1. This order will also govern Miscellaneous Petitions Nos. 49, 50, 51, 52, 53, 78, 81, 85, 87, 89, 90, 91, 92, 93, 94, 95, 101, 118, 150 and 152 all of 1960.
2. The petitioners in these twenty-One petitions under Articles 226 and 227 of the Constitution of India, who are all owners of concerns in the Mahakoshal region of Madhya Pradesh engaged in the manufacture and sale of bidis, challenge the legality of notification No. 307-XVI-58 published in the extraordinary Gazette dated the 30th December 1958 notifying the minimum rates of wages in respect of employment in tobacco (including bidi making) manufactory.
The petitioner in each of the eases seeks an appropriate writ or direction prohibiting the opponent State from giving effect to the said notification, and a writ of certiorari for quashing the order of the authority constituted under Section 20(1) of the Minimum Wages Act (hereinafter referred to as the Act) directing him to pay the difference between the wages actually paid and the wages that ought to have been paid under the said notification to the bidi rollers employed, using the word in a neutral sense, by the Sattedar (intermediary), who has been impleaded in each case as one of the opponents.
3. The material facts are that in the former State of Madhya Pradesh, which comprised the Mahakoshal region of the new State of Madhya Pradesh, the minimum wages for the workers in the bidi industry were first fixed in 1951 by notification No. 111-132-XXIII dated the 11th January 1951. These rates were revised in 1958 with effect from 2nd March 1950 by notification No. 564-451-XXIII dated the 23rd February 1956.
After the coming into being of the new State of Madhya Pradesh the Government, by notification No. 31-4029-XVI elated the 30th April 1957, constituted under Sections 5 and 6 of the Act, (as they stood then) an Advisory Board. This consisted of the Labour Commissioner Shri Oak, Shri Mehta, the Director of Economics and Statistics, six representatives said to be of the employers and six representatives said to be of the employee's. Shri Oak was appointed as the Chairman. On 18th August 1958, the Government issued a notification under Section 5(1) of the Act, which ran as follows:-
'No. 189-XVI -- As required by the amended provisions of the Minimum Wages Act, 1948 (Act No. XI of 1948) and in exercise of the powers conferred by Sub-section (1) of Section 5 of the said Act, the State Government are pleased to publish its proposals for the rates of wages specified in the schedule as minimum rates of wages in respect of employment in any Tobacco (including bidi making) manufactory for the information of all concerned.
All representations in this behalf may be addressed to the Secretary to Government in the Labour Department, Madhya Pradesh, Bhopal, within a period of two months from the date of the publication of this notification.
These proposals together with representations, if any, received within the period specified above shall be taken into consideration as per Sub-section (2) of the said section after a period of two months from the date of the publication of this notification.'
The notification then set out the rates of minimum wages. On 26th and 27th December 1958 meetings of the Advisory Board were held. It seems that at these meetings some consideration was given to the proposals published on 18th August 1958 and the representations received. Ultimately on 1st January or 2nd January 1959 the Government published the impugned notification dated 30-12-58 bringing into force the rates of minimum wages set out therein from 1st January 1959. There is some dispute as to when the extraordinary Gazette containing the notification was published. The petitioners say it was published on 9th January 1959. On the other hand, it was stated by the opponent State that an extraordinary Gazette publishing the notification was issued on 30th December 1958; that some copies of the extraordinary gazette were distributed along with the ordinary gazette dated the 2nd January 1959; and that the remaining copies were distributed in the ordinary gazette issued on 9th January 1959.
3-A. The validity of the notification in question was assailed by Shri Sen, learned counsel appearing for the petitioner Narottamdas, on the ground that the minimum rates of wages for employment in the bidi making manufactory having already been fixed first by a notification issued in 1951 and then revised in 1956, the State Government could not again fix minimum rates of wages for this employment and that it could only revise the rates already fixed in accordance with the new Section 5 of the Act; and that in so far as the impugned notification purported to be under Section 5(1)(b) of the Act fixing the minimum rates of wages for the bidi making manufactory over again, St was void and inoperative.
It was pointed out that the notification issued on 30th April 1957 constituting the Advisory Board stated that the Board had been constituted for fixation of wages fu?kkZfjr djus ds laca/k esa that the notification dated the 18th August 1958 publishing the proposals for wages made no mention whatsoever of revision of minimum rates of wages already fixed; and that the notification issued on 30th December 1958 nowhere said anything about the supersession of earlier notifications or revision of the minimum wages fixed thereby.
4. Learned Government Advocate did not dispute that under the Act the fixation of minimum rates of wages in respect of any scheduled employment could be only once and any change in the wages so fixed could be only by way of a revision. He, however, urged that the notifications issued on 18th August 1958 and 30th December 1958, though they did not in so many words refer to a revision of wages fixed in 1951 and revised in 1956, were in substance notifications for the purpose of revising the rates previously fixed.
5. In our view, the contention of the learned counsel for the petitioners has considerable force. Throughout the Act, a distinction has been drawn between the fixation of minimum rates of wages for the first time and revision of wages so fixed. The rates fixed for the first time have to be reviewed at intervals not exceeding five years and revised, is necessary. The necessary elements of minimum rate of wages fixed or revised are set out in Section 4 of the Act.
But the material distinction between the wages fixed for the first time and revised is that whereas in the fixation of wages for the first time the necessary elements stated in Section 4 have to be determined in accordance with the conditions of work, workload and cost of living existing at that time, in revising the rates fixed these elements have to be correlated not only to the conditions existing at the time of the revision but also to the minimum wages already fixed. The revision of wages must, therefore, bear some relation to the wages already fixed.
The dominant consideration in the revision of minimum wages is the change of circumstances after the original fixation. It is not without significance that under Section 3(1)(b) the Government is required to review at intervals not exceeding five years the minimum rates of wages so fixed. This means that the Government must review the wages in the light of the altered conditions and revise them if necessary. This distinction has a material bearing on the proposals the Government is required to publish under Section 5(1)(b) of the Act for fixation or revision of minimum rates of wages. Section 5 is as follows:-
'5(1) In fixing minimum rates of wages in respect of any scheduled employment for the first time under this Act or in revising minimum rates of wages so fixed, the appropriate Government shall either -
(a) appoint as many committees and sub-committees as it considers necessary to hold enquiries and advise it in respect of such fixation or revision as the case may be, or
(b) by notification in the Official Gazette, publish its proposals for the information of persons likely to be affected thereby and specify a date, not less than two months from the date of the notification, on which the proposals will be taken into consideration.
(2) After considering the advice of the committee or committees appointed under Clause (a) of Sub-section (1), or as the case may be, all representations received by it before the date specified in the notification under Clause (b) of that subsection, the appropriate Government shall, by notification in the Official Gazette, fix, or, as the case may be revise the minimum rates of wages in respect of each scheduled employment, and unless such notification otherwise provides, it shall come into force on the expiry of three months from the date of its issue: Provided that where the appropriate Government proposes to revise the minimum rates of wages by the mode specified in Clause (b) of Sub-section (1), the appropriate Government shall consult the Advisory Board also.'
It will be seen that the two clauses of the first sub-section provide alternative preliminaries for the fixation or revision of wages. If the Government does not appoint a committee to hold enquiries and advise it in respect of fixation or revision, then it has to proceed in the manner laid down in Clause (b) and publish its proposals for fixation or revision for the information of persons likely to be affected thereby and specify a date not less than two months from the date of the notification on which the proposals will be taken into consideration. The proviso to Sub-section (2) makes it obligatory on the Government to consult the Advisory Board when it proposes to revise the minimum rates of wages.
Sub-section (2) inter alia says that the minimum rates of wages shall be fixed or revised after taking into Consideration all representations received by the Government before the date specified in the notification under Clause (b) of Sub-section (1). It is thus clear that the publication of the proposals under Clause (b) is for the benefit and information of persons likely to be affected thereby with a view to enable them to make representations in connection with the proposals.
If the distinction between the fixation of rates for the first time and revision thereof is kept in mind, it is obvious that a representation that a person may make when proposals for the fixation of rates of wages for the first time are published would be entirely different from the representation that he would make in connection with the proposals for revision of wages already fixed.
In order, therefore, to give to the person concerned an effective opportunity of making representation, it is essential that the proposals published under Clause (b) must give him a clear indication as to whether they are for fixation of wages for the first time or for revision of the wages already fixed. In the present case, no such indication was given at all. The notification issued on 30th April 1957 appointing an Advisory Board mentioned that the Board was being appointed for fixing minimum rates of wages. It is quite true that the appointment of the Board for fixing minimum wages could not prevent the Government from consulting this Board in the matter of revision of minimum wages. But the notification issued on 15th August 1958 publishing the proposals, as it is worded, is clearly for fixation of wages for the first time.
It is also not possible to ascertain from the subsequent notification of 30th December 1958 whether the rates of wages notified were settled as for the first time or settled after a revision of the previous rates. The notification about the proposals published under Clause (b) cannot, therefore, be regarded as one about the proposals for revision of wages already fixed. That being so, the settlement of rates of wages notified on 30th December 1958 on the basis of these proposals cannot in any sense be regarded as a settlement of rates on revision.
Therefore, viewed as a notification fixing minimum rates of wages for the first time the notification dated the 30th December 1958 is void and inoperative as minimum rates of wages had already been fixed (see M. P. No. 150 of 1959 and No. 68 of 1959), and viewed as a notification of new rates of wages on revision, it is illegal inasmuch as the revision was not in accordance with the provisions of section 5(1)(b) of the Act.
6. Even if we are wrong in holding that the notification dated the 30th December 1958 considered as a notification of revised wages is illegal, it is still open to the objection next put forward on behalf of the petitioners, namely, that the said notification is invalid for the reason that the notification published under Section 5(1)(b) did not specify any date for the receipt of representations.
On this head the argument of Shri Sen, learned counsel for the petitioner Narottamdas, was that under Section 5(2) the right to make representation extended to the date specified in the notification published under Section 5(1)(b); that this right could not be confined to a date anterior to it; and that here the notification issued on 18th August 1958 not only did not specify any date but went on to say that representations should be sent within a period of two months from the date of the publication of the notification, when Clause (b) expressly provided that the date to be specified should be one after the expiry of two months and not earlier, from the date of the notification.
7. In our judgment, this contention must prevail. The language of Sub-section (2) and of Clause (b) of Sub-section (1) is too plain to require any elucidation for coming to the conclusion that after the publication of the proposals under Clause (b) any person affected thereby has a right to make a representation any time before the date specified in the notification under Clause (b) and that this date must be one not less than two months from the date of the notification.
This provision about the specification of a date so as to enable the person concerned to make a proper representation is clearly mandatory. As has been pointed out by the Supreme Court in Jagan Nath v. Jaswant Singh, AIR 1954 SC 210, H.N. Rishbud v. State of Delhi, (S) AIR 1955 SC 196, and Hari Vishnu v. Ahmad Ishaque, (S) AIR 1955 SC 233, there is no rule of universal application for determining whether a provision in a statute is absolute or directory.
The question in each case has to be decided on a consideration of the scope and object of the pro-vision, its nature and consideration of justice and convenience. At the same time it is well settled that where a statutory provision creates or grants a right, privilege or immunity and regulates the manner of its exercise it must be construed as mandatory (see Maxwell's Interpretation of Statutes, tenth edition p. 376; and Crawford's Statutory Constructions p. 526).
Now, it cannot be denied that Clause (b) of Sub-section (1) of Section 5 read with Sub-section (2) gives to a person affected by the proposals published under Clause (b) a right to make representation up to a date specified in the notification which must be one not less than two months from the date of the notification. This right cannot be taken away or curtailed by holding that the provision about the specification of a date is directory and that it is sufficient if there is substantial compliance therewith.
In order to preserve the right, the provision must be strictly followed. The notification that was issued in this case on 18th August 1958 under section 5(1)(b) omitted altogether to specify a date. It went further, and contrary to the express provision of Clause (b) prescribed that all representations should be submitted within a period of two months from the date of the publication of the notification.
This limitation of time in utter violation of Clause (b) is sufficient to invalidate the proposals published on 18th August 1958 as also the rates of wages determined on its basis by the notification dated 30th December 1958. This view finds support in the decision of a Division Bench of the Kerala High Court in Vasudevan v. State of Kerala, AIR 1960 Kerala 67.
That was a case where a notification under Section 5(1)(b) did not specify any date and mentioned that the proposals published would be taken into consideration after two months from the date of the publication of the notification and that any representation with respect to the proposals before the expiry of the above period would be considered by the Government.
The Kerala High Court held that the provision about the specification of a date was mandatory and that the notification about the proposals was not in compliance with Section 5(1)(b) and consequently the notification settling the rates of minimum wages on its basis was unsustainable.
8. The notification dated 30th December 1958 also suffers from the defect that it gave retrospective operation to the rates of wages fixed by it. The notification stated that the rates of minimum wages shall come into force from 1st January 1959. This notification was no doubt dated 30th December 1958, but as is evident from the letter addressed by the Superintendent, Government Printing Press, to the Under Secretary to Government in the Labour Department (exhibited at page 28 of the paper book as Annexure V), the text of the notification for printing was actually received late in the evening of 30th December 1958.
Thereafter it was composed in the press and the actual printing work began after the night of 81st December 1958. The letter mentions that 'a few local copies were distributed along with the ordinary gazette dated 2-1-1959.' It is not known whether the extraordinary gazette containing the notification was actually published even on 1st January 1959.
It is thus clear that if the extraordinary gazette was published on 1st January 1959, then the rates of wages became effective immediately. On the other hand, if the extraordinary gazette was published along with the ordinary gazette on 2nd January 1959, then the rates were given retrospective effect as from 1st January 1959. Now the settled rule about retrospective operation of an Act is that a statute has always a prospective operation unless the intention of the Legislature that it should have a retrospective effect is expressed in plain and unambiguous language.
The same rule applies in the consideration of retrospective operation of a notification issued under the parent Act. Unless the Act itself clearly authorizes the issue of a notification with retrospective effect, it must be held that such a notification is prohibited. That a notification fixing minimum rates of wages cannot be given retrospective operation is clear from Sub-section (2) of Section 5 itself.
That section concludes by saying, 'unless such notification otherwise provides, is shall come into force on the expiry of three months from the date of its issue.' The provision that in the absence of any specific date about the coming into force of the notification it shall become effective on the expiry of three months from the date of its issue unmistakably shows that the Legislature intended that some time should be given to the employers concerned before the minimum wages fixed by the notification come into operation.
The earlier provision 'unless such notification otherwise provides' must take its colour from the provision following it and must be construed as meaning 'unless such notification specifics a point of time after the issue of the notification.' Therefore, whether the extraordinary gazette was published on 1st January itself or on 2nd January, in either case it must be held to be invalid in so far as it made the rates of wages effective from 1st January 1959.
Assuming that the invalid portion of the notification could be severed, it would at the most be one bringing into force the rates of wages on the expiry of three months from the date of its issue: Stewart v. Brojendra Kishore, AIR 1939 Cal 628. Learned Government Advocate submitted that inasmuch as the notification was dated 30th December 1958, it should be taken as having come into operation from that date.
In view of the clear wording of Sub-section (2) we arc unable to accept this contention. In Johnson v. Sargant and Sons, 1918-1 KB 101 an order made by the Food controller on 16th May 1917 but not made known to the parties Concerned or to the public generally till 17th May was held to have come into operation only when it became known, namely, on 17th May.
In this connection it would be pertinent to mention that a similar contention was urged in Edward Mills Co. Ltd. v. State of Ajmer, AIR 1953 Ajmer 65 which was accepted by the Judicial Commissioner. The learned Solicitor-General of India who appeared for the State in that case did not seriously contest the position that under Section 5(2) the appropriate Government could not issue a notification giving retrospective effect to the rates of wages. That case went up to the Supreme Court and the decision of the Judicial Commissioner was upheld in Edward Mills Co. Ltd. v. State of Ajmer, (S) AIR 1955 SC 25.
9. The next challenge made by the petitioners to the validity of the (notifications dated 18th August 1959 and 30th December 1958 rests on the constitution of the Advisory Board appointed under Section 7 of the Act. It was argued that Section 9 required that the Board should consist of persons representing employers and employees in the scheduled employments in equal numbers and independent persons not exceeding one-third of its total number of members and that one of such independent members alone could be appointed as the Chairman; that, here, the persons appointed as representing employees were in no way connected with any of the scheduled employments and that one of the persons representing employers had likewise no such connection; that the Director of Economics and Statistics who was appointed as an independent member being an official could not be regarded as an independent person for the purpose of Section 9; and that Shri Oak, the Labour Commissioner, could not for the same reason be regarded as an independent person and could not in law be 'appointed as the chairman of the Board.
Relying on the observations of the Supreme Court in paragraph 6 of the judgment in Bijay Cotton Milk Ltd. v. State of Ajmer, (S) AIR 1955 SC 33 Shri Sen contended that the Supreme Court upheld the validity of the provisions of Sections 3, 4 and 25 on the considerations that consultation with advisory body was obligatory on all occasions of the revision of minimum wages and that the constitution of an advisory board consisting of even number of representatives of the employers and the employees, and of independent members expected to take a fair and impartial view of the matter furnished an adequate safeguard against any hasty or capricious decision by the Government; Learned counsel proceeded to say that it was, therefore, essential that the Board should consist of persons representing in a real sense the employers and the employees in the scheduled employments and that an official could not be regarded as an independent person and further if the Board was not validly constituted in conformity with Section 9, any consultation with such a Board would not be a consultation contemplated by the proviso to Sub-section (2) of Section 5.
10. In our judgment, this contention must be given effect to. Section 9 no doubt does not require that the Advisory Board should consist of representatives of employers and employees in each and every one of the scheduled employments; nor does it say that there should be representatives of employers and employees in the particular scheduled employment in respect of which minimum wages are intended to be fixed. The section also does not prohibit the appointment of an official on the Board.
But it makes it obligatory that the representatives of employers and employees in the scheduledemployments shall be equal in number and thatthe Board shall also consist of independent personsnot exceeding one-third of its total number ofmembers and that one such independent personshall be appointed as the Chairman. Now it must besaid that from the particulars given in the returnabout the various persons nominated on the Boardas representing the employees it is difficult togather whether they are in any way connected withany scheduled employment.
All of them seem to be connected with labour organisations and political parties rather than with any scheduled employment. One of the persons nominated as representing the employers is from the Chamber of Commerce. It has not at all been made clear as to how he is in any way Concerned with any scheduled employment.
11. We are not prepared to accept the stand taken on behalf of the State that the expression 'in dependent persons' as used in Section 9 means persons who are independent only of employers and employees in the scheduled employment and includes an official. The ordinary connotation of the words 'independent person' is a person who is not dependent on any body, authority or organisation and who is able to form his own opinion without any control or guidance from any outside agency.
In the matter of fixation of minimum wages thecontesting parties are no doubt the employers andthe employees. But the Government who fixes therates of wages is not absolutely disinterested in thematter. This is so especially when the Government itself controls or rung a scheduled employment. It is not disputed that the opponent-State controls employment in public motor transport asalso in a tannery at Gwalior.
If the State runs stage carriages and owns a tannery, then it is clearly an employer within the definition given in Section 2(e)(ii) of the Act. Then again, in a welfare state as envisaged by the Directive Principles of State Policy embodied in Part IV of the Constitution, the State cannot be regarded as a mere passive onlooker in the determination of wage structure or of minimum wages.
Articles 42 and 43 expressly enjoin that the State shall make provision for securing just and humane conditions of work and for maternity relief, and that it shall endeavour to secure, by suitable legislation or economic organisation or in any other way a living wage ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities.
The State is, therefore, actively interested in wage-earners and in the matter of fixation of minimum wages in any scheduled employment. If the State is thus an interested party, then a Government official cannot by any stretch of reasoning be regarded as an independent person for the purpose of Section 9. The expression 'independent person' must be construed to mean as one who is independent of the employers and the employees as well as the Government. A Government servant's freedom of action and thought is limited by the fact that he is required to act for carrying out Government's policy.
Learned Government Advocate referred us to the decision of the Punjab High Court in Jaswant Rai v. State of Punjab, AIR 1958 Punj 425 where it has been held that an independent person in the context of Section 9 means a person who is neither an employer nor an employee in the employment for which minimum wages are to be fixed and that an official such as a Labour Commissioner who is conversant with the employment conditions is an independent person. What we have already said is sufficient to indicate that we do not find ourselves in agreement with the view taken by the Punjab High Court.
12. If, as we think, Shri Oak, Labour Commissioner, and Shri Mehta, Director of Economics and Statistics, being officials cannot be regarded as independent persons within the meaning of Section 9, then the Board as constituted was without any independent member. The constitution of the Board would thus be contrary to Section 9. As pointed out by the Supreme Court in (S) AIR 1955 SC 3-3 (supra), the inclusion of independent members who are expected to take a fair and impartial view, is essential for the validity o the Board.
Without such members the Board cannot be regarded as an adequate safeguard against any hasty or capricious decision by the Government. It follows that the appointment of Shri Oak, an official, as the Chairman of the Board was wholly illegal. It does not require any argument to show that if the Board was not validly constituted, then it did not exist in law and that any consultation with such a Board would not be a valid consultation spoken of in the proviso to Sub-section (2) of Section 5.
As consultation with a validly constituted advisory body is obligatory in the case of revision of minimum rates of wages, the notification dated 30th December 1958 after placing the proposals published cm 18th August 1958 before the Advisory Board appointed in the present case must be struck down as invalid.
13. Shri Sen also submitted that the mere placing of the proposals before the meetings of the Board held on 26th and 27th December 1958 and a consideration by the Board of the proposals without following the procedure laid down in rule 18 of the Madhya Pradesh Minimum Wages Rules, 1951, was no consultation at all. It seems to us unnecessary to express any opinion on the essentials of consultation contemplated by the proviso to Section 5(2). The question may well arise in another case for explicit decision.
14. Shri Shukla, learned counsel appearing for some of the petitioners, supplemented the arguments of Shri Sen by making the submission that there was no relationship of employer and employee within the meaning of the definitions given in Sections 2(e) and 2(i) of the Act between any of the petitioners and the Sattedars or bidi makers. In order to appreciate this contention, it is necessary to state first the course of business in bidi concerns owned by the applicants.
In each case the proprietor enters into a Contract on substantially similar terms with Sattedars of the bidi industry for the supply of bidis. Under the contracts some of the proprietors sell tobacco to Sattedars; others sell even bidi leaves, thread and other material. The Sattedar undertakes to get bidis rolled and manufactured out of this material by engaging bidi-rollers.
The finished bidis are then sold by sattedars to the proprietor at certain rates according as they are up to the mark or below it. The bidis are sold by Sattedars only to the suppliers of material and to no one else. The proprietor maintains an account of the sale of material to the Sattedars and of bidis sold by them to him. It is made up and settled at the end of the agreed period and payment accordingly is made to the Sattedars.
The Sattedars are free to engage any labour they like and payments are made by them to the workers. The proprietors have nothing to do with the bidi-rollers. They do not prescribe any hours of work for the bidi-makers. No muster-roll is maintained by any proprietor and there are no rules as regards leave or holidays to the bidi makers. The proprietors do not exercise any control or supervision over the Sattedars or the bidi-makers engaged by the Sattedars. The Authority constituted under Section 20(1) of the Act found these facts. But it took the view that the contracts between the proprietors and Sattedars, the invoices of sale of material by the proprietors to the Sattedars and of bidis by the Sattedars to the proprietors and the rate at which the bidis are purchased by the proprietors are all sham transactions and that in reality the proprietor pays wages to the Sattedars and to the bidi-workers for the supply of bidis by the Sattedar to the proprietor. The Authority regarded this as the scheme to avoid the provisions of law and the liability of the payment of minimum wages settled under the Act.
15. Learned counsel urged that on these facts the Sattedars could not in any sense be said to be employees of the petitioners; that they were indeendent contractors; and that there was no material before the Authority to come to the conclusion that the contracts between the petitioners and the Sattedrs were sham transactions. Learned counsel relied on Chintamon Rao v. State of Madhya Pradesh, AIR 1958 SC 388. In re, Polisetti Lakshmayya, 1959-1 Lab LJ 556 (AP) and Ahmad Hussain and Sons v. United Beedi Workers' Union 1958-2 Lab LJ 606: (AIR 1959 Mad 221).
16. On the facts narrated above as to the course of business which are not disputed by the learned Government Advocate, there can be no doubt that the Sattedars or the bidi-rollers are not employees of any of the petitioners. Section 2(e) defines 'employer' as any person who employs, whether directly or through another person, or whether on behalf of himself or any other person, one or more employees in any scheduled employment. The definition of 'employee' given in Section 2(1) is as follows:-
' 'Employee' means any person who is employed for hire or reward to do any work, skilled, or unskilled, manual or clerical, in a scheduled employment.....'
Unless, therefore, there is a relationship of master and servant between two persons and a contract of employment between them, one cannot be said to be an employee of the other. The determination whether a person is a servant or agent on the one hand or an independent contractor on the other depends on whether or not the employer not only determines what has to be done but retains control of the actual performance, in which case the person is a servant or agent. This is the guiding test which has been laid down by the Supreme Court in Dharangadhra Chemical Works Ltd. v. State of Saurashtra, (S) AIR 1957 SC 264 where Bhagwati J. after referring to several English authorities made the following observation :-
'The principle which emerges from these authorities is that the prima facie test for the determination of the relationship between master and servant is the existence of the right in the master to supervise and control the work done by the servant not only in the matter of directing what work the servant is to do but also the manner in which he shall do his work, or to borrow the words of Lord Uthwatt at page 23 in Mersey Docks and Harbour Board v. Coggins and Griffith (Liverpool) Ltd. 1947-1 AC 1 at p. 23. 'The proper test is whether or not the hirer had authority to control the manner of execution of the act in question'.
The nature or extent of control which is requisite to establish the relationship of employer and employee must necessarily vary from business to business and is by its very nature incapable of precise definition.'
This test was followed by the Supreme Court in AIR 1958 SC 388 for determining whether a Sattedar employed in a bidi factory situated in Sagar was a worker within the definition given in Section 2(1) of the Factories Act. It was held on the terms of a contract entered into between the Sattedar and the proprietor that he was an independent contractor and not a worker.
The Supreme Court made it clear in Chintaman Rao's case, AIR 1958 SC 388 (supra) that their decision was not intended to lay down a general proposition that under no circumstances a Sattedar can be considered to be a worker within the meaning of the definition in the Factories Act and that the question whether a person was or was not a worker under the Act depended on the terms of the contract entered into between him and employer.
17. Applying the test formulated by the Supreme Court in the decisions referred to above to the undisputed facts here, there can be no escape from the conclusion that the Sattedars in the pre- sent cases are independent contractors and not employees of any of the petitioners. The matter seems to be really concluded by the Supreme Court's decision in Chintaman Rao's case AIR 1958 SC 388.
The terms of the contract on which the Sattedars in the Supreme Court case worked for the proprietor of the bidi factory arc substantially identical with these on which the Sattedars here are working for the petitioners. Learned Government Advocate sought to distinguish the case of Chintaman Rao AIR 1958 SC 388 by saying that in that case the question of employment was decided with reference to Section 2(1) of the Factories Act. This is not a valid distinction. It is no doubt true that the decision in Chintaman Rao's case AIR 1958 SC 388 was in relation to Section 2(1) of the Factories Act.
But the judgment in that case proceeded on the basis that a person could not be regarded as a worker within the meaning of Section 2(1) of the Factories Act unless there was a contract of employment between him and the person engaging him; and that on the terms of the contract concluded between the Sattedar and the proprietor of the bidi factory no relationship of master and servant had been established and further that the Sattedar was an independent contractor.
As already stated, the terms of contracts between the Sattedars and the petitioners here are not different from those on which the Supreme Court in Chintaman Rao's case AIR 1958 SC 388 came to the conclusion that the Sattedars were independent contractors. Learned Government Advocate was not able to suggest to us any difference which would make the decision in Chintaman Rao's case AIR 1958 SC 388 inapplicable here.
18. It was then urged by the learned Government Advocate that the definition of 'employee' in Section 2(i) included 'an out-worker to whom any articles or materials are given out by another person to be made up, cleaned, washed, altered, ornamented, finished, repaired, adapted or otherwise processed for sale.....'; that this inclusive provision showed that an out-worker such as a bidi-roller was an employee. This contention must be rejected for the reason that before an out-worker can be regarded as included in the definition, it must be established that he is a person employed for hire etc.
An out-worker who is not employed is not included in the definition of the word 'employee' given in Section 2(i). The provision relied on by the learned Government Advocate only makes it clear that an out-worker employed by a person and engaged in any of the processes mentioned in Section 2(i) is an employee no matter whether he works in his own home or in some other premises not being the premises under the control and management of the employer.
19. In coming to the conclusion that the con-tracts between the petitioners and the Sattedars were sham contracts, the Authority was solely influenced by the consideration that the contracts were a device or subterfuge on the part of the petitioners to avoid their liability for the payment of minimum rates of wages to the bidi-workers. There is no evidence whatsoever to show that the transactions of sales of material by the petitioners to Sattedars and of sales of bidis were unreal.
The question about the relationship betweenthe petitioners and the Sattedars or the bidi-rollershas to be decided with reference to the definitionsof the words 'employer' and 'employee' given inthe Act and not on any ethical considerations. Ifby concluding contracts with Sattedars the petitioners could legally avoid their liability under theAct that would not make the contracts sham transactions.
The avoidance of liability in a legal manner cannot alter the legal relationship between the contracting parties. In 1958-2 Lab LJ 606: (AIR .1959 Mad 221) also it was urged that contracts entered into by proprietors and certain intermediaries in a bidi manufacturing concern were not real contracts as they were a mere device to defeat the provisions of the Industrial Disputes Act. While repelling the contention it was observed by the learned Judge of the Madras High Court -
'The evidence on record was all one way, and it showed that the contracts were given effect to. That such contracts enabled the proprietor to defeat the provisions of statutes, for example, the Factories Act, did not make the contracts themselves any the less real and binding as between the contracting parties. Whatever the commercial morality of the transaction might be, the proprietor could claim a legal right to organise his business within the limits of law, and if within those limits he avoided the necessity to employ the intermediary or the beedi roller as his servant, the proprietor was entitled to do so.'
We are clear in our mind that there is no relationship of master and servant between the petitioners and the Sattedars or the bidi rollers engaged by the Sattedars. If the Sattedars or the bidi rollers are not employees of the petitioners, then the question of the petitioners being required to pay any minimum wage settled under the Act to the Sattedars or the bidi rollers cannot arise.
20. We, therefore, allow all these petitions and direct the issue of a writ prohibiting the opponent State from giving effect to the notifications dated 118-8-1958 and 30-12-1958 and quash in each case the order of the Authority constituted under Section 20(1) of the Act by a writ of certiorari. There will be no order as to costs in any petition. The security deposits shall be refunded to the petitioners in all these petitions.
21. Just before this order was about to be signed and delivered by us, learned Government Advocate drew our attention to the Minimum Wages (Madhya Pradesh Amendment) Act, 1959, by which Section 2(e) of the Minimum Wages Act, 1948, in its application to Madhya Pradesh, was amended and a new section Section 18-A was introduced in the Act. By the amendment made in Section 2(e) a person deemed to be an employer under the new Section 18-A has been Included in the definition of 'employer'. The new Section 18-A inserted in the Act runs as follows:-
'18-A. Liability of principals in certain cases--(1) Subject to the provisions of Sub-section (2), wherein any scheduled employment in respect of whichminimum rates of wages have been fixed under thisAct, any person (hereinafter in this section referredto as the principal) contracts with any other person(hereinafter in this section referred to as the contractor) for having any goods made for sale for thepurposes of the trade or business of the principaleither wholly or partly out of materials supplied tothe contractor by such principal, then notwithstanding that the employees for making such goods areemployed by the contractor, the principal shall alsoin addition to the contractor be deemed for all purposes of this Act to be the employer in relation tosuch employees:
Provided that where by virtue of the provisions of Sub-section (1), a principal is convicted of an offence punishable under Section 22, he shall be punishable only with fine as provided for in that section. (2) The provisions of this section shall apply only to such scheduled employments as the State Government may, by notification, specify in that behalf.
22. It was suggested that the effect of these amendments is to make the bidi rollers employees of both the proprietor of a bidi concern and the Sattedars contracting with the proprietor for sale of bidis made wholly or partly out of the material supplied by the contractor to the proprietor. It is not necessary for us to consider in these cases the effect of the local amending Act of 1959. The Act was published on 12-8-1959 and Sub-section (2) of Section 18-A provides that the provisions of Sub-section (1) will apply only to such scheduled employments as the State Government may, by notification, specify in that behalf.
A notification making Section 18-A applicable to employment in any tobacco (including bidi making) manufactory was published by the State Government in the gazette of 21-8-1959 (Notification No. 5140-XVI dated 31-7-1959). The result of this notification is that the new Section 18-A and the amended definition of the word 'employer' in Section 2(e) apply to bidi making manufactory after 21-8-1959 and not before.
In all the cases before us, the orders of the Authority, constituted under Section 20(1) of the Act relate to payment of minimum wages for periods prior to the enactment of the amendment Act of 1959. The liability of the petitioners to pay these wages has, therefore, to be considered with reference to.' the definition of the word employer given in Section 2(e) as it stood before it was amended.
Therefore the conclusion reached by us earlier on the basis of the provisions of the Minimum Wages Act, 1948, as it stood before it was amended by the local Act of 1959, namely that the Sattedars or bidi-rollers are not employees of the proprietors does not require any modification. The question of the effect of the amending Act will be considered when a case to which it is applicable comes up before this Court.