in this Act to eliminate or stop the contractsystem altogether. The attempt is to regulate it and also to regulate the employer-employee relationship with a view to make it more beneficial to the employee. That being so, we find several provisions in this Act which recognise the contractor as a part and parcel of the beedi industry. 'Contractor' has been defined in Clause (d) of Section 2 of the Act, He is again referred to when the term 'contract labour' or 'employee' has been defined. Several functions which the employer has to perform are also performed by this contractor, in as much as he delivers tobacco and leaves to the home worker and collects the rolled beedis after application of chhat. He also makes payment to them. In the Act, as well as in the rules framed thereunder, how the raw materials shall be distributed, how the chhat shall be applied and what the principal employer or the contractor will do in that behalf has been laid down. It therefore, appears to us that the contractor as was understood in this industry has been retained as an integral part and there is no attempt to eliminate him altogether, though, of course, the attempt is to eliminate the vices that appeared to have crept into this industry through the agency of the contractor.
14. Before again we specifically deal with the objections raised on behalf of the petitioners, it may be noted that this is an Act in the nature of a restriction on the right of trade and commerce granted by the Constitution to any citizen. The right to practise any profession, or to carry on any occupation, trade or business is guaranteed by Article 19(1)(g). Undoubtedly the present Act is in the nature of restrictions on that, fundamental right. Since the fundamental right of the present petitioners falls under Clause (g) of Article 19(1)(g), it is open to the State to make laws imposing in the interests of the general public, reasonable restrictions on the exercise of that right. Shri Phadke for the petitioners argued that it is not being disputed in the returns, not could it be disputed that the impugned Act is in the nature of restrictions on the fundamental right of the petitioners to conduct their business of bidi manufacture. The moment it is possible to say that a particular statute or law or the rules made thereunder are in the nature of restrictions on the fundamental rights, it is for the State to point out that the restrictions embodied in the statute or the rules are reasonable and also necessary in the interests of the general public. It is not for the the petitioners to show that the restrictions are unreasonable, but the burden of proof is on the State to point out that looking to the public interests involved, the restrictions put are reasonable. In Vrajlal Manilal and Co. v. State of Madhya Pradesh AIR 1070 SC 120 the Supreme Court was dealing with the provisions of an Act enacted for regulating the trade of tendu leaves by creating the Statemonopoly and debarring some persons including contractors who had committed default in the prior contracts and those who had no prior experience from participating in the sale and purchase of tendu leaves. When such a restriction was challenged as unreasonable and infringing the provisions of Articles 19(1)(f) and (g) of the Constitution, the Supreme Court observed as follows in paragraph 10:
'It is well recognised that when an enactment is found to infringe any of the fundamental rights guaranteed under Article 19(1), it must be held to be invalid unless those who support it can bring it under the protective provisions of Clause (5) or Clause (6) of that Article. To do so, the burden is on those who seek that protection and not on the citizen to show that the restrictive enactment is invalid.'
From this point of view, we find that in the pleadings so-called, not much information was made available to this Court for judging how the restrictions contemplated by the impugned Act are reasonable or are in the public interests. However, whatever material the State wanted us to look into has now been examined by us. It consists of the findings given by Court dealing with the prior cases arising out of this beedi industry, the references to certain reports of Commissions from time to time, and the report of the Minimum Wages Committee appointed by the State Government in 1964. Having placed this material before us, it will have to be seen on examination of the restrictions, as also the approach of the State, whether those who support this Act have been able to discharge this burden to demonstrate that the provisions are not only in the public interests but the restrictions are reasonable.
15. We have already indicated that the attack is mainly twofold. The first attack is about the legislative competence, and the other is about the unreasonableness of some of the provisions contained in this Act. So far as the first attack is concerned, we do not find much substance in it. In the returns filed on behalf of the State, reliance is placed upon the Entry 24 of List III in the Seventh Schedule of the Constitution. That entry deals with the welfare of labour including conditions of work, provident funds, employer's liability, workmen's compensations, invalidity and old age pensions and maternity benefits. While arguing before us, however, reliance was placed on behalf of the State by the learned Assistant Government Pleader on Entries 7, 22, 23 and 24. The learned Assistant Government Pleader alternatively argued that even if these entries mere found not strictly relevant, there is nothing to prevent Parliament from passing an Act like the one before us under Entry 97 of List I in the Seventh Schedule. If the matters contained in the Act squarely fall under the welfare of labour including their conditions of work, and the employers liability and the maternity benefit etc., then undoubtedly the Act is supported by the provisions of Entry 24 of List III in the Seventh Schedule. If it were to be imagined that there is no specific provision anywhere in the entries contained in the other Lists, it would be a matter not enumerated in Lists II and III and would fall in the residuary Entry 97 of List I. Shri Dharmadhikari, learned Assistant Government Pleader, also relied upon a Judgment of the Madras High Court in Abdur Rahim v. State of Madras, 1961 2 Lab LJ 213 (Mad) to support his argument of the constitutionality of the Act. On an examination of the entries in List III, we are satisfied that the subject-matter of the present legislation could fall principally under Entry 24 but also partly under Entries 7, 22 and 23. Entry 7 deals with contracts of various types but excludes only contracts relating to agricultural land. Entry 22 deals with trade unions, as also with industrial and labour disputes. Entry 23 deals with social [security and social insurance, and employment and unemployment. Besides these three, entry 24 deals with welfare of labour 'including conditions of work, employer's liability and maternity benefits. There are other subjects covered by entry 24 but no reference need be made to them as the present Act does not contain any provision relating to those subjects. This Act, as we have pointed out, is principally for the purpose of providing better amenities to the workers in the beedi industry and to regulate their conditions of work, as also other matters connected therewith. If it is found that under the garb of a certain contract with a person who has no bargaining power, conditions of work are enforced which would otherwise be undesirable from the public point of view, it is competent for the State to intervene and to lay down conditions of work which will be consistent with the welfare of not only the employee concerned but also the welfare of the community at large, which is the public interest. We do not therefore see why the present legislation should not fall under one or all entries and principally under Entry 24 of List ITI in the Seventh Schedule. We do not think that it is necessary to resort to the residuary Entry 97 in List I though undoubtedly if it were necessary to go to it, it would cover the present piece of Legislation.
16. Mr. Qazi for some of the employers argued that a very artificial definition of an 'employer' has been enacted and persons who have no direct contract or nexus with the principal manufacturer or employer has been artificially made an employer under this Act and is further made answerable for various things which might occur behind his back and without his knowledge. If this grievance has any substance it would be a relevant point to consider when the reasonableness of the provisions is examined; but so far as legislative compe-tense is concerned. It is open to the Legislature to make a deeming provision and to attribute a certain character to a person which the contract made by him does not attribute to him. But hardship or unreasonableness is a different concept from legislative competence. We do not therefore think that it is possible to countenance the challenge of the petitioners that Parliament had no authority to enact the present Act. The challenge to the constitutionality of the Act thus fails.
17. The second challenge appears to us to be more substantial and requires a closer examination. In the context of the history behind this legislation and the prevailing method of manufacturing beech's, some of the provisions of this legislation may be noted for the purpose of understanding their implications. Section 2 deals with definitions. There is no particular quarrel with clauses (a) to (d) of that Section. However, so far as the definition of 'contractor' contained in Clause (d) is concerned, it is to be noted that the contractor is defined to be a person who, in relation to a manufacturing process, undertakes to produce a given result by executing the work through contract labour or who engages labour for any manufacturing process in a private dwelling house and includes a sub-contractor, agent, munshi, thekedar or sattedar. So far as the arguments of the petitioners are concerned, what is to be noted is that the definition seeks to include the work got done by engaging labour for the manufacturing process in a private dwelling house as the work produced or the result produced by the contractor. This will have some relevance when the definition of employer is being considered. The definitions which may be required to be referred to very often in the further discussions are the following ones in Section 2 of the Act:
'(d) 'contractor' means a person who, in relation to a manufacturing process, undertakes to produce a given result by executing the work through contract labour or who engages labour for any manufacturing process in a private dwelling house and includes a sub-contractor, agent, munshi, thekedar or sattedar;
(e) 'contract labour' means any person engaged or employed in any premises by or through a contractor, with or without the knowledge of the employer, in any manufacturing process;
(f) 'employee' means a person employed directly or through any agency, whether for wages or not, in any establishment to do any work, skilled unskilled, manual or clerical, includes-
(i) any labour who is given raw materials by an employer or a contractor for being made into beedi or cigar or both 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 permission of, or under agreement with, the employer or contractor;
(g) 'Employer' means-
(a) in relation to contract labour, the principal employer, and
(b) in relation to other 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 substantial interest in the control of the affairs of any establishments 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 any other name;
(h) 'establishment' means any place or premises including the precincts thereof in which or in any part of which any manufacturing process connected with the making of beedi or cigar or both is being or is ordinarily, carried on, and includes an industrial premises;
(i) 'industrial premises' means any place or premises (not being a private dwelling house), including the precincts thereof, in which or in any part of 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;
(k) 'manufacturing process' means any process for, or incidental to, making, finishing or packing or otherwise treating any article. or substance with a view, to its use, sale, transport, delivery or disposal as beedi or cigar or both;
(m) 'principal employer' means a person for whom or on whose behalf any contract labour is engaged or employed in any establishment;
(n) 'private dwelling house' means a house in which persons engaged in the manufacture of beedi or cigar or both reside.'
18. It would be seen that the definition of 'contract labour' includes any person engaged or employed in any premises by or through a contractor, with or without the knowledge of the employer, in any manufacturing process. We have pointed out while describing the method of manufacturing beedis that an employer can have a contractor with whom the very contract will be to supply raw materials and to receive finished product. How that contractor gets the work done is not the concern of the principal employer. However, by this definition in Clause (e), even the labour engaged or employed by such a contractor in any premises, namely, in his own premises or in the private dwelling house of the respective worker, with or without the knowledge of the employer, is to be treated as contract labour for the purposes of this Act. The next definition in Clause (f) relating to 'employee' is again a very wide definition. Itmeans a person employed directly or through any agency, whether for wages or not, in any establishment to do any work, skilled, unskilled manual or clerical and further includes any labour who is given raw materials by an employer or a contractor for being made into beedi or cigar or both at home, or any person not employed by an employer or a contractor but working with the permission of, or under agreement with, the employer or contractor. The person rolling beedis or cigars at his own home is described in this Act as 'home worker'. Not only those who are employed as such but those who are merely engaged for work or who are permitted to do certain work in the premises are included in the wide definition of employee by this Act.
19. It may bo noted that the above reference to the two definitions of 'contract labour' and 'employee' refers to establishments. This Act conceives of two different places of work. 'Industrial premises' is therefore defined in Clause (i) to mean a place or premises, not being a private dwelling house, including the precincts thereof, in which or in any part of winch 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. What is manufacturing process is also defined in Clause (k) to cover any process for, or incidental to, making, finishing or packing or otherwise treating any article or substance with a view to its use, sale, transport, delivery or disposal as beedi or cigar or both. When the manufacturing process is thus known, a place or premises where any part incidental to this process goes on would be an industrial premises. A larger definition is still to be found when the word 'establishment' is defined in Clause (h). It includes any place or premises including the precincts thereof in which or in any part of which any manufacturing process connected with the making of beedi or cigar or both is being, or is ordinarily, carried on and includes an industrial premises. 'Private dwelling house' defined in Clause (n) means a house in which persons engaged in the manufacture of beedi or cigar or both reside. The cumulative effect therefore, is that the house of home workers would be 'establishment' and industrial premises are included in the general definition of 'establishment'. The place where a worker also resides is specifically excluded from the definition of 'industrial premises'. It could thus be seen that whether the place where the manufacture of beedis takes place is a regularly engaged place by the employer or the contractor for the purpose of labourers to gather and perform, or whether it is merely a dwelling house where the home-worker takes leaves and tobacco and rolls them all of them would be covered by the definition of 'establishment'. With this wide meaning of 'establishment' in view, it would at oncebe appreciated that the definition of 'employee in Clause (f) comprises in it every person, whether he is working in the regular factory premises as such or whether lie is working in his own home. It will also include not only those who are regularly employed but who are merely engaged to do certain types of work. It would further include a person who is merely permitted to work by the contractor or the employer. Very comprehensive definitions are thus made of the words 'employee', 'establishment', 'contractor' and 'contract labour'.
20. With these definitions in mind, the definition of the word 'employer' contained in Clause (g) of Section 2 has to he examined. It consists of two parts. Two types of persons are made employers for the purposes of this Act. Clause (a) of the definition covers in relation to the contract labour, the 'principal employer'. This would at once point out that where the contract labour is either engaged or employed by a contractor and the employer has no knowledge of whom the contractor has employed or engaged, he would still be the principal employer in relation to such contract labour. This is therefore a deeming definition of 'employer' where the contractual relationship of employer and employee may not exist. Law attributes to such a person the character of being the employer vis-a-vis the contract labour. The second part of the definition contained in Sub-clause (b) makes the person employer in relation to 'other labour, when he has the ultimate control over the affairs of an establishment or who has, by reason of his advancing money, supplying goods or otherwise, a substantial 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 any other name. In this definition the basis is the establishment, and we have already seen how wide the definition of 'establishment' is. The home-worker's home where the family is rolling beedis with the help of the raw material supplied to them becomes an establishment. If a person has ultimate control over the affairs of such an establishment or even though he has no direct control but by reason of advancing money or supplying goods or otherwise, has a substantial interest in the control of the affairs of any establishment, he would be the employer, no matter that he entrusts the actual affairs of such an establishment to be managed by a person designated as the managing agent, manager, superintendent or by any other name. The last clause will even include a contractor if that is the designation by a particular employer to a person who is looking after the affairs of an establishment but in which establishment he has a substantial interest in the control of its affairs by reason of his advancing money, supplying goods or otherwise. In other words, it appears to us that with a view to make certain provisions with the avowed object of passing on certain benefits to the workers of the beedi industry and to regulate their relationship with the employer, these definitions have been enacted for the purpose of incorporating the further provisions which now deal with the relationship between the employer and employee, as also the benefits which are to accrue from the administration of this Act. The learned counsel on behalf of the petitioners have very severely attacked the extended definition of 'employer' contained in Sub-clause (a) of Clause (g) of Section 2, but we shall revert to it a little later.
21. As in many such regulatory measure, this Act envisages that no employer shall use or allow to be used any place or premises unless ho holds a valid licence issued under this Act, and no such premises shall be used except in accordance with the terms and conditions of such licence. For the purpose of issuing such licences, as also for the purpose of performing all or any of the functions under the Act, the State Government is authorised to appoint a competent authority by notification in the official Gazette. That is the provision of Clause (c) of Section 2. Section 4 enjoins on a person who wants to use or allows to be used any place or premises as industrial premises, to make an application in writing to the competent authority, in such form and on payment of such fees as may he prescribed, for a licence to use, or allow to be used, such premises as an industrial premises. It may at once be made clear that though manufacture of beedis is contemplated by this Act in industrial premises as well as other establishments, the need for a licence is confined to industrial premises only. Sub-section (1) of Section 4 vests the competent authority with the power to decide whether to grant or refuse a licence, and while doing so, it is required to have regard to the matters mentioned in Clauses (a) to (e) of that sub-section. They relate to the suitability of the place or premises, the previous experience of the applicant, the financial resources of the applicant including his financial capacity to meet the demands arising out of the provisions of the laws for the time being in force relating to welfare of labour, the disclosure whether the application is made bona fide-on behalf of the applicant himself or in benami for any other person, and the welfare of the labour in the locality, the interests of the public generally and such other matters as may be prescribed. Sub-section (7) of Section 4 deals with the State Government's power to issue directions and to prescribe conditions under which a licence could be issued. Sub-section (4) of Section 4 lays down the time-limit and validity of a licence and the method and manner of renewal thereof. Sub-section (5) of Section 4 lays down that the competent authority shall not grant or renew a licence unless it is satisfied that the provisions of the Act and the rules made thereunder have been substantially complied with. Sub-section (6) deals with the suspension and cancellation of a licence and the method thereof. Sub-section (8) enjoins a duty on the competent authority to pass an order in writing with reasons when a licence is being refused or is not renewed.
22. Section 5 deals with the appeals against orders refusing to grant or renew a licence or cancelling or suspending the same. It is not particularly necessary to note the provisions of the appointment of Inspectors and their powers which are contained in Sections 6 and 7. The provisions of Sections 8 to 16 are more or less similar to the provisions of the Factories Act dealing with the same subject and no particular grievance is being made before us so far as these provisions are concerned. The provisions of Section 17 which are again very similar to the provisions of the Factories Act contained in Chapter VI thereof relate to the working hours of industrial premises. Here attain no particular complaint is made; but reference to the working hours will be made when the questions of considering leave, the terms and conditions of working and the calculation of wages for leave period are to be taken into account. The same approach will apply to the provisions of Section 18 in the matter of deciding what is overtime. No particular reference was made to Sections 19 and 20. So far as Section 21 was concerned, there is no quarrel with Sub-section (1) relating to the closure of industrial premises on one day in a week. The dispute relates to Sub-section (3) dealing with the payment of wages for that day on the basis of the daily average of the total full-time earnings. We will consider this attack along with the common dispute relating to that expression and the method of calculation which is also relevant for the provisions of Sections 26 and 27. Sections 22 to 25 were also not referred to as disputed sections.
23. Sections 26 and 27 are subjected to a very serious attack by the employers. They object to the provisions of annual leave with wages contained in Section 26. It takes a working day as a measure for calculating 20 days of work performed by him during the previous calendar year, for enabling the employee to obtain one day of leave with wages. Section 27 deals with the payment to be made for the leave with Wages and lays down the measure as the daily average of the 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 allowances. What is total full-time earning Is a matter of serious contest and it will be considered separately in due course. Section 28 is not challenged as such but only in relation to the extended responsibility of the employer under the artificial definition contained in Sub-clause (a) of Clause (g) of Section 2. The provisions of Sub-section (1) of Section 29 are challenged on the ground that they will entail considerable labour in maintaining accounts of the work done outside the industrial premises and all that work will not worth it at all. So far as Section 31 is concerned, the quarrel again is confined to a person who is not actually by reason of contract an employer but is artificially made an employer by the extended or deemed definition of this Act, Sub-section (1) of Section 31 enables an employer to terminate the services of an employee who has served with him for more than six months only by one month's notice and that too for a reasonable cause. If, however, the services of an employee are to be dispensed with on a charge of misconduct supported by satisfactory evidence, no such notice is necessary. In either of these cases, the action taken by the intermediary like the contractor proving unreasonable or unlawful may be responsible in creating liabilities for the principal employer, though his own contract with the contractor or the contractor's contract with the employee does not contemplate any such effect. Sub-sections (2) and (3) or Section 31 are merely incidental to the dispute relating to the termination of services, and if the extent of reasonableness of the provisions of Sub-section (1) is once declared or decided, the other provisions will automatically apply to those persons who are in fact employers and are liable to answer for their own acts.
24. Section 33 deals with the general penalty for offences. Contravening any of the provisions of the Act or any rule made thereunder, or failing to pay wages or compensation in accordance with any order of the appellate authority passed under Clause (b) of Sub-section (2) of Section 31 is declared a penal offence punishable for the first time with fine which may extend to two hundred and fifty rupees, and for a second or any subsequent offence, with imprisonment for a term which shall not be less than one month or more than six months or with fine which shall not be less than one hundred rupees or more than five hundred rupees or with both. This provision again is challenged on the same ground that unreasonable vicarious responsibility is being extended even to penal consequences for acts which may have been done in utter ignorance of the principal employer.
25. Sub-section (2) of Section 39 is thereafter challenged as creating an unnecessary burden and a sort of hindrance in the smooth working of this industry which has traditionally gone on without much difficulty on either side. This relates to the application of the provisions of the Industrial Disputes Act to disputes between the employer and the employee relating to theissue by the employer of raw materials to the employees, the rejection by the employer of beedi or cigar or both made by an employee, and the payment of wages for the beedi or cigar or both rejected by the employer. By Rule 34 of the rules framed under Section 44, a dispute of this type is made referable to the Labour Officer notified under the Bombay Industrial Relations Act, 1946, of the local area in which the industrial premises is situated. The Labour Officer is supposed to bold a summary inquiry, and for that purpose he is authorised to hold such inquiry as he may consider necessary after, or course, giving an opportunity to both sides to represent their cases. Section 40 deals with the effect of laws and agreements which are inconsistent with the present Act. Section 41 vests a power in the State Government to exempt certain industrial premises or class of employers or employees from the operation of this Act. Section 42 gives the Central Government power to give directions to a State Government as to the carrying into execution of the provisions of the Act. Section 43 excludes from the operation of this Act private dwelling houses where the owner or occupier carries on any manufacturing process In such private dwelling house with the assistance of the members of his family living with him in such dwelling house and dependent on him. There is a proviso to this section which says that the owner or occupier thereof should not be an employee of an employer to whom the Act applies. Section 44 is about the general rule-making power.
26. We have generally summarised the provisions of the Act to point out how the avowed intention of the Legislature is intended to be translated into action by making the various provisions. It would now be appropriate to consider the particular objections raised regarding the individual provisions of this Act. The principal argument in that behalf is that the definition of 'employer' is unduly enlarged to cover relationship which is not that of an employer and employee at all and has therefore imposed obligations upon the principal employer which are far beyond the necessities of the situation. That the Legislature can enact a deeming provision and create a legal fiction is not being doubted. If this Act is in the nature of restrictions on the fundamental right of carrying on business and trade by a citizen, it is logical that the restrictions proposed to be imposed must, in the first instance, be in the interest of the general public and also answer the description of being reasonable. The concept of reasonableness has not been defined by the Constitution, and rightly so. It may not be possible always to lay down abstract standards of what reasonableness should imply, nor is it possible to indicate a general pattern which ought to be observed. Since life is becoming more and more complex,situations do arise in the matter of trade and business which were never conceived of. It would therefore be appropriate in each case to consider the nature or the right alleged to have been infringed, the underlying purpose of the evil that is sought to be eradicated and the disproportion of the imposition, the prevailing conditions at the time and the nature of the trade and business which is sought to be controlled. These are all considerations which must enter the judicial verdict in finding out whether the particular restrictions are reasonable or otherwise. We may with advantage refer to the provisions of an Act which was passed by the then Legislature of the Central Provinces and Berar, namely, the C.P. and Berar Regulation of Manufacture of Bidis (Agricultural Purposes) Act, 1948. In some of the districts of the then Central Provinces and Berar, it was found that the Agricultural labour and villagers generally took to beedi-making to such an extent that agricultural labour was not available in sufficient number for paddy cultivation. The Act of 1948 was therefore passed, which completely prohibited beedi-making in certain parts of the then State during certain period. Those restrictions were challenged as unreasonable and were struck down ultimately as unreasonable. That was in Chintamanrao v. State of Madhya Pradesh : 1SCR759 . While examining the provisions of that Act, the question that was formulated for consideration by their lordships was whether the total prohibition of carrying on the business of manufacture of beech's within the agricultural season amounts to a reasonable restriction on the fundamental rights mentioned in Article 19(1)(g) of the Constitution. It was observed that unless it was shown that there was a reasonable relation of the provisions of the Act to the purpose in view, the right of freedom of occupation and business cannot be curtailed by it. One of the tests of reasonableness therefore that was suggested was that there ought to be a reasonable nexus between the evil that is sought to be eradicated and the provision which is in the nature of a restriction. It was also indicated that even assuming that some restriction is necessary, the limitation proposed ought not to be arbitrary or excessive in nature beyond what is required in the interest of the general public. In that context, it was suggested that the word 'reasonable' implies intelligent care and deliberation, that is, the choice of a course which reason dictates. Legislation which arbitrarily or excessively invades the right cannot be said to contain the quality of reasonableness and unless it strikes a proper balance between the freedom guaranteed in Article 19(1)(g) and the social control permitted by Clause (6) of Article 19, it must be held to be wanting in that quality. In the course of the discussion, it was also suggested that a provision enacted may appear reasonable. However, from the language in which it iscouched, it may be possible to extend those restrictions to purposes which are not constitutionally warranted. In such circumstances when the language employed is wide enough to cover restrictions both within and without the limits constitutionally permissible the legislative action affecting such a right must be held to be wholly void. These generalizations, of course, are restricted to the particular facts of that case, but the principle underlying is of great assistance in judging what is reasonable in respect of a particular piece of legislation. We were referred to several judgments by the learned counsel on both sides which contained certain instances or illustrations where the provisions were either held valid or invalid. We may make a passing reference to them while examining the particular provisions of the impugned Act. They are essentially decisions dealing with the particular facts before the Supreme Court, but undoubtedly they are a good guide so far as the principles on which the conception of reasonableness is to be tested.
27. One of the principal grievances on behalf of the petitioners is that the principal employer who merely engages contractors in some cases at least, genuine independent contractors would find himself in a very precarious condition under the provisions of this Act. The definition of 'employer' in Clause (g) of Section 2, and more particularly in Sub-clause (a) thereof, is emphasised in that behalf. The definition which we have quoted above shows that the employer means, in relation to contract labour, the principal employer. Now, the principal employer has been defined in Clause (m) to mean a person for whom or on whose behalf any contract labour is engaged or employed in an establishment. Now, 'establishment' is again a very wide term, as we have already indicated. The words 'contract labour' mean any person engaged or employed in any premises by or through a contractor, with or without the knowledge of the employer, in any manufacturing process. These definitions assume that there would be a contractor who is engaging or employing labour in any premises, namely, his own or in the respective premises of the home-workers, without the knowledge o the employer. The cases which have till now gone to the Supreme Court in the matter of beedi industry show that there were various contractors through whom the workers or the home-workers were engaged. The plea of the prosecution or the labourers, as the case may be, has always been that the principal employer is the real employer and not the contractor. The institution of contractor is a device created for the purpose of evading the provisions of the Factories Act. It is also created for the purpose of evading any responsibility for payment and looking to the welfare of the toiler in the industry. The decisions indicate that two differentconclusions were reached depending upon the evidence led before the Court. In some cases, the contractor was held to be an independent contractor and the employees engaged by him could not therefore have any relationship of master and servant with the principal employer. In one of the judgments which were referred to, namely, D. C. Dewan Mohideen Sahib and Sons v. United Bidi Workers' Union 1964 2 Lab LT 633 -- AIR 1968 SC 370, a finding of fact was given by the Labour Court that the middleman, that is, the contractor was a mere camouflage and the real employer was the appellant himself. The Legislature therefore knew when the present Act was passed that there are manufacturers who have genuine contractors from whom they purchase beedis and to whom they supply raw materials at stated rates. There are also manufacturers who create the contractor as a mere middleman merely for the purpose of evading the responsibility cast upon the employer under the various laws. In fact, when the contractor is a sham contractor, the attempt is even to get rid of the contractual relations which ought to flow from the relationship of master and servant. Against this background, and with all the material that was collected through the various Committees and Commissions, the intention of the present Act certainly does not appear to eradicate the contractor altogether. Otherwise, a definition like the one in Clause (d) of Section 2 could not be thought of. In spite of the fact that there may be genuine contractors engaged by the principal employer, the concept of master and servant relationship has been extended to the labour engaged by the contractor with or without the knowledge of the principal employer.
28. The other part of the definition of the word 'employer' finds place in Sub-clause (b) of Clause (g) of Section 2. Not much fault could be found with this definition as it deals with a 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 substantial interest in the control of the affairs of any establishment, and naturally includes any other person to whom the affairs of any such establishment are entrusted with whatever name or label that may be given to such person. Here the concept is that the person who is obviously the manufacturer has a direct interest in the affairs of the establishment. However, he has given it a different form by appointing a middleman like the managing agent, manager, superintendent or any other person, given a particular designation. This is the same concept which we find was a question of fact decided in the case of D. C. Dewan Mohideen Sahib and Sons : 7SCR646 (cit; sup). Such a person is undoubtedly an employer and cannot evadethe responsibility that ought to be fastened on the shoulders of the employer. There can therefore be no quarrel with the definition of 'employer' in Sub-clause (b) of Clause (g) of Section 2.
29. What precisely is then the effect of the definition contained in Sub-clause (a) of Clause (g) of Section 2? He is the employer and would be as such answerable for everything that such an employer is required to do under the Act. The first and the primary necessity for him would be to see that not only does he obtain a licence for his industrial premises but he sees to it that a contractor who would have an industrial premises obtained a licence. This is clear from the provisions of Section 3 which lay down that the employer shall not use or allow to be used any place or premises as an industrial premises without obtaining a licence. So far as obtaining a licence for an industrial premises is concerned, we do not think that the idea of the licence by itself could be considered an unreasonable restriction. If the industry is to be controlled for the purpose of enforcing certain provisions in the interests of the employees, directing the employer to have a licence which contained the conditions under which the industry is to be run is a normal and well known mode of controlling industries these days. The appointment of a competent authority with the powers to issue licence cannot therefore be complained of as unreasonable. We may incidentally point out that Mr. Qazi for some of the petitioners complained against the provisions of some of the clauses of Sub-section (3) of Section 4. Section 4 deals with the creation of a competent authority who will deal with the issue, cancellation and renewal of licences, as also with the terms and conditions on which licences have to be applied for and given., Mr. Qazi said that Sub-section (3) of Section 4 permits the competent authority to decide whether to grant or refuse a licence, and for that purpose it is to have regard to the matters mentioned in the clauses that follow. Even this broad provision is challenged by Mr. Qazi on the ground that it seems to leave an unfettered discretion in the authority either to grant a licence or to refuse a licence. The last clause of the opening portion of Sub-section (3) merely requires the competent authority to have regard to the matters that follow but it does not indicate that if an applicant fulfils the conditions that follow, a licence ought to follow as a matter of course. He further adds that Clause (b) in that Sub-section speaks of the previous experience of the applicant, and Clause (d) requires the applicant to disclose whether the application is made bona fide on behalf of the applicant himself or in benami of any other person.
30. We do not think that the criticism of Mr, Qazi has any substance. Provisions of this type where the competent authority is authorised to give licences with certain directions with regard to certain matters could not be styled by themselves as unreasonable. In Kishan Chand v. Commr. of Police : 3SCR135 the question was whether the provisions of Section 39 of the Calcutta Police Act, 1866 were an unreasonable fetter or restriction on the fundamental rights of a citizen guaranteed under Article 19(1)(g) of the Constitution. Under that section, the Commissioner of Police was authorised to issue licences to eating houses. The provisions of Section 39 quoted in the judgment show that the Commissioner of Police was authorised at his discretion from time to time to grant licences to the keepers of such houses or places of public resort and entertainment upon such conditions to be inserted in every licence as he, with the sanction of the State Government from time to time shall order, for securing the good behaviour of the keepers of the said houses or places of public resort or entertainment and the prevention of drunkenness and disorder among the persons frequenting or using the same; and the said licences may be granted by the said Commissioner, for any time not exceeding one year. The Supreme Court repelled the argument that no guidance was given in this section to the Commissioner of Police in the matter of principles on which the licence could be granted or refused. Their Lordships pointed out that the object is contained in the section itself, namely, to find out the capacity of the applicant to secure good behaviour of the keepers of the said houses and his capacity to prevent drunkenness and disorder among the persons frequenting or using the same. It was also pointed out that there was a provision to make an appeal in case the grievance was that the licence was arbitrarily rejected.
31. If the provisions of Sections; 4 and 5 of the Act are read together, ii would be amply clear that sufficient safeguards have been indicated not only for the purpose of guiding of competent authority in the matter of issue of licences but for the purpose of correcting any errors committed by such authority. Under Sub-section (7) of Section 4, the State Government was authorised to issue in writing to the competent authority such directions of a general character as the Government may consider necessary in respect of any matter relating to the grant or renewal of licences under that section. This is therefore the first safety valve where the State Government is going to guide thecompetent authority as to how licences should be granted or refused. If in spite of the fact that a particular applicant claims to fulfil all the requirements of the law the competent authority wants to reject a licence to him, it is required to pass an order in writing with reasons therefor. Such a speaking order is subjected to an appeal under the provisions of Section 5. Viewed in the light of these provisions, we think that the conditions enumerated in Sub-section (3) of Section 4 could not be considered to be either unreasonable or unconnected with the subject of granting licences. The previous experience of the applicant may be of some assistance in considering whether he should be granted a licence. The previous experience might indicate whether he was found to be an employer who had attempted to flout the provisions of the Act with a view to deprive the employees of their legitimate benefits. Mere want of previous experience may not, we think, by itself come in the way of a person from trying to start a beedi industry for the first time. In the same way, no grievance can be made if the applicant is required to disclose whether he himself is the real proprietor of the industry or he is merely a benamidar for someone else. This may be a very relevant matter because the provisions of this Act create for the first time additional, and to some extent onerous, responsibility on the employer. The financial responsibility particularly is an important one, and unless the manufacturer is able to bear it and discharge it properly, the benefits which are intended to reach the home-worker or the other employees of the industry may not be really effective. From that point of view, not only the provisions of Clause (d) but also of Clause (c) relating to the financial resources of the applicant and his capacity to meet the demands arising out of this Act seem to be reasonable. As their Lordships said in the judgment referred to above, we think that the creation of a competent authority and the provisions of Sections 4 and 5 are not meant merely to refuse a licence but to grant it but with due care and caution after examining the propositions whether the applicant will be in fact in a position to carry out all the demands that arise from the implications of this Act. We would therefore reject the argument of Mr. Qazi, that the provisions of Sections 3 and 4 read together are unreasonable.
32. An important circumstance that may be noted in the matter of licence is that the provisions from Section 3 to Section 25 are meant only to cover industrial premises and not other establishments. The expression 'industrial premises' has been used in thiscase to cover every place of the contractor or the manufacturer where the manufacturing process is going on but excludes from its operation the private dwelling house where the home-worker is rolling beedis. This provision hag some history behind it. An attempt wag made to extend the provisions of the Factories Act to premises where less than 20 workers were working in the place maintained by the contractor or the employer, as the case may be. The idea therefore was that all premises except the private dwelling house of the home-worker should be subjected to certain discipline and liability which are conceived of by the Factories Act. We find that several provisions in this Act are bodily copied from Chapter VI of the Factories Act. Since all other premises except the private dwelling house are now required to be covered by the benevolent provisions of Sections 3 to 25, the scheme of licensing has been introduced for all industrial premises. At the same time, it may be noted that the question of licence was restricted to Industrial premises only as defined by this Act. Out of these provisions, only Sub-section (3) of Section 21 is now specifically challenged before us and not the others. Though we started this discussion with a view to examine the implications of this Act and the liabilities that would be cast upon the employer since all these provisions relate to the duties of the employer, we are examining them generally for the purpose of finding out their inherent reasonableness or otherwise, and also for the purpose of finding out whether the additional responsibility created by these provisions should really be fastened upon the principal employer in addition to the contractor who would directly engage the employees himself. If an industrial premises is there, it is but legitimate that it 'should conform to the standards of cleanliness and safety as contemplated by the provisions of Sections 8 to 16. No quarrel can be made with the provisions of working hours contained in Section 17 and the payment of overtime if in fact a person works for more than what is expected of him. The only point that may be noted at this stage is that even in the case of genuine contractors, the principal employer would still be responsible to see that all the provisions of these sections are observed faithfully and truly by the contractor engaged by him. When we reach the consideration of Section 33, we will point out how such a proposition is going to cast onerous and sometimes almost impossible responsibility upon the employer. We will also indicate generally the effect of literal enforcement of the provisions of this Act upon thenormal working of the industry as it exists at present.
33. We do not think that the provisions of Section 22 relating to the notice of periods of work or the other provisions of Sections 23 to 25 are in any way unreasonable so far as the working in an industrial premises goes- Even the provisions of Sections 21, 26 and 27 which have to be considered together would not appear to be unreasonable so far as a workman engaged or employed in an industrial premises is concerned and who has to his credit full-time hours of work according to the concept of full-time of this Act. The provisions of Subsection (3) of Section 21 deal with a weekly holiday regarding the industrial premises and there is no such provision of a weekly holiday so far as the home-worker is concerned. A common provision of annual leave with wages is made for all employees, whether they work in the industrial premises or whether they work in their own houses. That is the scheme of Sections 26 and 27, and the challenge that is held out is in respect of the extension of the concept of annual leave with wages to home-workers as well as to those workers in industrial premises who have no fixed hours of work according to the terms of the contract under which they are engaged. Since this constitutes an important independent attack on the reasonableness of the statute, we will consider this separately after the present question relating to the definition of employer contained in Sub-clause (a) of Clause (e) of Section 2 is disposed of.
34. Sub-section (1) of Section 29 was styled as rather onerous by Mr. Qazi who represented some of the employers. Under this provision, the employer has to make an application for obtaining permission to permit the wetting or cutting of beedi or tobacco leaves being done outside the industrial premises. Under Sub-section (2) of Section 29 a record of this work has to be maintained in the form prescribed. Mr. Qazi said that this will unnecessarily add to the workload and the record sought to be created may not be of particular use. While Mr. Qazi was making this complaint, we asked him whether the tendu leaves and tobacco are being issued to the workers in the industrial premises for being taken home. He had to admit that wherever the tendu leaves are issued, they are invariably issued for being taken home and the work of wetting and cutting is never done in the indus^ trial premises. We then asked him whether his clients and other similarly situated manufacturers maintain any record of this issue. Mr. Phadke for some of the other employers admitted that arecord was being kept. Mr. Qazi consulted some persons who were instructing him and admitted that a record of issue was being maintained. If some kind of record is being already maintained about this issue of leaves, we fail to understand how maintaining the same record in a definite form prescribed is going to add to the workload of the manufacturers. It may be noted that one of the provisions of this Act by way of regularising the relationship of employer and employee envisages disputes that may arise and the settlement thereof. Sub-section (2) of Section 39 contemplates one of the possible disputes between an employer and employee relating to the issue by the employer of raw material to the employee and the summary settlement thereof by the Labour Officer as provided by Rule 34. It cannot be gainsaid that such a dispute may arise. If a dispute can arise and has to be settled, it is necessary that some record is required to be maintained, so that the complaint made could be tested against some tangible evidence.
35. We may now point to the provisions of Section 31 which by themselves appear to us to be wholesome and necessary in the interests of safety and continuity of employment. The services of an employee who has served for more than six months are not to be lightly dispensed with except for a reasonable cause and that too after giving one month's notice in writing or wages in lieu thereof. There is of course a proviso which enables the employer to dismiss an employee without notice if he is charge-sheeted for misconduct supported by satisfactory evidence and a domestic inquiry is held by the employer by observing the rules of natural justice. The question again here does not relate to the reasonableness of the provisions themselves, but it mainly relates to the responsibility of the principal employer in respect of the acts done or omissions committed by a genuine contractor in relation to the employees either engaged or employed by him. The provisions of Sub-sections (2) and (3) of Section 31 deal with the remedies available to the employee for getting his grievances redressed, where he wants to complain that he is discharged, dismissed or retrenched without a proper cause or without following the proper procedure. The consequences that may follow include not merely compensation for wrongful termination but in a given case, reinstatement with back wages. All these effects of the litigation between the genuine contractor and the employee would create a heavy burden against the principal employer which would be unreasonable, as if he was directly committing all the errors which are in fact committed by the contractor.
36. Section 33 is the culminating section dealing with the consequences that should follow from the contravention of any of the provisions of this Act and those consequences are to be borne by all the employers as such which obviously include the principal employer. Section 33 says that any person who contravenes any of the provisions of this Act or any of the rules made thereunder or fails to pay wages or compensation in accordance with any order of the appellate authority passed under Clause (b) of Sub-section (2) of Section 31, shall be punishable for -the first offence, with fine which may extend to two hundred and fifty rupees, and for a second or any subsequent offence, with imprisonment for a term which shall not be less than one month or more than six months, or with fine which shall not be less than one hundred rupees or more than five hundred rupees or with both.
37. Pausing here, we may now look back in retrospect on all the provisions cumulatively for the purpose of examining the reasonableness of the definition of 'employer' contained in Clause (g) of Section 2. We may point out some of the special features of this industry. The report of the Minimum Wages Committee of 1964 made available to us by the learned Assistant Government Pleader indicates that piecemeal legislation has failed. Even the Statement of Objects and Reasons shows that the attempt of some of the States to regularise the relationship of employer and employee in this industry failed for the simple reason that this was a mobile industry and immediately shifted to another State where similar restrictions, were not to be had. We may note here that it was stated at the Bar by Mr. Kumbhare, learned counsel for the employees' Union that the moment the notification under the Minimum Wages Act was issued in this State, all the beedi factories in the Vidarbha Region were closed in 1958 for three months and increasingly the Gharkhata system is being resorted to by the employers. It may also be noted that this industry unlike other industries, does not require heavy machinery for its manufacturing process. On the contrary, it appears that the use of heavy machines is prohibited as the employment of a vast number of employees who feed themselves on beedi rolling has got to be preserved. This being the peculiar nature of the industry it seems to be sensitive in its reaction to the laws that are being made and the reaction of the employers appears to be quite sharp and immediate. The provisions of this Act must therefore be examined in the light of this peculiar nature of this industry. As we read the provisions of this Act, logically taken to theirconclusions, they mean that the principal employer is made liable civilly as well as criminally in respect of every facility that is made available to all the employees including the home-worker. Even when therefore a genuine case of a contractor exists and that contractor, having received full payment from the principal employer, fails to make payment to his own employees, it will amount to the principal employer not making payment or failing to make payment of wages. This will expose him to consequences which are civil as well as criminal. He may have to face a litigation before the Payment of Wages Authority as that Act is made applicable to this industry by Section 28 of this Act. He will further be liable to be prosecuted under Section 33, and if such a performance is repeated twice not by the same contractor but by two contractors independently, it will be a second offence of the principal employer. Be it noted in this context that it was stated at the Bar by the learned counsel representing the Employees' Union that there are about 5000 contractors at present functioning in the Bhandara district. It was further stated at the Bar that two of the main manufacturers control almost 75 to 80 per cent of such business through the contractors. The report of the Minimum Wages Committee shows that their questionnaire was responded to by 27 manufacturers from the Vidarbha Region. It therefore appears that on the facts stated there is a considerably large number of contractors working under some of the principal employers. Would it be proper, of course on the footing of continuing the beedi manufacture in the same manner and on the same size as it is going on today, to fasten the civil and criminal responsibility of all these persons upon the principal employer? It was again admitted that an individual contractor may not be in a position to handle more than 30 to 40 employees in the matter of issuing raw materials, collecting the beedis and conducting their inspection If the principal employer is faced with the proposition of bearing all the civil and criminal responsibility of omission and commission of all these contractors under him the inevitable result will be that the' manufacturer will give up the Gharkhata system and may think of some other system which is less onerous under this Act. If that flows as a consequence, what is the effect of this Act? Does it succeed in providing welfare to the workers in the beedi industry including the home-workers, or does it bring the employment of the home-workers to an end? It does not appear to be the intention of the Act that the Gharkhata system should be stopped andfactory or industrial premises manufacture alone should be encouraged in this industry.
38. In his enthusiasm to support this measure, Mr. Dharmadhikari, learned Assistant Government Pleader, referred us to the judgment of the Madras High Court in : (1961)IILLJ213Mad . He relied upon this judgment not only to show that the provisions of the Madras Act are mostly in pan materia with the provisions of the present Act but also to show that the effect of that Act as envisaged by the learned Judges was to discourage and stop the home khata system and to drive the labourer to the regular factories. We do not think that this judgment can be of any assistance in considering the provisions of the present Act. In the first instance, we find that the extended definition of 'employer' contained in Sub-Clause (a) of Clause (g) of Section 2 is not to be found in the Madras Act. The definition in Section 2(g) of the Madras Act quoted on page 223 of the report compares favourably with the definition of employer in Sub-clause (b) of Clause (g) of Section 2 of the present Act. Then again that Act requires that every place where the beedi manufacture was to go on had got to be licensed. The report of the Natarajan Committee quoted and discussed by the learned Judges of the Madras High Court showed that the conditions under which the home-workers were working were, to say the least, most pitiable. In some cases, there was no home and the term 'home-worker' was a misnomer. People were sitting under trees for rolling beedis in season and out of season. The learned Judges have taken the view that if the provisions of this Act discouraged such sub-human conditions of work and sought to provide better amenities under the factory conditions, there is nothing wrong in preferring the factory manufacture of beedis, to the home khata system that was prevalent in Madras, Mr. Phadke said that he joins issue with the conclusion of the learned Judges of the Madras High Court and would like to say that it is not in public interests to stop the home khata system altogether. It is not necessary to consider that argument at all in the present' case because the impugned Act before us does not seek to stop or eradicate the Gharkhata system altogether. On the contrary, it seems to preserve it with the distinction that better amenities ought to be made available even to the home-workers. How can therefore the provisions of the Madras Act and the discussion of the learned Judges in the matter of that Act be of any assistance to us?
39. We may consider one or two aspects of the same proposition, namely, the vicarious liability of the principal employer in relation to the employee at large. Ordinarily in matters industrial, the responsibility of a person should be correlated to his right of superintendence or supervision. In a case falling under Sub-clause (b) of the definition, where a pre tense was being formerly made that the employees were not his (employer's) employees but were those of the contractor, the Labour Courts have removed that screen and held on facts that the employer was the real employer. It obviously means that he had all the power of superintendence and enforcement of discipline. If he neglects to do so or tolerates a misdeed of his own contractor who is purely an employee in fact, it will stand to reason that the employer must be held responsible for any consequences. If we however imagine a case of a genuine contractor which we repeat seems to have been preserved by this Act, how can the employer have any right in law of supervision or interference in the management of the contractor in his own affairs? If such a principal employer would not have any right of interference or supervision over the affairs of the contractor in terms of his contract with him, is it fair to make him responsible for the acts of omission and commission of the contractor?
40. We may here refer with advantage to the judgment of the Supreme Court in Orissa Cement Ltd. v. Union of India, : (1962)ILLJ400SC . That was a case under the Employees' Provident Funds Act, 1952. By notification under Section 7 of that Act, the Central Government extended the benefits of the Provident Funds Scheme to contract labour. As the appellant Company failed to credit in respect of contract labour their own contribution and the contribution of the contract labour, proceedings were started under the Employees' Provident Funds Act. On the facts found, the Supreme Court observed that the employer, so far as the contract labour was concerned, was a contractor who paid their wages and it was not the petitioner company that could pay the contract labour. Paragraph 32 of the Provident Fund Scheme envisages that it is the employer who pays his own labour that must credit to the Fund not only his own contribution but that of the employees. He is given in turn a right to deduct from the wages of the employees the contribution which the employees ane supposed to make. In the face of the Scheme, the Supreme Court points out; How could we say that the Orissa Cement Company had any right to deduct from the wages of the contract labour any portion of their wages towards the provident fund? Such a direction by a notification under Section 7 therefore operates unfairly and harshly upon the employer and could not be sustained under those provisions. Apart from the peculiar facts in which that case arose, it seems to be possible to derive' assistance from the principle on which it was decided. If the employer had no right to deduct any part of the wages of the contract labour, he could not be held responsible for not deducting it. By the same logic, if the affairs of the contractor could not be controlled by the principal employer, will it be fair to hold him responsible for the acts and omissions of the contractor?
41. Mr. Dharmadhikari for the State referred us to the judgment of the Gujarat High Court in Ramanlal Chimanlal v. State of Gujarat. : (1967)ILLJ447Guj . That was a prosecution under the Factories Act (Section 92) for breach of some rules by the employee of the manager of the factory or the owner of the factory. For every act of omission and commission in the matter of the factory, the principal 'employer there has been fastened with the responsibility and it is obvious that vicarious liability, civil or criminal is fastened upon the employer. Mr. Dharmadhikari argued that such a provision was challenged as unconstitutional but was upheld by the Gujarat High Court. We again fail to understand how any assistance could be derived from this judgment. There appear to be two distinguishing features between the provisions and the facts of that case, and the general provisions that are considered in the impugned Act. The primary distinction is that it is the owner of the Factory who has overall control and supervision over the affairs of the factory. If he chose to appoint a person and get work done which is primarily his, and the responsibility for which is also primarily his, it is legitimate that the responsibility for non-discharge of duties is also fastened upon the owner. That feature, as we have pointed out, would be absent in the case of a genuine contractor. There is again a very salient provision in the Factories Act. If we read the provision of Sections 92 and 101 of the Factories Act together, if a breach is committed by a subordinate and the owner is in a position to show that he had taken all due and reasonable precautions he could, that constitutes good defence to the criminal action against him. No such provision is to be found in the present Act. Section 33 merely says that any person who contravenes any provision shall be liable. It is not even open to the principal employer to show that he had taken allthe precautions he could in the circumstances and for whatever lapse has taken place, he is not responsible at all. To us it appears that the provisions of Section 33 are too drastic. Instead of promoting the object of the Act, namely, the preservation of the contract system, together with certain facilities being made available to the home-worker, they will have the tendency to disintegrate the present system of Gharkhata.
42. Mr. Dharmadhikari referred us to the judgment of the Supreme Court in Manohar Lal v. State of Punjab : 1961CriLJ570a . The provisions of Section 7 (1) of the Punjab Trade Employees Act, 1940, were being challenged as enacting unreasonable restrictions upon the right of a person to do business. Under that provision all shops were required to be closed for a day which was the close day under the Act and that included even those shops where the owner alone worked on his own behalf. It was contended that this was an Act for the welfare of employees only and the owner of the establishment could not be compelled to close down his shop. This argument was negatived on the ground that this was an Act In the interests of the general public which includes the welfare of all connected with the trade and commerce, and in that sense even the employer or owner of an establishment included under the clause who must be given rest, which is a matter of general public interest, and for achieving that object, Section 7 (1) was enacted. Mr. Dharmadhikari particularly emphasises the language used by the Supreme Court, namely, that acts apparently innocent in themselves may have to be prohibited and restricted in order to secure the efficient enforcement of the valid provisions of an Act, We again fail to understand how this principle which is undoubtedly wholesome could be stretched and applied to the situation with which we are dealing. Why that provision was enacted is also indicated in the earlier part of the judgment by pointing out that the ratio of the legislation is social interest in the health of the worker who forms an essential part of the community and in whose welfare therefore the community is vitally interested. A deeming provision which is a legal fiction may be made to extend the definition; but would it be fair and would it be in the public interests to make it so irksome as to lead to the cessation of the system itself which is conceived of by the Act as a matter of some benefit to the employees, especially the home-workers? It may be noted that the home-workers are a peculiar type of class. They are agriculturists and otherwise staying in villages which may befar off from the place of the principal manufacturer. The principal manufacturer may not himself be able to reach this place if he were to directly deal with them. An intervening agency is therefore a sine qua non of the Gharkhata system. If unduly harsh restrictions which are disproportionate with the gains which the principal employer may be making are fastened on him by a legislation of the present type, the effect, in our opinion, would be dwindling down of the Gharkhata system. This does not seem to be in the public interests as this is not the object of the present legislation as we read it.
43. Mr. Dharmadhikari for the State and the Union sought to draw sustenance from a judgment of the Supreme Court in Basti Sugar Mills Ltd. v. Ram Ujagar : (1963)IILLJ447SC . In that case their Lordships upheld the extended definition of 'workman' in Section 2 (z) of the U.P. Industrial Disputes Act, 1947, which sought to include the contract labour as employees or workmen of the industry itself. We may point out that their Lordships were dealing with a case where the sugar mill employed a contractor for doing certain work of the factory and in the factory premises. Twenty-one persons were employed through the contractor for the purpose of removal of press-mud in the sugar factory belonging to the mill. The extended definition sought to include such workmen as being employees of the sugar mill itself. The challenge to such an extended meaning given to the expression 'workman' was negatived on the ground that this was an essential work of the factory which the factory was supposed to do itself. It is entirely different that it appointed a contractor and got the work done through him. Not only the work was of the factory but was done in the factory premises itself. What the factory was supposed to do itself, it got it done through the agency of the contractor. In such a situation, the deeming provision was upheld a reasonable restriction as the facts and circumstances of that situation demanded. We have already pointed out that several factors have to enter the judicial verdict when the concept of reasonable restriction is being tested against the provisions of a particular Act. Apart from the extended definition, the judgment proceeds to point out that the words 'employed by the factory' were capable of being extended to include such workmen who were working under the contractor. Here again, if any ratio is to be drawn regarding the principles on which such cases are to be decided, it is the nature of the work and the supervision and control which the employer is entitled to exercise in thecarrying out of that work. In the case before the Supreme Court, they also emphasised the fact that not only it was a type of work which the factory itself had to do but it was being carried out in the factory premises itself. It is not possible to say that a manufacturer who is now being styled as the principal employer must himself get the work of rolling beedis done, unless we imagine that the contract system is to be put an end to. If that was the object and was sought to be achieved, the provisions of the Act, if challenged, would have been examined from another point of view altogether. If the object is to preserve the contractor and the Gharkhata system as it is, it would not be possible to say that the principal employer must himself get the beedi rolling done under his personal supervision. The principle of the Basti Sugar Mills' case : (1963)IILLJ447SC cannot therefore be of any assistance in considering the reasonableness or otherwise of the provisions of the impugned Act.
44. While trying to meet the argument of Shri Phadke that a faithful implementation of the present Act might see the end of the contract and the Gharkhata system, Mr. Dharmadhikari referred us to a judgment of the Supreme Court in Shibu Metal Works v. Their Workmen 1966 I LLJ 717. We do not again see, with respect, how this case can be used for solving the problems which are likely to be created by the implementation of the present Act. Their Lordships were dealing in that case with an industrial award which suggested abolition of contract labour system. That award was ultimately upheld. Mr. Dharmadhikari referred us to a quotation adopted by the Supreme Court from the report of the Royal Commission on Labour in India. That part of the Royal Commission's report suggests that whatever the merits of the system in primitive times, it is now desirable if the management has to discharge completely the complex responsibilities laid down upon it by law and by equity, that the manager should have full control over the selection, hours of work and payment of the workers. We do not read in this judgment anything which suggests that contract system is not good for any kind of industry at all and that it must be abolished wherever it exists. The relevant quotation from the Royal Commission's report conceives of a modern industry with the complex responsibility and it is to such a modern industry that the observations of the Royal Commission apply. We do not think that a doctrinaire approach is possible in the matter of any system as such. The desirability of a system is tobe considered from two different points of view. A particular system of work may have inherent merit and it would be desirable to preserve it whatever the other developments that may take place. It may be that a particular system has some merit in relation to the existing facts and that system may be preserved so far as the corresponding facts continue to exist. The Supreme Court also has not adopted a doctrinaire approach to the abolition of the contract system as such. We may again point out as we have repeatedly done that the object of the present legislation is not to abolish the contract system and any argument which has validity in favour of abolishing the contract system is therefore not relevant at all when the merits of the present legislation are being examined.
45. With this broad approach to the vicarious liability which is fastened upon the principal employer by this Act, we have mainly discussed the implications of Section 33. It is not necessary to refer to every provision of the intervening sections to which we have already given a detailed reference. Wherever therefore an act is required to be committed or a rule is required to be observed by the employer, it would always mean the intervening contractor as well as the principal employer. From the simplest provision of maintaining the industrial premises in a certain order up to the maintenance of accounts and payment of wages, everything is covered by the intervening provisions and for each such act or omission in relation to those provisions committed by the independent contractor, the principal employer would be answerable for civil as well as criminal consequences.
46. Let us now consider whether this was inevitably necessary for the purpose of achieving the object of the present legislation. If it could have been shown that unless this is done, the object could not be achieved, it would be necessary to consider whether such a restriction in the circumstances be held reasonable restriction, We have now the provisions of this Act dealing with the question of licence. When we refer to the expression 'contractor', in this context, we have always the independent contractor in our mind. Mr. Dharmadhikari also tried to suggest while this judgment was being dictated that an independent contractor which is in the mind of this Court does not seem to have a place in the present Act. We told him that it does not appear to be the pleading either of the State or the Union, nor was such an argument addressed to us during the long debate that took place before we reached this judgment. However, since, he has madethat suggestion, we may merely point to the definition of 'contractor' in Clause (d) and the definition of 'employer' in Sub-clause (a) of Clause (g) of Section 2, which clearly bears out the fact that such a contractor is very much conceived of by this Act. Even if such a contractor exists, the principal employer who makes a' contract with such a contractor is tried to be roped in for shouldering the responsibilities of this Act and therefore the propriety of the extended definition in Sub-clause (a) of Clause (g) of Section 2.
47. Now, resuming the discussion about the provisions relating to licences, which is the accepted customary mode of controlling an industry, we find that there are ample provisions which would achieve the object of the Act without bringing in the principal employer: We have already said that the provisions of Sections 3 and 4 appear to be reasonable. If that is so, under Section 3, every employer is required to obtain a licence, and an independent contractor who is going to engage or employ labour either in his own premises or in the premises of the home-workers in their own home, would be required to obtain a licence if he maintains an industrial premises. We think that the submission made by Mr. Kukday on behalf of the Employees' Union in the matter of the definition of 'industrial premises' contains considerable merit. Industrial premises have been defined to mean and include any place or premises, except a private dwelling house where or in any part of which an industry or manufacturing process connected with the making of beedi or cigar or both is being, or ordinarily, carried on. The definition of 'manufacturing process' includes any process for, or incidental to, making, finishing or packing or otherwise treating any article or substance with a view to its use, sale, transport, delivery or disposal as beedi or cigar or both. One of the features of this industry that was stated before us was that the contractor so-called has normally a place of his own in a village. If there are adjoining villages, he may have one place for two or more villages. However, the important feature is that it is a place from which he issues tobacco and leaves and where he receives the beedis at the end of the day. He has a certain place for stocking the raw materials before their issue, and this would be a process connected .with or incidental to the making of beedis. The premises of the contractor would be in that sense 'industrial premises.' Whether the contractor wants to get beedis rolled through the Gharkhata system or wants to have an independent place with some people working directly under his supervision,he would always be required to take out a licence. That too appears to us to be the correct interpretation of the provisions of this Act. In that case, here is an Act which compels every contractor to obtain a licence for beedi manufacture. The moment he applies for a licence, the provisions of Sub-section (3) of Section 4 would be attracted. The competent authority would examine whether the place or the premises proposed are suitable, whether the contractor has previous experience, whether the applicant has financial resources, including his financial capacity, to meet the demands arising out of the provisions of the laws for the time being in force relating to welfare of labour, whether he is the bona fide applicant on his own behalf or a benamidar for someone else, and whether the welfare of the labour in the locality, the interest of the public generally and such other matters require that the applicant should be given a licence. The vice or evil that is sought to be eradicated, as it appears from the various reports preceding this legislation and also the various judgments that have taken place in relation to these industrial laws appear to be that the contractor is a man of straw. The real employer evades the responsibility, financial as well as other. If under this Act, the contractor hereafter could not be a person of straw, unless the competent authority fails to discharge its functions property, there is no fear of the employees' claim being flouted in any manner. In the face of these provisions which we think are not only relevant but wholesome for the proper administration of this Act, is not the object carried out or is not the object likely to be achieved by making the independent contractor liable as an employer for all the demands of this Act? Could it be said that without roping in the principal employer such a result would not be achieved? If it could be said that there was no need to include the principal employer by the extended definition and the object could otherwise be achieved, the particular provision relating to the definition contained in Sub-clause (a) of Clause (g) of Section 2 is in the nature of an excessive restriction upon the freedom of trade and commerce guaranteed to a citizen under Article 19(1)(g). It may not be possible to argue in this case that the provision proposed is not at all connected with the object of the Act. It undoubtedly is connected with the object of the proposed restriction and, in our view, appears to be far too stringent, oppressive and in excess of the requirements of the situation. A provision like this, which is undoubtedly conceived of with the laudable motive of curbing some of the malpractices inthe beedi industry, is likely to shut the door of employment for the home-worker if carried to its logical end. It is in this sense we think that not only this provision is in excess of the requirements of the situation but is likely to defeat the very object of this legislation. Needless to say that if an employer falls under Sub-clause (b) of Clause (e) of the definition, then undoubtedly he will be answerable for all the claims arising out of the administration of this Act. While coming to this conclusion, we have yet to consider the provisions of Sections 21, 26 and 27. The merits of those provisions are otherwise challenged as unworkable and inapplicable to a part of the present industry and that aspect will be discussed hereafter. However, we may indicate that the financial burden of leave with wages in respect of every employee in all establishments so far as the annual leave with wages is concerned would also fall upon the principal employer even where an independent contractor is functioning under him. To that extent, that is an additional responsibility which may scare away the employer from resorting to the Gharkhata system of the present day. That is an additional ground for which we think that this restriction is unreasonable and far in excess of the necessities of the situation. We would therefore strike down the definitions in Section 2(g)(a) and 2 fm) as invalid and inoperative. It is to be presumed that all the provisions of this Act are now to be read on the footing that these definitions do not exist in the Act. As a logical consequence of striking down the above two definitions, it seems to be necessary to delete the words 'in relation to other labour' contained in Sub-clause (b) of Clause (g) of Section 2. They are now rendered redundant in view of the fact that the earlier Sub-clause (a) from the definition has been struck down by this judgment. In fact, we are obliged to Mr. Kukday for bringing to our pointed notice this consequence of the conclusions reached by us in the matter of striking down these two definitions.
48. The second important challenge taken up against the provisions of this Act relates to leave with wages. There is a special provision in the case of industrial premises for a paid weekly holiday, that is provided by Sub-section (3) of Section 21. However, for all employees in any establishment, annual leave with wages is provided by Section 26. In the case of industrial premises, the premises are required to be closed for one day in a week. Even then for a holiday under this section the employee in the industrial premises has to be paidnotwithstanding any contract to the contrary at the rate equal to the 'daily average' of his 'total full time earnings' for the day on which he had worked during the month immediately preceding the holiday exclusive of any overtime earnings and bonus but inclusive of dearness and other allowances. Annual leave is provided for all employees. Subsection (1) of Section 26 lays down that In the case of an adult, the leave will be at the rate of one day for every twenty days of work performed by him during the previous calendar year, and In the case of a young person, at the rate of one day for every fifteen days of work performed by him during the previous calendar year. Whether it is a weekly holiday for an employee in the industrial premises or whether it is an annual leave of any employee in any establishment, the payment that is to be made is on the basis of the daily average of his total full time earnings for the days on which he has worked during the preceding week so far as the weekly holiday is concerned, and during the month immediately preceding his leave so far as the annual leave is concerned, exclusive of course of any overtime earnings and bonus but inclusive of dearness and other allowances. In the matter of annual leave, the expression 'total full time earnings' has also to include the cash equivalent of the advantage accruing through the concessional sale to employees of foodgrains and other articles, as the employee may for the time being be entitled to but does not include bonus. In the matter of calculating the day as well as the wages for the leave day, two questions are raised for our consideration. The provisions of Sections 26 and 27 apply to all employees whether they work in the industrial premises or in their own homes. What is a day of work and what are full time earnings of these persons? Both these vexed questions have been judicially considered time and again and a certain view has been taken by the majority judgment of the Supreme Court. For the purpose of defining a day, so far as the home-worker is concerned. Explanation II to Section 27 is added. According to this Explanation, for the purpose of determining wages payable to a home-worker during leave period as also for the purpose of payment of maternity benefit to a woman home-worker, 'day' shall mean any period during which such home-worker was employed, during a period of twenty-four hours commencing at midnight, for making beedi or cigar or both. From mid-night to mid-night, therefore, is the day which is laid down for the purpose of calculating wages payable to a home-worker. In the matter of industrial premises, prima facie, 'day' will be according to the working hours notified under the provisions of Sections 17 and 22 read together. The definition of day does not however solve the difficulties that may be faced in the enforcement of the provisions of this section. It is not every day or any day that is relevant for the purpose of counting the wages on a leave day but it is only those days where the employee works for full time. That seems to be relevant under both these provisions. Under Sub-section (3) of Section 21 as well as under Sub-section (1) of Section 27, the rate for payment has got to be equal to the daily average of his total full time earnings for the days on which he had worked during the week immediately preceding his leave. These provisions again are not new but seem to be taken from the provisions of Sections 79 and 80 of the Factories Act. Under Section 79 of the Factories Act, if a worker work a for a period of 240 days or more in a factory during a calendar year, he is to be allowed during the subsequent calendar year leave with wages for a certain number of days calculated at the rate prescribed in that section. Different days are provided for adults and children as is done by Section 27 of the present Act. When the wages for that period is to be calculated, Sub-section (1) of Section 80 of the Factories Act lays down that for the leave allowed to him under Section 79, a worker shall be paid at a rate equal to the daily average of his total full time earnings for the days on which he worked during the month immediately preceding his leave. The further reference to the exclusion of overtime and bonus and inclusion of dearness allowance is also identical with the provisions of Section 27(1) of the impugned Act. The provisions of Sections 26 and 27 are therefore in pari materia with the provisions of Sections 79 and 80 of the Factories Act. The provisions of the Factories Act were already extended to the beedi industry and the operation of Sections 79 and 80 in relation to the beedi industry has already been the subject-matter of judicial decisions. Mr. Kukday for the Employees' Union argued that the Legislature has taken this prior history Into account and has amended the judicial decisions by way of this new legislation. To amend judicial decisions by legislation is a well-known method and if that has been successfully implemented, the new provisions will have to be interpreted according to their own language and contents. How precisely this amendment has been effected has been stated before us by Mr. Kukday by referring to Explanation II to Section 27. He stated that theword 'day' has been defined. In the case of the Factories Act it is normally assumed that the worker has to attend the factory from the opening hours and has to remain at his work throughout the day as required by the Standing Orders applicable to the Industries governed by the Factories Act. What the Legislature has done now under this Act is to extend the provisions of the Industrial Employment (Standing Orders) Act, 1946, to the entire beedi Industry, whether the employees are more than 50 or less. Sub-section (1) of Section 37 makes the Industrial Employment (Standing Orders) Act applicable to all industrial premises wherein fifty or more persons are employed or were employed on any one day of the preceding twelve months. Sub-section (2) of that section vests the power in the State Government to extend the provisions of that Act to all other industrial premises irrespective of the number of persons working in them. It is true that till now, no notification has been issued under Sub-section (2) of Section 37. It is possible to argue that there was hardly any time for the State Government to issue such a notification. The present Act came into force on 1st April, 1968. It was published in the Official Gazette on 1st December. 1966 but the Maharashtra State Government extended its application to this State, except Section 3, on 1st April, 1968. Even Section 3 was made applicable as from 1st May, 1968. However, an application to challenge the vires of the Act came to be presented sometime in June 1968 and an interim stay order was obtained from this Court suspending the operation of this Act. It may therefore be that the State Government had not had time enough to consider the issuance of a notification under Sub-section (2) of Section 37. It however appears that the rules under the Act were already framed and kept ready by 28th March, 1968, and they were brought into force along with the Act on the same day, namely, 1st April, 1968. However, whether the State Government had time enough or not was not decisive of the matter which is being challenged before us. We will take it that the State Government could and would in due course extend the provisions of the Industrial Employment (Standing Orders) Act to all the industrial premises irrespective of the number of workers working in them.
49. In spite of this extension of the Industrial Employment (Standing Orders) Act, we have to consider two different sets of facts. We will have to examine the provisions of Sections 26 and 27 in relation to the home-worker and also in relation to the employeeworking in the industrial premises. In the industrial premises, the problem has again two different facets. At least, one of the employers in Special Civil Application No. 514 of 1969 has pleaded that he does the manufacture of beedis only through the factory and his contract with the workers is not of a fixed type. He has a definite time when he issues raw materials within which period every employee has to come and receive the raw materials. However, there are no definite hours of work. The factory undoubtedly has hours of work notified during which it will remain open. The worker may come in and go out as he likes. He is paid at the end of the day on the basis of his turn-out. In other words, the contract is piece rate contract with no definite hours of work and not even an obligation to come every day and work. If the employee in such an establishment requires leave, he could take his own leave. It also appears that in case he wants to absent himself for ten days, he has to notify that fact to the employer, so that the employer does not think that he has given up the employment altogether. We find that there is no return in this petition controverting these allegations. Even in the other returns which are of a stereotype nature, this question has not been specifically dealt with at all. From some of the judgments to which we will presently refer, it will be apparent that such contracts are not unknown in the beedi industry. On the contrary, they have been proved and accepted in some of the judicial decisions, to which we will presently refer.
50. How to calculate a day of work and more so, a day of full time work for an employee who is under no obligation to work for a definite number of hours? This will be a question to consider so far as the employees in the industrial premises are concerned. So far as the home-workers are concerned, there does not seem to be any possibility of fixed hours of work for them. The very nature of the contract shows that some material is taken home and the final product is returned to the contractor or the employer, as the case may be. Like the notified hours of work in the factory, there is no possibility of certain positive hours of work in a house. Even on the question of the total number of hours for which the home-worker must work, the matter is only left to the leisure that he may spare on his own volition. There could not and does not appear to be a specific contract either in terms of minimum or definite production per day. At any rate, no such contract has been pleaded by any of the employees. So far as the Union and the State are concerned, there is nospecific pleading on any of the details alleged in the petition, but the return is the general justification in terms of the objects of the Act and the whole-someness of the various provisions which are enacted.
51. Faced with this situation. Mr. Kukday for the employees' Union argued that a contract of the type alleged would not survive any more after the impugned Act begins to operate. That is because the Industrial Employment (Standing Orders) Act, 1946 would hereafter be applicable to all industrial premises and at least so far as industrial premises are concerned there would now be definite hours of work and an obligation to take work for a certain number of hours and to give work for those definite number of hours. The hours notified under the notice under Section 22 read with Section 17 would deter-mine the full time work of the day. There is considerable force in this argument so far as the concept of full time work of a day is concerned. It is possible to logically infer that where the hours of work for the whole day are notified, those would determine the full time work of that day. However, we do not read anything in the Industrial Employment (Standing Orders) Act which casts a duty on the employee to work for a definite number of hours irrespective of his own contract with the employer, nor do we read any authority in the employer to obtain a definite number of hours without making a specific contract in that behalf from his employee. We also do not see in this Act any provision which prohibits a contract of the present type where there are no fixed hours of work for an employee and he is free to come and go during the course of the day. Shri Kukday argued that under Section 2-A of the Industrial Employment (Standing Orders) Act, model Standing Orders are provided which would be operative at once, and if any amendment is to be made in these Standing Orders, an application has to be made within the time fixed and in the manner prescribed by the provisions of that Act. Under Section 3, within six months from the date on which the model Standing Orders apply to any industrial establishment under Section 2-A, the employer or any workman employed therein may submit to the Certifying Officer five copies of the draft amendments for adoption in such industrial establishment. A further procedure is then laid down, according to which the amendments will be either accepted or rejected, and in case they are accepted, the amended Standing Orders would be certified. They would then begin to operate as Standing Orders for that particular industry. StandingOrders represent a contract between the employer and the employee, and whether the employer or the employees have voluntarily agreed to certain conditions or not, the provisions of the Standing Orders would supplement the original contract and would take its place where the original contract is contrary to these Standing Orders. However, essentially they represent a contract of employment and where a contract exists that the employee is free to come and go at any time, we do not read in these orders any provision which compels the employee to attend to his work at a particular time and to remain at his work for the entire period of the day which is notified as the working hours of the industrial premises. Mr. Kukday brought to our notice Standing Order 11 from the model Standing Orders, which requires that all workmen shall be at work in the establishment at the times fixed and notified. Workmen attending late shall be liable to be shut out and treated as absent, provided that no workman who attends within 15 minutes of the starting time shall be shut out. One of the queries we put to Mr. Kukday was whether this provision would also control a part-time worker engaged by the industrial establishment. To us it appears that where there is a contract of work for full time, this Order will be operative, but if the contract is different in terms of the total number of hours to be put in in the day, this will have no relevance, and therefore of no application. We do not read in that Order a prohibition in an employer to make a contract for taking less hours of work in a day or to have a contract different from the one which will always cover the hours of work notified in the establishment.
52. This discussion is made particularly to point out that in spite of the judgment of the Supreme Court on this subject, dealing with the provisions which are identical in words, we do not read in the impugned Act anything which is different from the provisions of the Factories Act contained in Sections 79 and 80. The question first arose in Shankar Balaji v. State of Maharashtra, : (1962)ILLJ119SC through a Criminal Court. The appellant Shankar Balaji was the owner and occupier of a beedi factory where one Pandurang Londhe was working as a workman and employee. He worked for a certain number of days in 1967 and ceased to work from August 1967. It was alleged by the prosecution that Pandurang's services were terminated by a notice. It was admitted that a notice to that effect was put up but the appellant denied that Pandurang was a labourer or a worker and that Pandurang had voluntarily left the service. It was further alleged that four days' leave with wages was due to Pandurang and no wages were paid to him. For not keeping the registers properly and for not paying the wages, a prosecution under Section 79(11) of the Factories Act was launched. The defence was that Pandurang was not a worker at all in the first instance and even if he was, there could be no means of calculating his wages for the leave period as there were no fixed hours of work for him to put in on any working day. The terms of the contract that were alleged were similar to the pleadings in Special Civil Application No. 514 of 1969 before us. Pandurang himself gave evidence and admitted those terms of employment. The question that arose was whether Pandurang was a worker and even if .he was, could his wages for the leave be calculated on the wording of Sections 79 and 80? The earlier part of the discussion dealing with what is an employment and what are the ingredients of employment that must be proved before that relationship is established need not detain us. It is true that their Lordships of the Supreme Court found that on the terms alleged. Pandurang could not be a worker. Dealing with the second defence of the employer, their Lordships pointed out that the day for the purposes of Section 2, Clause (e), of the Factories Act. means a period of twenty-four hours beginning at midnight. The provisions of Sections from 51 to 58 are then summarised to point out how they operate in respect of the working in the factory. Section 63 of that Act lays down that no adult worker shall be required or allowed to work in any factory otherwise than in accordance with the notice of periods of work for adults displayed in the factory. It would therefore be obvious that a day in this context would mean a period of work mentioned in the notice displayed. Only that worker can therefore be said to work for a period of 240 days, whose work is controlled by the hours of work he is required to put in according to the notice displayed under Section 61. Having summarised the provisions of the Factories Act in this manner, their Lordships proceed to point out that Pandurang, the worker in that case, was not bound to work for the period of work displayed in the factory and therefore his days of work for the purposes of Section 79 could not be calculated. It was urged before their Lordships by the counsel for the State that each day on which Pandurang worked, whatever be the period of time that he worked, would count as one day of work for the purposes of this section. This argument was repelled on the ground that when the section provided for leaveon the basis of the period of working days, it must contemplate a definite period of work per working day and not any indefinite period for which a person may like to work on any particular day. Their Lordships then proceeded to quote the provisions of Section 80 which are, as we pointed out, in pari materia with the provisions of Section 27 of the impugned Act. Even according to the Factories Act, the question that has to be decided was what is the daily average of the workman's total full time earnings for the days on which he worked during the month immediately preceding his leave. It was necessary for the calculation of the rate of wages on leave to know his total 'full time earnings' for the days he had worked during the relevant month. Their Lordships pointed out that the total full time earnings can only mean the earnings he earns in a day by working full time on that day, the full time to be in accordance with the period of time given in the notice displayed in the factory for a particular day. As the expression 'full time' was nowhere defined in the Factories Act, their Lordships quoted the meaning of that expression from the Webster's International Dictionary, and from Words and Phrases, Permanent Edition, published by West Publishing Co.. Vol. 17. The second publication says:
'In an industrial community, term 'full time' has acquired definite significance recognised by popular usage. Like terms 'part time' and 'over time', it refers to customary period of work; and all these terms assume that a certain number of hours per day or days per week constitute respectively a day's or week's work within a given industry or factory.'
This being the normal meaning understood in the industrial community, and in the absence of any definition, of 'full time' in the Factories Act. their Lordships concluded that in their opinion, there could be no basis for calculating the daily average of the worker's total full time earnings when the terms of work be as they were in that case and that therefore the wages to be paid for the leave period could not be calculated nor the number of days for which leave with wages could be allowed be calculated in such a case. Having taken that view, they found that no offence could be said to have been committed by Shankar Balaji as the calculation of the leave wages was impossible and therefore the question of payment did not arise. We will presently refer to the minority judgment in this case on which Mr. Kukday relies heavily for pointing out the alleged amendment of the judicial decision bythe present legislation. Since this is the view of the Supreme Court and as no other judgment has been brought to our notice which takes a different view, it appears to us that the meaning given to the expression in Sections 79 and 80 of the Factories Act by the Supreme Court would have to be accepted when the same expression is used in other Acts provided the reference to context did not exhibit a different intention.
53. In this context, we may at once point out that in spite of the fact that the contract is what is being alleged, if there is a worker who works for the full time notified in the notice put up in the factory each day and is allowed to do so by the employer as the employer may be bound to permit in view of the fact that the choice is of the worker to work for such time as he chooses, what should happen to him has been considered by another judgment of the Supreme Court to which we will presently refer. However, Mr. Kukday argued that the minority judgment in Shankar Balajl's case. : (1962)ILLJ119SC has a distinct approach to the proposition of what is full time. Subba Rao, J. as he then was, in the differing judgment suggests that the terms of the employment being peculiar, whatever time the employee may put in would represent 'his' full time for that day. The day on which he attends would be his day and the work he puts in on that day would represent his full time work. Mr. Kukday argued that the working of the beedi industry being peculiar and the contracts of the type being in vogue, it is possible to say that the Legislature desired that each employee should get the benefit proportionate to the work he puts in. It is this concept which seems to have been accepted by the Legislature, and therefore the impugned Act contains the terminology of the unit being the daily average of his total full time earnings. Here again, we find it difficult to accept this argument for the simple reason that the wording of Sections 79 and 80 is not different from the wording of Sections 26 and 27 of the impugned Act. It is that wording of Sections 79 and 80 which has been construed by the majority judgment to mean something and in spite of that being the decision of the Supreme Court the Legislature has chosen to enact subsection (3) of Section 21 and Section 27 in the same or identical language. A different intention cannot therefore be read when the same language has been almost adopted without any change Whatsoever. The Legislature has taken the trouble to define a 'day' for the home-worker as there would have been difficulty in finding out a home-worker's day. The same Legislature could haveadded one more explanation to point out what is meant by full time earnings of a particular employee, so that all kinds of engagements and employments would be covered by that definition. We do not find any material in the present Act to accept the arguments of Mr. Kukday that this Act represents an amendment of the judicial decision through the process of legislation. In the case of a home worker therefore, it is impossible to determine what are the total full time earnings and it is there-fore not possible to determine the daily average of such full time earnings for the days on which he might have worked in the month immediately preceding the grant of leave. In the same manner where an employee in an industrial premises has a contract of the type alleged in Special Civil Application No. 514 of 1969 and he does not choose to work for ail the days for the full hours notified, it is equally impossible to determine what are his full time earnings and what is his daily average therefore of the full time earnings for the days on which he worked during the month preceding. In the case of both these types of employees, therefore, the provisions of Sections 26 and 27 are inoperative. To an employee in an industrial premises where the contract is similar to one alleged in Special Civil Application No. 514 of 1969 and the employee does not in fact work for the full hours notified in the premises, even Sub-section (3) of section 21 will not apply.
54. There then remain two other types of workers who could be classified as one type for the purposes of considering the applicability of these provisions. There may be an employee in the industrial premises who under the terms of the contract is bound to work for the notified hours. There may be another employee in the industrial premises having a contract similar to one in Special Civil Application No. 514 of 1969 but volunteers and chooses to work for the full hours of the day as notified in the notice in the premises. The first by way of obligation and the second by way of volition bring themselves under one class of persons who are working for full time for the entire hours notified in the notice. What would happen to them? Are they entitled to the benefits of Sub-section (3) of Section 21, as also of Sections 26 and 27? Mr. Kukday seems to be right that in the case of such a person, the way has already been found by the Supreme Court in the case of : (1963)ILLJ270SC . In that case their Lordships were dealing with a case very much similar to Shankar Balaji's case : (1962)ILLJ119SC but with the difference that a notification under Section 85 was issued extending the provisions ofthe Factories Act to the particular premises. The worker concerned was held to be a worker for the purposes of Section 2 of the Factories Act. However, when the question of calculating the benefits of paid leave arose under the provisions of Sections 79 and 80, a case was contemplated where there will be no obligation on the worker to work for full time under the terms of his contract but he would choose to work for full time as notified in the notice in the industrial premises. If two things existed, their Lordships say that the benefit of a weekly holiday and annual paid leave could be extended to him. Their Lordships observed at page 1600 as follows:
'Section 79 clearly applies to workers who work for the full period of employment during factory hours and for the prescribed number of days and it may appear at first sight somewhat inappropriate that the benefit of annual leave with wages should be extended by Notification under Section 85(1) to persons who do not work for the hours fixed for the establishment. But it is in our judgment clear that Section 79 if it is made applicable by Notification under Section 85 would apply to those workers only who work in the factory for the full period prescribed under Sections 61, 71 and 66(i) of the Factories Act by the employer for not less than the number of qualifying days. A 'deemed worker' who is paid only for work done by him and who is under no obligation to attend at any fixed time may be entitled to benefit of annual leave with wages only if he fulfils the working conditions applicable to workers as defined in Section 2 of the Act. The privilege of working for a period less than the period prescribed for regular workers in a factory will not, if he works for less than the prescribed hours, come to the aid of a deemed worker so as to enable him to claim the benefits of Section 79; but that privilege will not deprive him, if he fulfils the conditions relating to the duration of work, of the benefit of Section 79. The fact that a deemed worker in a factory to which Section 79 is extended by a Notification, by virtue of his contract or otherwise is not bound to attend at times fixed by the owner of the factory does not mean that he can never fulfil the conditions relating to attendance for earning leave with wages. If a deemed worker attends the factory for the full duration fixed as factory hours and works for 240 days or more during a calendar year, he would be entitled to the benefits of sections 79 and 80 of the Act.'
55. The above discussion clearly shows that the worker, in order to obtain the benefits of sections 79 and 80, must fulfil the conditions of working for the full hours notified in the factory or the industrial premises and also must put in requisite number of such days in a calendar year to enable him to reap the benefits thereof in the succeeding calendar year. They also point out that the full time in the case of such a worker would be that time which is notified in the industrial premises. If such a worker exists in the beedi industry and chooses to work for the full hours notified in the notice issued under Section 17 read with Section 22 of the present Act, there may be a case to which the provisions of Sub-section (3) of Section 21, as also Sections 26 and 2.7 will apply. The provisions of those sections are therefore good and valid but their application may be limited to the cases employees as we have detailed above.
56. The last point that must now be considered relates to chhat or rejection of beedis as sub-standard. Chhat has been one of the constant grounds of complaints by the employees of the beedi. industry. They always allege that the employers had a double system of chhat and the rejection was done without any fixed principles. It was an arbitrary method by which the employees were deprived of their wages. Under Clauses (r) and (s) of Section 44 of the Act, rules have been made by the State Government regarding sorting and rejection of beedis. Rule 36 requires that the work of sorting or rejection of beedi manufactured by the employees shall ordinarily be got done by the employer at the place or premises where the beedis are manufactured and in the presence of the employee who manufactured the beedis. This rule was attacked by Mr. Qazi as unreasonable on the ground that it would require the manufacturer or the contractors as the case may be, to go to the houses of the employees for the purpose of sorting of beedis. This problem would not arise in the case of industrial premises because the place of manufacture will be the same. It is possible to imagine that the manufacturing process has been defined by the Act and beedis could be said to be manufactured wherever that process or any part of it is going on. In the circumstances, the place from which the contractor issues raw materials, as also the place where the roller rolls the beedis would be both places where the beedis are manufactured. Ordinarily it is either of these places where the work should be done and the intention seems to be that the home-worker particularly should not be made to move out of his own village where he gets the raw materials. In that view, we donot think that this rule is unreasonable, or fastens any extra or irksome liability upon the manufacturer or contractor.
57. The real dispute is centred round the limit with regard to the rejection of beedis laid down by Rule 37. According to Sub-rule (1) of this rule no employer or contractor shall ordinarily reject as sub-standard or chhat or otherwise more than five per cent of the beedis or cigars, or both, received from the worker including a home worker. Sub-rule (2) requires that where any beedi or cigar is 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 beedis or cigars so rejected at one-half of the rate at which wages are payable to him for the beedis or cigars, or both, which have not been so rejected. Mr. Phadke for the employers attacked this rule as being arbitrary and fixing an artificial limit for rejecting sub-standard beedis. He relied upon some of the observations of the report of the Minimum Wages Committee made available to us by the Assistant Government Pleader. The statistical information collected by the Committee shows that this problem, though universal in the entire State, was not so acute in the Factory or Sadar system but it was generally of a serious nature in the contract system. The statistics collected by the Committee showed that all the ten concerns reporting in the Bombay region stated that they had no contract system and nine of them stated that the percentage of chhat ranges from 1/2 per cent to 3 per cent and one concern stated that the chhat was 10 per cent. The 26 contractors in the Bhandara district who reported chhat system stated that the chhat percentage varied from 2.5 per cent to 3 per cent by the contractors and the chhat at the second stage by the main employers to the tune of 5 per cent. Four concerns in the Aurangabad district stated that they had no contract system and the chhat was hardly 1/2 per cent. The report then proceeds to point out how the rejected beedis were treated in different manners in different regions. Relying upon these statistics, Mr. Phadke said that when there was no restriction by rule or law and when the employers and employees were smoothly conducting their business in the traditional manner, there has been considerable variation in the percentage of chhat. He particularly emphasised the fact that the percentage was always higher in the contract system where the work was mainly carried out by the Gharkhata system. The reason, according to him, is obvious. It is the entire family that works. Untrained hands also learn beedi making fromthe material received by the head of the family. There is hardly any supervision over this work. These factors are bound to affect the efficiency and the percentage of chhat would always vary.
58. In spite of such an experiencebeing available, the Legislature has chosen to lay down a flat rate of 5 per cent of chhat and therefore has invited the criticism of being discriminatory for refusing to make a rational classification. He derived support for this argument from the judgment of the Supreme Court in State of Kerala v. Haji K. Kutty : 1SCR645 . There is no doubt that refusing to make a rational classification and to apply a uniform standard to objects, persons and transactions widely different is itself a kind of discrimination. However, on examination of the rule and the statistics that were available before such a rule was made, we do not find that the principle enunciated in the Supreme Court judgment could be really applicable. We do not read Rule 37 to mean that a uniform 5 per cent chhat is to be effected. It only lays down an outer limit. It does not mean that each worker's beedis must be rejected to the extent of 5 per cent. In the factory system or the industrial premises system as the present Act envisages, there may be very little chhat as there is more direct supervision. The experience collected over years shows that even the contractors were hardly effecting chhat to the extent of 2 1/2 to 3 per cent. The contractors, we assume, have long experience of this industry and they know what is a sub-standard beedi. We do not find much rationale for the full 5 per cent chhat. If the experience collected is any guide, the only limit of 5 per cent appears to be a fairly reasonable limit and we do not see any unreasonableness about this rule. It is difficult to imagine that no limit should be fixed. If things were to be left to the good sense of the worker and the employer, no laws would have been necessary. If a law is to be made some arbitrary limit will have to be fixed. If that limit corresponds or responds to the previous experience of the working gathered and the normal working of the industry, the limit so laid down will have to be considered as reasonable in the circumstances. Even this outer limit is indicated to be operated not in every case, and in a given case it may be open to debate or decision of a proper authority whether the additional chhat is proper or improper. We do not accept the argument that an invidious discrimination has been made by the Legislature by refusing to classify. Classification is inherent in the working of the system itself. If there is a better product in the supervised part of the industry, namely,the industrial premises, there would be less percentage, and so far as the home-worker is concerned, it is important to note that the labour is to be paid at half the rates for beedis or cigars rejected as required by Sub-rule (2) of Rule 37. Even that rule is not unreasonable because the statistics collected and the arguments addressed to us show that even for the sub-standard beedis there is a market though at a lesser rate. The home-worker is not interested in increasing the percentage of sub-standard beedis only for the purpose of getting less rate. It is true that pilfering of tobacco is an 'accepted vice of this industry. When no such rules existed and pilfering was considered an existing malaise, even then chhat has hardly exceeded 3 per cent, except in the case of one manufacturer who was inclined to make it 10 per cent We therefore think that taking an overall view of the picture, the provisions of the maximum limit of 5 per cent, as well as the payment of half wages for the rejected beedies appear to be reasonable.
59. This being our view. we declare the provisions of Sub-clause (a) of Clause (g) of Section 2 and the provisions of Clause (m) of Section 2 of the Beedi and Cigar Workers (Conditions of Employment) Act, 1966, as invalid. As a consequence, the words 'in relation to other labour' contained in Sub-clause (b) of Clause (g) of Section 2 are to be treated as deleted. The rest of the Act is upheld as legal and valid and is to be read with the two clauses mentioned above as being absent in the section of definition. However, the provisions of Sections 26 and 27 will not apply at all to the home-workers as understood under the Act. The provisions of subsection (3) of Section 21 and the provisions of Sections 26 and 27 will not apply to an employee in the industrial premises who has a contract similar to one in Special Civil Application No. 514 of 1969 and who does not voluntarily choose to work for the full hours of work notified under Section 22 read with Section 17 of the Act on all the days or the requisite number of days. These sections will be operative as indicated in the discussion in the body of the judgment. All the rules framed under the Act are upheld as legal and valid. In the circumstances, the costs will be borne as incurred.
60. Order accordingly.