M.M. Ismail, J.
1. This batch of writ petitions raises a question regarding the construction and constitutional validity of several provisions of the Beedi and Cigar Workers (Conditions of Employment) Act, 1966 (Central Act XXXII of 1966), hereinafter referred to as the Act. The petitioners in Writ Petitions Nos. 2680 to 2685, 2688 to 2701, 2711, 2712, 2727, 2762, 2797, 2847 to 2857, 2919, 3028, 3223, 3268, 3425, 3477 and 4466 of 1968; 227, 468, 503, 531, 629, 579, 711, 849, 1065, 1301 and 1926 of 1969; 3211, 3641 and 3730 of 1970 and 923 to 928 of 1971 are what are known as trade mark holders in beedies. The petitioners in Writ Petitions Nos. 415 to 425 of 1969 and 444 to 455 of 1969 call themselves as contractors in the manufacture of beedies, attached to the petitioner in W.P. No. 227 of 1969. The petitioners in Writ Petitions Nos. 40, 41, 169, 211, 212, 213, 231, 276 and 2631 of 1969 and 2848 of 1970 are manufacturers of cigars. The petitioners in W.P. No. 125 of 1969 are cigar rollers attached to the petitioner in W.P. No. 40 of 1969. All these petitioners challenge the applicability of the Act to them on different grounds.
2. There is a long history behind the Act, gatherable from the judicial decisions as well as from the reports of the various commissions appointed by the Government. The process of manufacture of beedi is 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 wrapper leaves are mainly obtained from the tendu plants which grow in wild forests of Chanda and Bhandara districts in the Vidharbha region of the State of Maharashtra and in certian other States. In order to cheapen the cost of production, the manufacturers mix inferior quality of tobacco with this tobacco. A small quantity of tobacco is put on the leaf and that 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 fingers. The other tip is tied with a piece of thread of varying colours according to the choice of the manufacturer. The quality of the beedi and its popularity depend upon the quality of the wrapper leaf, the quantity of tobacco and the nature of the mixture. The various trade mark holders distinguish their beedies with reference to the particular process of mixture. This process of manufacture itself will show that it can be done at any place by a human individual without the aid of any machine or tool except the scissors referred to above. It does not require any specified and demarcated place equipped with any instrument or tool. It is this very simplicity of the process of the manufacture that has been responsible for the failure on the part of the Government to apply successfully the various legislations meant for the welfare of the labour to the workers in this industry of manufacture of beedies and cigars.
3. The manufacture of beedies is carried out through different systems known as contract system, out of work system and direct employment system. In the case of a contract system, the manufacturer or the trade mark holder issues, beedi leaves and tobacco to an intermediary called contractor, who engages labour for rolling the beedies and supplies the finished products to the trade mark holder. The contractor who takes the beedi leaves and tobacco from the Trade Mark holder may maintain an establishment of his own in which he can collect the beedi rollers who roll the beedies or he in his turn may distribute the beedi leaves and tobacco to individual rollers who do the rolling in their respective dwelling houses and supply the finished products to the contractor. The trade mark holder maintains a small establishment from which the beedi leaves and tobacco are issued and in which the finished products are received and ultimately packed.
4. With regard to the out of work system, the trade mark holder issues the beedi leaves and the tobacco to various beedi rollers directly who take the same to their own places, roll them into beedies by themselves with the assistance of the members of their family and return the finished products to the trade mark holder. In such a case, each worker would have a pass book issued under the Central Excise Rules showing the maximum quantity of tobacco permitted to be in the possession of the worker. The quantity of tobacco issued by the trade mark holder to the worker is also entered in that pass book.
5. As far as the direct 'employment system is concerned the trade mark holder himself maintains an establishment in which he collects the beedi rollers who roll the beedies in the said premises itself.
6. In every one of these cases, the trade mark holder has got the right to reject what he considers to be sub-standard or defective beedies. When they are so rejected, the beedies are broken and the tobacco is removed and reissued. When the contract system is adopted, there is a possibility of double rejection. The contractor himself, when collecting the rolled beedies rejects what he considers to be defective and sub-standard beedies and when the contractor supplies the finished products to the trade mark holder, the latter in his turn, has got the right to reject what he considers to be sub-standard or defective beedies.
7. As far as the direct employment system is concerned, it does not present any difficulty whatever. The trade mark holder is the employer and the beedi rollers are his employees and the, relationship of master and servant exists between the two. However, some argument has been advanced even with regard to this, based on certain alleged peculiar features involved in the working of this system. When a contractor has an establishment of his own and collects the beedi rollers in his premises where the rolling is done, that again may not present any difficulty, because the relationship of master and servant can be said to be present between the two, subject of course to the qualification referred to above. However, when the contractor or the manufacturer issues the beedi leaves and tobacco to the beedi rollers who take them to their dwelling houses, where they roll the beedies by themselves or with the help of the members of the family as and when they find leisure, the system is said to present some difficulty in the form of there being no relationship of master and servant between the two in the sense that the time of the beedi rollers is not entirely at the disposal of the trade mark holder or the contractor as the case may be and they have no control or supervision over the manner of the rolling of the beedies. Even in cases where the trade mark holder or the contractor maintains an establishment of his own in which the beedi rollers are collected and where the rolling of the beedies is done, the peculiar features are said to be : The beedi rollers can come at any time they please and there are no fixed hours for their coming and working and there is no requirement that they should come day after day and engage themselves in rolling beedies, since they are paid only on the basis of piece rate and they get wages only for the work they do. They may come whenever they like and if they are not inclined to work on any particular day, neither the trade mark holder nor the contractor has any power to compel them to come and do the beedi rolling and there is no obligation on their part to be present at the establishment for the purpose of rolling the beedies at any specified time. It is these special features which have eluded the application of the labour welfare measures like the Factories Act and other allied and similar legislations to the beedi industry. At the same time the Government and the Legislature had been feeling that the beedi workers required protection from the exploitation of the trade mark holders. Their working conditions were reported upon by several committees, one such being the committee under the Chairmanship of Mr. D.V. Rege, I.C.S. appointed by the Government of India in 1944. In 1946, the Government of Madras appointed a Court of Enquiry to enquire into the labour conditions in beedi, cigar, snuff, tobacco curing and tanning industries. That Court of Enquiry again submitted its report. There is yet another report by Mr. M.A. Natarajan. It is unnecessary to refer to these reports very elaborately since a detailed reference has been made to them in the judgment of this Court in Abdul Rahim v. State of Madras, represented by the Secretary, Department of Industries, Labour and Cooperation, Fort St. George, Madras (1961) 2 M.L.J. 42, which considered the construction and the very constitutional validity of the provisions of the Madras Beedi Industrial Premises (Regulation of Conditions of Work) Act (Madras Act XXXII of 1958), hereinafter referred to as the Madras Act. A number of persons who were connected with the beedi industry challenged the validity of that Act, and this Court except for striking off the definition of the term 'employer' in Section 2 (g) (i) of the Madras Act upheld the validity of that Act by that judgment. Similar measures were enacted by one or two Legislatures of other States in the country. However, the Act came to be passed by Parliament with the avowed object of making it applicable to the entire country. The Statement of objects and reasons appended to the Bill which became the Act stated:
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 of the said Act. A special feature of the industry is the manufacture of beedies 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 interest.
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 work, spreadover, rest periods, overtime, annual leave with pay, distribution of raw materials etc.
The Act, except Section 3, was brought into force in the State of Tamil Nadu with effect from 1st July, 1968 and Section 3 itself was notified to come into force with effect from 1st August, 1968. On 29th August, 1968, the State Government in pursuance of the powers conferred on it by Section 44 of the Act promulgated rules which fixed the rates of licence fees and also set out the circumstances under which alone an employer was entitled to reject beedies which were defective or sub-standard and similar other matters. It was at this stage these writ petitions were filed challenging the constitutional validity of the provisions of the Act and praying for a declaration that the Act is illegal, void and inoperative in law and violative of the fundamental rights of the petitioners under Articles 14 and 19 (1) (f) and (g) of the Constitution of India. The petitioners also prayed for the issue of a writ of mandamus in each case, restraining the respondents herein, namely, the Union of India and the State of Tamil Nadu from enforcing the provisions of the Act against the various petitioners.
8. For the purpose of understanding the arguments advanced in support of these writ petitions, it is necessary to refer to the salient provisions of the Act. Section 2 of the Act defines the various terms and expressions and we are extracting in this judgment the expressions and terms whose definitions have been the subject-matter of elaborate argument and dis-discussion before us.
Section 2(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 include a sub-contractor, agent munshi, thekedar sattedar.
Section 2(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.
Section 2(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, and includes:
(i) any labourer 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.
Section 2 (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 other wise, 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.
Section 2(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.
Section 2(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.
Section 2(m) 'principal employer' means a person for whom or on whose behalf any contract labour is engaged or employed in an establishment.
Section 2(n) 'private dwelling house,' means a house in which persons engaged in the manufacture of beedi or cigar or both reside.'
With reference to the above definitions, two important features have to be noticed. Section 2 (g) (a) is restricted to contract labour only and the word, ' employer ' in that provision has to be understood in the context of the definition of the term, 'contract labour' in Section 2 (e) and the definition of the term, ' principal employer' in Section 2 (m). The very definition of the term , ' principal employer ' contemplates some other person engaging or employing contract labour in any establishment on behalf of or for another person, in the instant case, the trade mark holder. The definition of the term, ' contract labour' itself implies that the actual employment of the particular labour need not be with the knowledge of the employer.
9. It is against the background of these provisions, an argument was advanced on behalf of the trade mark holders that the trade mark holders cannot be treated as employers with reference to the beedi rollers engaged by their contractors, who are actually independent contractors and it is the contractors who alone can be described as employers. This argument was advanced on the assumption that a trade mark holder has nothing whatever to do with the actual labour engaged by his contractor, that under the agreement entered into between the trade mark holder and the contractor it is the exclusive responsibility of the contractor to engage labour of his choice and the trade mark holder has no concern with the actual manner of the rolling of the beedies, that all that the trade mark holder is interested in is only the finished products, namely, the rolled beedies, and that therefore the labour employed by the contractor cannot be said to be on behalf of or for the trade mark holder and consequently the trade mark holder will not fall within the scope of the expression, ' employer ' used in the Act. As far as Section 2 (g) (b) is concerned, there can be no difficulty, because Section 2 (g) (a) and Section 2 (g) (b) from the very language are mutually exclusive and Section 2 (g) (b) has reference to the control over the affairs of any establishment.
10. The next feature that has to be noticed is the definition of the two terms, 'establishment' and 'industrial premises'. The expression;, 'establishment ' is very wide and any place or premises including a private dwelling house will fall within the scope of that expression. On the other hand, the expression, 'industrial premises' is carved out of 'establishment' excluding private dwelling house. Therefore, it is clear that whenever any particular provision refers to ' industrial premises ', it will not apply to a private dwelling house.
11. Section 3 of the Act provides that no employer shall use or allow to be used any place or premises as an industrial premises unless he holds a valid licence issued under the Act and no such premises shall be used except in accordance with the terms and conditions of such licence. Section 4 deals with the necessity for applying for a licence, the particulars to be mentioned in the application and the matters which should be taken into account by the licensing authority in deciding to grant or refuse the licence applied for. Section 5 provides for an appeal against refusal of a licence. Section 6 enables the State Government to appoint officers to function as Inspectors for the purpose of the Act. Section 7 deals with the powers of Inspectors. Sections 8 to 16 deal with certain requirements to be complied with by an employer in an industrial premises and they are confined only to industrial premises. Section 8 deals with cleanliness in the industrial premises, while Section 9 deals with the provision for maintenance of such standards of lighting, ventilation and temperature as may be prescribed, in the industrial premises. Section 10 prohibits overcrowding in industrial premises. Sections 11, 12 and 13 deal with the provision of drinking water, latrines and urinals and washing facilities respectively in the industrial premises. Section 14 states that in every industrial premises wherein more than fifty female employees are ordinarily employed, there shall be provided and maintained a suitable room or rooms for the use of children under the age of six years of such female employees. Section 15 insists on the provision of such first-aid facilities as may be prescribed, in the industrial premises. Section 16 states that the State Government may, by rules, require the employer to provide and maintain in every industrial premises wherein not less than two hundred and fifty employees are ordinarily employed, a canteen for the use of the employees. Section 17 deals with working hours in the industrial premises while Section 18 provides for wages for overtime work in such industrial premises. Section 19 deals with interval for rest, while Section 20 deals with spread over of the working hours. Section 21 insists upon weekly holidays being made available. Section 22 deals with notice of periods of work and Section 23 states that the hours of work in the industrial premises should correspond with the notice under Section 22. Section 24 prohibits employment of children, while Section 25 prohibits employment of woman or young person in any industrial premises except between 6 a.m. and 7 p.m. Section 26 deals with annual leave with wages and in view of the argument advanced with reference to that section as well as Section 27, it is necessary to extract those two sections and we do so.
Section 26. Annual leave with wages.
(1) Every employee in an establishment shall be allowed in a calendar year leave with wages--
(i) in the case of an adult, at the rate of one day for every twenty days of work performed by him during the previous calendar year ;
(ii) 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.
Explanation : The leave admissible under this sub-section shall be exclusive of all holidays whether occurring during, or at the beginning or at the end of the period of leave.
(2) If an employee is discharged or dismissed from service or quits employment during the course of the year, he shall be entitled to leave with wages at the rate laid down in Sub-section (1).
(3) In calculating leave under this section, any fraction of leave of half a day or more shall be treated as one full day's leave and any fraction of less than half a day shall be omitted.
(4) If any employee does not, in any calendar year, take the whole of the leave allowed to him under Sub-section (1), the leave not taken by him shall be added to the leave to be allowed to him in the succeeding calendar year:
Provided that the total number of days of leave that may be carried forward to a succeeding year shall not exceed thirty in the case of an adult or forty in the case of a young person.(5) An application of an employee for the whole or any portion of the leave allowed under Sub-section (1) shall be in writing and ordinarily shall have to be made sufficiently in, advance of the day on which he wishes to leave to begin.
(6) If the employment of an employee who is entitled to leave under Sub-section (1) is terminated by the employer before he has taken the entire leave to which he is entitled, or if having applied for leave he has not been granted such leave, or if the employee quits his employment before has taken the leave, the employer shall pay him the amount payable under Section 27 in respect of leave not taken and such payment shall be made, where the employment of ' the employee is terminated by the employer, before the expiry of the second working day after such termination and where the employee quits his employment on or before the next pay day.
(7) The leave not availed of by an employee shall not be taken into consideration in computing the period of any notice required to be given before discharge or dismissal.
27. Wages during leave period.--(1) For the leave allowed to him under Section 26, an employee shall be paid at the rate equal to the daily average of his 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 clearness and other allowances.
Explanation I.--In this sub-section, the I expression 'total full time earnings' includes the cash equivalent of the advantage accruing through the concessional sale to employees of the foodgrains and other articles, as the employee is for the time being fully entitled to, but does not include bonus.
Explanation II.--For the purpose of determination of the wages payable to a home worker during leave period or for the purpose of payment of maternity benefit to a woman home worker ' day' shall mean any period during which such home worker was employed during a period of twenty four hours commencing at midnight, for making beedi or cigar or both.
(2) An employee who has been allowed leave for not less than four days in the case of an adult 'and five days in the case of a young person shall before his leave begins be paid wages due for the period of the leave allowed.
Section 28 deals with the application of the Payment of Wages Act, 1936, to industrial premises. Section 29 makes some special provisions for the wetting or cutting of beedi or tobacco leaves by the employees, while Section 30 deals with onus as to age. Another section on which considerable argument was advanced before us is Section 31 and we are extracting the same below:
Section 31. Notice of dismissal.--(1) No employer shall dispense with the services of an employee who has been employed for a period of six months or more except for a reasonable cause and without giving such employee at least one month's notice or wages in lieu of such notice:
Provided that such notice shall not be necessary if the services of such employee are dispensed with on a charge of miscouduct supported by satisfactory evidence recorded at an inquiry held by the employer for the purpose.(2)(a) The employee discharged, dismissed or retrenched may appeal to such authority and within such time as may be prescribed either on the ground that there was no reasonable cause for dispensing with his services or on the ground that he had not been guilty of misconduct as held by the employer or on the ground that such punishment of discharge or dismissal was severe.
(b) The appellate authority may,, after giving notice in the prescribed manner to the employer and the employee, dismiss the appeal or direct reinstatement of the employee with or without wages for the period during which he was kept out of employment or direct payment of compensation without reinstatement or grant such other relief as it deems fit in the circumstances of the case.
(3) The decision of the appellate authority shall be final and binding on both the parties and be given effect to within such time as may be specified in the order of the appellate authority.
Section 32 provides for penalty for obstructing an Inspector, while Section 33 is a general provision dealing with penalty for offences. Sub-section (1) of Section 33 is as follows:
Save as otherwise expressly provided in this Act, any person who contravenes any of the provisions of this Act or of any rule 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.Section 34 deals with offences by companies. Section 35 provides for indemnity in favour of persons for anything which is in good faith done or intended to be done under this Act or any rule or order made thereunder. Section 36 deals with cognizance of offences. Section 37 provides for the application for the Industrial Employment (Standing Orders) .Act, 1946, and the Maternity Benefit Act, 1961, to every industrial premises under the Act and that section reads:
Section 37. Application of the Industrial Employment (Standing Orders) Act, 1946 and the Maternity Benefit Act, 1961.--(1) The provisions of the Industrial Employment (Standing Orders) Act, 1946, shall apply to every industrial premises wherein fifty or more persons are employed or were employed on any one day of the preceding twelve months as if such industrial premises were an industrial establishment to which that Act has been applied by a notification under Sub-section (3) of Section 1 thereof, and as if the employee in the said premises were a workman within the meaning of that Act.
(2) Notwithstanding anything contained in Sub-section (1), the State Government may, after giving not less than two months' notice of its intention so to do, by notification in the Official Gazette, apply all or any of the provisions of the Industrial Employment (Standing Orders) Act, 1946, to any industrial premises wherein less than fifty employees are employed or were employed on any one day of the preceding twelve months as if such industrial premises were an industrial establishment to which that Act has been applied by a notification under Sub-section (3) of Section 1 thereof and as if the employee in the said premises were a workman within the meaning of that Act.
(3) Notwithstanding anything contained in the Maternity Benefit Act, 1961, the provisions of that Act shall apply to every establishment as if such establishment were an establishment to which that Act has been applied by a notification under Sub-section (1) of Section 2 thereof:
Provided that the said Act shall, in its application to a home worker, apply subject to the following modifications, namely:
(a) in Section 5, in the Explanation to Sub-section (1), the words or one rupee a day, whichever is higher' shall be omitted; and
(b) Sections 8 and 10 shall be omitted.
Section 38 states that Chapter IV and Section 85 of the Factories Act, 1,948, shall apply to an industrial premises and the rest of the provisions of that Act shall not apply to any industrial premises. Section 39 (1) states that the provisions of the Industrial Disputes Act, 1947, shall apply to matters arising in respect of every industrial premises, while Sub-section (2) states that notwithstanding any thing contained in Sub-section (1), a dispute between an employer and employee relating to (a) the issue by the employer of raw materials to the employees, (b) the rejection by the employer of beedi or cigar or both made by an employee, and (c) the payment of wages for the beedi or cigar or both rejected by the employer, shall be settled by such authority and in such summary manner as the State Government may by rules specify in this behalf. Section 40 deals with the overriding effect of the provisions of the Act as against the provisions contained in any other law for the time being in force or in the terms of any award, agreement, or contract of service whether made before or after the commencement of the Act. Section 41 enables the State Government by notification in the Official Gazette to exempt, subject to such conditions and restrictions as it may impose, any class of industrial premises or class of employers or employees from all or any of the provisions of the Act. Section 42 enables the Central Government to give directions to a State Government as to the carrying into execution of the provisions of the Act. Section 43 states that nothing contained in the Act shall apply to the owner or occupier of a private dwelling house who 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. Section 44 confers upon the State Government power to make rules for carrying out the purpose of the Act.
12. Mr. K. K. Venugopal, who addressed the leading arguments on behalf of the petitioners, concentrated his attack on Sections 3, 4, 17 to 23, 26, 27 and 31 and 37 (3) of the Act in their application to the trade mark holders. He really did not have any complaint regarding Sections 8 to 16 which deal with the provisions for various amenities in an industrial premises except to point out that some of the provisions are couched in passive voice, for example, Section 15 states that every industrial premises shall provide such first aid facilities as may be prescribed, without indicating as to who should provide such facilities. His contention is that the language of Section 3 as well as Section 4 clearly shows that the licence has to be obtained only by the contractor and not by the trade mark holder, since the trade mark holder cannot be said to be an employer at all and it is only the contractor who is the employer. In order to derive support for this argument, he referred to Sub-section (3) of Section 4 which enumerates certain matters to which the licensing authority should have regard in deciding whether to grant a licence or not. In particular he drew our attention to Section 4 (3) (b) which refers to ' the previous experience of the applicant'. Section 4 (3) (c) refers to the financial resources of the applicant including his financial capacity to meet the demands arising out of the provisions of the law for the time being in force relating to welfare of labour and Section 4 (3) (d) is, ' whether the application is made bona fide on behalf of the applicant himself or benami for any other person'. According to the learned Counsel, these considerations will apply only when a contractor applies for a licence and from the very nature of the requirements, it will be seen that they will have no relevancy when a trade mark holder applies for a licence and this itself shows that the intention of the Act is that as between the trade mark holder and the contractor, the obligation is cast upon the contractor alone under these sections. Similarly with regard to Sections 8 to 16, the argument of the learned Counsel is that on his understanding of the meaning of the word, ' employer', the obligation under these sections is cast only on the contractor and not on the trade mark holder. With regard to Sections 17 to 23, the contention of the learned Counsel is again the same, namely, that the industrial premises is maintained only by the contractor and not by the trade mark holder and the obligation is imposed only on the contractor Since he is appearing for the contractor also, he challenged the correctness of the applicability of' these provisions even to industrial premises by contending that there are no fixed hours of work, that the beedi rollers can come at. any time they like ; that they can roll the beedies for whatever time they please; that they need not even come and work regularly day after day and that therefore these provisions are totally unworkable and inapplicable to such a situation. With regard to Sections 26 and 27 which we have extracted already, the argument of the learned Counsel is that though Section 26 (1) is in general terms, without giving any indication that it applies to home workers, Sections 26 and 27 go together and Section 27 expressly makes it applicable to home workers and that both the sections together can have no application to home workers. Even with regard to industrial premises, the contention of the learned Counsel is that they will have no application, since there are no fixed hours of work for beedi rollers to come and work. The attack on Section 31 was made, based upon the language ' employed for a period of six months or more', by contending that the said section will have no application to domestic workers or home workers, since no relationship of master and servant exists between the trade mark holder or contractor on the one hand and the home worker on the other, so as to hold that a home worker was ' employed for a period of six months or more '. Even otherwise, the contention was that the relationship of master and servant would exist only between the contractor and the beedi rollers in a contract system and not between the trade mark holder and the beedi rollers.
13. The entire question was argued before us on the basis of the pleadings in these writ petitions. The trade mark holders as well as the contractors in their affidavits have stated certain facts. For instance, in W.P. No. 2680 of 1968, the petitioner in paragraph 2 of its affidavit has stated that the petitioner concern was started in the year 1900 for manufacture of beedis ; that it has been marketing beedis under the registered trade marks ' Four Horse ', ' No. 10 Beedis ', and ' Pigeon Beedis', that the petitioner manufactures beedis under what is known as the 'contract system'; that for this purpose, the contractors who deal with the petitioner are 40 in number ; that the daily production of beedis of the petitioner is in the region of 12 lakhs ; and that in addition thereto, the petitioner directly employs clerks, maistries; packers and labelling staff. Paragraph 3 'of the affidavit refers to the three systems of manufacture referred to earlier in this judgment and it is as follows:
From time immemorial, the system of manufacture of beedies in the State of Madras has been divided into three (1) contract system, (2) out-work system and (3) direct employment system. In the case of direct employment, the trade mark holder himself runs the factory wherein the workers who are his employees come and roll beedies and tender the finished products. This system has been adopted in the entire State of Madras. The contract system is one by which the trade mark holder enters into an agreement with the contractors. In North Arcot district, he issues raw-materials for the manufacture of beedies to the contractors. Under the agreement, the contractor undertakes to engage his own labour for the purpose of rolling the beedies and supply the finished products to the trade mark holder. The rate per thousand beedies is negotiated by the trade mark holder with the contractor, which after payment of wages, would leave him a margin of profit. It is the entire responsibility of the contractor to decide the manner in which or the means by which the beedies are rolled and tender the same to the trade mark holder. For this purpose, he may directly employ labour who would work in the contractor's premises ; or he would issue raw materials to individual rollers who-would roll the beedies in their own homes by themselves or with the assistance of the members of their family. This work of rolling; beedies at home-is done by individual workers both on full time basis or on a part-time basis so that he may at the same time attend to his other avocations. The trade mark holder is concerned in this system, only with the finished product after the beedies tendered by the contractor are procured. The defective and substandard products and those not in conformity with the specifications contracted for are rejected. These rejected beedies are in turn broken and the tobacco removed for re-issue. The contractor is paid only for such beedies. as are not rejected.
Paragraph 4 states how the contractor in his turn carries out his work and the same is as follows:
In the event of the contractor rolling the beedies in his own premises rented by him or owned by him, an L-2 licence under the Central Excise Act is taken out in his own name. In the event of his issuing raw materials to workers to be rolled in their own homes, the workers take out pass books showing the quantity of tobacco issued to them, which pass book is issued under the provisions of the Central Excise Rules, which bears the seal of the Central Excise Office. The trade mark holder is not concerned with the fact whether a contractor runs his own premises where workers roll beedies or whether the raw material is issued by the contractor in his turn to workers who take the raw materials to their own homes. At no time is the trade mark holder aware of the names of the workers who roll the beedies for the contractors or the numbers of workers engaged by him for that purpose. Very often the contractors are persons residing in the adjoining villages who come to the town for the purpose of getting the raw materials and they carry them to their villages where the beedies are rolled either in their own premises or in the premises of the out-worker or home-worker. There is nothing which prevents the contractor from taking the raw material and entering into agreement with more than one trade mark holder. As a matter of fact, the Industrial Tribunal, Madras, in I.D. No 12 of 1958 by its award dated 8th November, 1958, has held ; 'It is therefore clear that there is no prohibition against branch managers taking to beedi manufacturing works under other proprietors, and it is not likely that this proprietor would have allowed his servants to undertake work from other masters.
Paragraph 5 refers to the out-work system and the same is as follows:
Coming to the out-work system, the trade mark holder directly issues raw, material to workers who come to the trade mark holder's premises for collecting the raw material. Each worker would have a pass book issued under the Central Excise Rules showing the maximum quantity of tobacco which is permitted to them to be in their possession. The quantity issued by the trade mark holder to the worker is entered in his pass book and the raw material is taken by him to his home. The worker rolls the beedies by himself or with the help of the members of his family on a full time basis or during his spare time, at the same time attending to his own other avocation. The finished product is brought to the trade mark holder's premises for delivery and in the case of contract system, the trade mark holder receives the finished product after rejecting the defective or broken or sub-standard beedies. As in the case of contract system, the trade mark holder is not concerned with the question as to how exactly the beedies. were rolled. As already stated, it is open to the individual worker who takes away the raw material under the out-work system to have the beedies rolled by whomsoever he chooses. On the basis of the above statement of fact, so far both under the contract system and under the out-work system, the beedi roller who works in his own home , during his spare time or on a full time basis or by himself or with the help of any member of his family or any others whomsoever he chooses, would not be a servant of either the trade mark holder or of the contractor, as no control or supervision could be exercised over the manner in which he does the work, and there is no personal covenant with the trade mark holder or contractor' that the work will be done by the particular worker alone and not by any other worker. In such a case, the time of the worker is not at the disposal of the contractor or the trade mark holder. Inasmuch as the contractor can enter into agreements with different trade mark holders, a worker is entitled to take his raw material and supply the finished product to different trade mark holders or different contractors.
Paragraph 6 is general and the same is as follows : -
This was an industry which did not necessitate the existence of a factory where alone the manufacturing process can be carried on by reason of the fact that the work connected with the manufacture of beedies could be carried out in the spare time by the worker himself or by any member of his family, in his own house. The system had so developed that this industry had spread out into the villages in the nature of a cottage industry and it is eminently suited for enabling the members of village families to earn substantial sums towards their livelihood. On the other hand, the very nature of the industry is such that it would be impossible to apply the various pieces of labour legislation which protected the workers who are employed in the various industries, in so far as the application of any such legislation would result in causing hardship on the workers, which would destroy the basis on which the industry had been built. The part-time worker or the members of his family including women and children, who would assist in rolling the beedies or taking any part in producing the finished product would be disentitled from participating in the industry and earning their livelihood, if the conditions appertaining to the other industries were made applicable to the beedi industry, in which case the workers would be compelled to work on whole-time basis which would not be in their own interests and which would stultify the industry which had developed over the years on the basis already stated. Again and again, the Labour Courts and Industrial Tribunals repelled the stand taken by certain unions that these workers engaged in rolling beedies with the help of the members of their family during their spare time or with the assistance of any other workers whom they chose, would be workers to whom either the Industrial Disputes Act or the Factories Act or any other piece of legislation would be applicable.
Paragraphs 7 and 8 refer to the Madras .Act and the decision of this Court thereon.
14. A common counter-affidavit has been filed in these writ petitions on behalf of the first respondent as well as the second respondent.
15. In paragraph 2 of the common counter-affidavit of the first respondent, it is skated that the said counter-affidavit is filed on the question of the validity of the Act only.
16. In paragraph 2 of the common counter-affidavit filed on behalf of the second respondent, it is stated as follows:
The facts stated by the petitioner in paragraphs 1 to 8 of the affidavit are substantially correct.' But it is submitted that in actual practice, the contractor undertakes the manufacture of Beedi only for one factory or trade mark holder.
In view of the statement contained in paragraph 2 of the counter-affidavit of the second respondent, Mr. Venugopal, learned Counsel for the petitioners, contended that the facts stated by the petitioners in paragraphs 1 to 8 of their affidavits have been admitted to be correct by the second respondent, who alone is the local authority to enforce the Act, and this admission would clearly show that the trade mark holders are not employers of the beedi rollers and it is only the independent contractors who can be said to be the employers; that no relationship of master and servant exists between the trade mark holders and the beedi rollers; and that therefore the various provisions of the Act imposing an obligation on the employers cannot be enforced against the trade mark holders. In support of his contention, the learned Counsel relied certain well-known decisions of the Supreme Court dealing with the concept of employment and the significance of master and servant relationship. The first decision relied on by Mr. Venugopal is Dharangadhara Chemical Works Limited v. State of Saurashtra and Ors : (1957)ILLJ477SC . That case was concerned with the definition of the term 'workman' in the Industrial Disputes Act, 1947. That was also concerned with the question whether the agarias were independent contractors or workmen. Dealing with the definition of the term, 'workman' in Section 2 (s) of the Industrial Disputes Act, 1947, the Supreme Court observed:
The essential condition of a person being a workman within the terms of this definition is that he should be employed to do the work in that industry, that there should be, in other words, an employment of his by the employer and that there should be the relationship between the employer and employee of master and servant. Unless a person is thus employed there can be no question of his being a workman within the definition of the term as contained in the Act.
The Supreme Court in that case referred to a pronouncement of the House of Lords in Short v. J. & W. Henderson Limited (1946) 62 T.L.R. 427 where Lord Thankerton recapitulated the four indicia of a contract of service, namely (a) the master's power of selection of his servant, (b) the payment of wages or other remuneration, (c) the master's right to control the method of doing the work, and (d)the master's right of suspension or dismissal, and extracted the following passage from that judgment:
Modern industrial conditions have so much affected the freedom of the master in cases in which no one could reasonably suggest that the employee was thereby converted into an independent contractor that, if and when an appropriate occasion arises, it will be incumbent on this House to re-consider and to restate these indicia. For example (a), (b) and (d) and probably also (c) are affected by the statutory provisions and rules which restrict the master's choice to men supplied by the labour bureau, or directed to him under the Essential Work provisions, and his power of suspension or dismissal is similarly affected. These matters are also affected by trade union rules which are at least primarily made for the protection of wage-earners.
The Supreme Court finally pointed out that the correct method of approach would be to consider whether, having regard to the nature of the work, there was due control and supervision by the employer and in that context referred to the following observations of Fletcher Moulton, L.J. in Simmons v. Heath Laundry Company (1910) 1. K.B. 543.
In my opinion it is impossible to lay down any rule of law distinguishing the one from the other. It is a question of fact to be decided by all the circumstances of the case. The greater the amount of direct control exercised, over the person rendering the services by the person contracting for them the stronger the grounds for holding it to be a contract of service, and similarly the greater the degree of independence-of such control the greater the probability that the services rendered are of the nature of professional services and that, the contract is not one of service.
The next decision relied on by the learned Counsel is Chintaman Rao and Anr. v. State of Madhya Pradesh : 1958CriLJ803 . That decision also considered the distinction between an independent contractor and a workman and followed the tests laid down in Dharangadhra Chemical Works Ltd. v. State of Saurasktra and Ors. : (1957)ILLJ477SC , as to when-a person can be said to be a workman or an employee. The Supreme Court, further pointed out that there is a clear-cut distinction between a contractor and a workman and the identifying mark of the latter is that he should be under the control and supervision of the employer in respect of the details of the work.
17. Mr. Venugopal further sought to derive assistance in support of his contention from the decision of the Supreme Court in Orissa Cement Limited and Ors. v. Union of India and Ors. : (1962)ILLJ400SC . That decision dealt with the notifications of the Government of India extending the benefits of the Provident. Fund Scheme to contract labour and the Supreme Court held that the said notifications were discriminatory and did not put reasonable restrictions on the right of those employers who employed contract labour to carry on trade or business within Article 19 (6) of the Constitution and, therefore, must be struck down as unconstitutional. The Supreme Court pointed out that the provisions of the Employees Provident Fund Scheme, as amended by the notifications, secured the benefits of the Scheme to employees who are employed through contractors, but the principal employer was incapable of exercising as against contract labour, the right given to him under Para. 32 of the Scheme to deduct from the wages of an employee the amount paid by the employer towards the provident fund on account of the employee; that the intention of the Legislature as expressed in Section 6 (1) of the Act was to make the employer liable only for a moiety of the provident fund and, while the Scheme of 1952 was well-designed to carry out this intention in its application to workmen directly employed, by reason of the combined operation of Paras. 30 and 32, it broke down in its extension to contract labour by reason of the inapplicability of Para. 32; and that it operated unfairly and harshly on persons who employed contract labour and it further resulted in discrimination between those who employed contract labour and those who employed direct labour. Mr. Venugopal sought to press this decision into service to challenge Section 31 of the Act. His contention is that it is the contractor who employs the beedi rollers and if that contractor dismisses or discharges the beedi rollers contrary to the provisions of Section 31, the trade mark holder is sought to be made liable and therefore on the principle of the decision of the Supreme Court referred to above, it must be held that that section is ultra vires and operates harshly and unfairly on the trade mark holder.
18. Mr. Venugopal next relied on the decision of the Supreme Court in Harakchand Ratanchand Banthia and Ors. v. Union of India and Ors. : 1SCR479 . That decision among others dealt with the constitutional validity of Section 88 of the Gold (Control) Act, 1968 and with reference to that section, the Supreme Court observed:
This section extends the scope of the vicarious liability of the dealer and makes him responsible for the contravention of any provision of the Act or rule or order by any person employed by him in the course of such employment. The rational basis in law for the imposition of vicarious liabiltiy is that the person made responsible may pre-vent commission of the crime and may help to bring the actual offender to book. In one sense the dealer is punished for the sins committed by his employee. It may perhaps be said if the dealer had been more alert to see that the law was observed the sin might not have been committed. But the section goes further and makes the dealer liable for any past contravention perpetrated by the employee. It is evident that the dealer cannot reason ably be made liable for any past misconduct of his employee though the dealer can be made liable for any act done by his employee in the course of the employment and whom he can reasonably be expected to influence or control The maxim qui facit per alium facit per se (he who acts through another acts through himself) is not generally applicable in criminal law. But in Section 88 it has been extended beyond reasonable limits. We are, therefore, of opinion that Section 88 imposes an unreasonable restriction on the fundamental right of the petitioners and is unconstitutional.
Reliance was also placed on a decision of this Court in Public Prosecutor v. Neelamegam Pillai (1964) I L.L.J. 275. That dealt with the prosecution relating to a cigar factory under the Factories Act and Srinivasan, J., after referring to the earlier decisions of this Court, held that in view of the particular facts of that case, the person concerned could not be held to be a workman. The learned Judge recorded the finding of fact arrived at by the Labour Court with regard to another factory, in an award, which was marked as follows:
The Labour Court went into the question of the condition obtaining in factories of this kind and came to the conclusion that notwithstanding that notices were put up apparently in compliance with the requirements of the Factories Act, the terms and conditions under which the workers were employed in the factory did not bring these 'workers within the scope of the definition contained in the Factories Act. The nature of the supervision and control exercised by the manager of the factory over the workers consisted only in seeing that the workers returned the number of cigars which could be rolled out of the quantity of tobacco supplied to them. It was found the volume of work which the worker was called upon to do depended not only upon the ability of the worker to roll cigars but upon the discretion and necessity of the proprietor. There was no specific workload in the sense that a worker was called upon to work for certain regular hours of the day and to turn out a certain quantity of cigars dependent upon the number of hours of work, that is to say, the worker was not employed on the basis of the time for which he worked but only on the quantity of cigars which he rolled. There was also the evidence that any worker could leave one factory and take up work in another.
The learned Judge further proceeded to state:
Notwithstanding the external trappings of a factory in that the accused in this case had either obtained a licence or put up notice boards specifying hours of work or maintained registers in a more or less indifferent manner it is established that the workers were not employed on any permanent basis. They were free to come and go as and when they liked, and the work could be stopped by the manager of the factory on rainy days or for lack of tobacco or when stocks accumulated on hand without any responsibility for payment of any salary to the workers on such days when work was not done. The work was also remunerated only on the quantity turned out by the workers. A worker could finish rolling such number of cigars as would earn him whatever amount he liked and could leave off work then. He was not compelled to stay at the factory between specified hours of work and continue to work there during those hours. The only measure of control or supervision that was exercised by the manager was to see that the quantity of tobacco supplied to the worker was not misused and that the product turned out by them was in good condition-These facts make it obvious that the contract was not a contract of service but a contract for services. The circumstance that these workers had to work in the premises of the employer makes no difference. That step was necessary because tobacco is an excisable commodity and could not be taken out of the premises and had to be accounted for by the management.
19. As we have pointed out already, the argument of Mr. Venugopal, based on the decisions referred to above, is that as the facts stated by the petitioners in paragraphs 1 to 8 of their affidavits are admitted by the second respondent, such facts establish that the contractors are independent contractors and therefore there is no relationship of master and servant between the trade mark holders and the beedi rollers. The learned Advocate-General, who appeared for both the respondents in these writ petitions clearly represented to us that the respondents did not want to go back on the averments contained in paragraph 2 of the counter-affidavit filed on behalf of the second respondent and that they stood by the same. But he contended that even on the basis of those averments, the petitioners had not established that the contractors to whom they issued beedi leaves and tobacco were independent contractors as contemplated by the decisions referred to above and that the trade -mark holders had nothing whatever to do with the beedi rollers engaged by such contractors. Therefore, we have to proceed on the basis that the broad features of the systems of manufacture of beedis stated by the petitioners in their affidavits have been admitted by the respondents herein, though from the very nature of the case, it is impossible to hold that the respondents have admitted all the details contained in the said paragraphs of the affidavits filed on behalf of the petitioners, such as the number of contractors engaged by each petitioner or the turnover of beedis of each petitioner etc. Mr. Venugopal himself very rightly proceeded on the basis that it is only the broad features of the systems of manufacture stated in the affidavits of the petitioners that must be deemed to have been admitted by the respondents.
20. We are clearly of the opinion that the argument of the learned Counsel for the petitioners is misconceived in that it misses one significant and crucial factor. As we have pointed out already, the Trade mark holders distinguish their beedis with reference to the particular mixture of tobacco and it is this mixture of tobacco that is issued by them to the so-called contractors. From the very nature of the case, the quantity of beedi leaves and tobacco issued to the contractors must be accounted for in terms of the number of beedis lolled and they must be finally returned to the trade mark holders. Neither the contractors nor the beedi rollers are at liberty to use the beedi leaves and the tobacco issued by a particular trade mark holder for rolling the beedis for another trade mark holder. The entire quantity of beedi leaves and tobacco issued by a particular trade mark holder has to be accounted for in terms of the number of beedis rolled and supplied to that trade mark holder and necessarily, therefore, there must be a correlation between the two. It is not as if that as soon as the trade mark holder issues the beedi leaves and tobacco to the contractor, the former loses all interest in those raw materials and all that he is interested in is, his getting a certain number of rolled beedis. From the moment of the issue of the beedi leaves and the tobacco to the contractor till they are returned in the form of rolled beedis, the interest of the trade mark holder in the raw materials continues and if there is a shortage in the number of beedis rolled, with reference to the quantity of beedi leaves and tobacco issued, the contractor will certainly be accountable, to whom the beedi rollers will be accountable in their turn. The very fact that the contractor in the first instance and the trade mark holder at a later stage have got a right to reject what they consider to be substandard and defective beedis is sufficient to constitute control and supervision over the operation carried out by the beedi rollers. It is not as if that the bargain or arrangement between the trade mark holder and the contractor consists of two independent transactions, namely, that the trade mark holder sells his raw materials to the contractor and the contractor in his turn sells the rolled beedis to the trade mark holder, whether such beedis were rolled out of the raw materials issued by the. trade mark holder or some other raw materials obtained from elsewhere. The very fact that the proprietor being a trade mark holder in respect of a particular beedi is interested in the manufacture of beedis from the moment of the issue of raw materials till the return of the rolled beedis is sufficient to constitute control and supervision which the trade mark holder exercises over the actual process of the manufacture of the beedis. As a matter of fact, the very averments contained in the affidavit which we have extracted already support this conclusion of ours.
21. The Supreme Court had to consider a case of such beedi manufacture in Bridhichand Sharma v. First Civil Judge, Nagpur and Ors. : (1961)IILLJ86SC . After considering, its decision in Dharangadhra Chemical Works Ltd. v. State of Saurashtra and Ors. : (1957)ILLJ477SC , and Chntaman Rao and Anr. v. State of Madhya Pradesh : 1958CriLJ803 , to which reference has already been made and on which reliance has been placed by the learned Counsel for the petitioners, the Supreme Court : pointed out:
The question therefore that arises is whether in these circumstances it can be said whether the appellant merely directs what work is to be done but cannot control the manner in which it has to be done; of course, the nature of extent of control varies in different industries and cannot by its very nature be precisely defined. Taking the nature of the work in the present case it can hardly be said that there must be supervision all the time when beedis are-being prepared and unless there is such, supervision there can be no direction as to the manner of work. In the present case the operation being a simple one, the control of the manner in which the work is done is exercised at the end of the day, when beedis are-ready, by the method of rejecting these-which do not come up to the proper standard. In such a case it is the right. to supervise and not so much the modern which it is exercised which is important.
22. We are clearly of the opinion that this decision of the Supreme Court is against the contention of the learned Counsel for the petitioners. As a matter of fact, with reference to the facts which we have mentioned, the right to supervise is available to the trade mark holder and it is certainly open to him to see that the raw materials issued by him to the contractor are not wasted or misused by the contractor or by the actual rollers of beedis and for that purpose the trade mark holder can certainly impose conditions on the contractor with regard to the type of rollers he should employ and the place where the rolling of beedis should be done. The fact that the trade mark holder trusts the contractor and allows him to engage the necessary labour for the rolling of the beedis in the belief that the contractor will not misuse the raw materials issued to him and he in his turn will see that the beedi rollers themselves do not misuse the raw materials, will not lead to the inference that the trade mark holder has no right to supervise the actual rolling of the beedis, even though he may not choose to exercise that right.
23. Another decision of the Supreme Court in which the facts are much more favourable to the contentions advanced on behalf of the trade mark holders also negatives the case of the petitioners. That decision is Management of D.C. Dewan Mohideen Sahib and Sons v. Secretary, United Beedi Workers' Union, Salem and Anr. : 7SCR646 . That case arose on a reference made under the provisions of the Industrial Disputes Act, 1947. There also the contention that was put forward was that there was no relationship of master and servant between the trade mark holder and the actual rollers of beedis and it was only the independent contractor who was the employer of the beedi rollers. In that case, the contractor was referred to as a branch manager or intermediary. A sample agreement between the trade mark holder and the contractor was produced before the High Court which provided inter alia for the following terms:
(1) that the proprietor should supply the tobacco and the beedi leave;
(2) that the intermediary should engage premises of his own and obtain the requisite licence to carry on the work of having the beedis rolled there;
(3) that at no time should more than nine beedi rollers work in the premises of that intermediary;
(4) that the intermediary should meet all the incidental charges for rolling the beedis including the cost of thread and the remuneration paid to the beedi rollers;
(5) that for every unit of 1,000 beedis rolled and delivered by the inter-miediary to the proprietor, the latter should pay the stipulated amount, after deducting the cost of the tobacco and the beedi leaves supplied by the proprietor;
(6) that the intermediary should not enter into similar engagement with any other industrial concern;
(7) that the price of the raw materials, and price to be paid for every unit of 1,000 beedis rolled and delivered were to be fixed at the discretion of the proprietor.
With reference to those facts, a single Judge of this Court held that neither the beedi roller nor the intermediary was an employee of the trade mark holder. But the appellate Bench took a different view and according to the appellate Bench, the intermediaries were impecunious and according to the evidence, could hardly afford to have factories of their own; the evidence revealed that the trade mark holders took the real hand in settling all matters relating to the workers and the intermediary was a mere cipher and the real control over the workers was that of the trade mark holders; and therefore the so-called intermediaries or the so-called independent contractors were no more than agents of the trade mark holders. When the matter was taken up to the Supreme Court, the Supreme Court, after referring to its earlier decisions in Dharangadhra Chemical Works Ltd. v. State of Saurashtra and Ors. : (1957)ILLJ477SC , Chintaman Rao and Anr. v. State of Madhya Pradesh : 1958CriLJ803 , and Bridhichand Sharma v. First Civil Judge, Nagpur and Ors. : (1961)IILLJ86SC , referred to already and Shankar Balaji Waje v. The State of Maharashtra : (1962)ILLJ119SC , and Bhikusa Yamasa Kshatriya (P.) Ltd. v. Union of India and Anr. : (1963)ILLJ270SC , upheld the view of the appellate Court and pointed out:
As the appeal Court has rightly pointed out the so-called independent contractors were indigent persons who were in all respects under the control of the appellants. There is in our opinion little doubt that this system has been evolved to avoid regulations under the Factories Act. Further there is also no doubt from whatever terms of agreement are available on the record that the so-called independent contractors have really not been independent at all. As the appeal Court has pointed out they are impecunious persons who could hardly afford to have factories of their own.... The so-called independent contractor is even bound not to employ more than nine persons in his so-called factory. The sale of raw materials to the so-called independent contractor and resale by him of the manufactured beedis is also a mere camouflage, the nature of which is apparent from the fact that the so-called contractor never paid for the materials. All that happens is that when the manufactured beedis are delivered by him to the appellants, amounts due for the so-called sale of raw materials is deducted from the so-called price fixed for the beedis. In effect all that happened is that the so-called independent contractor is supplied with tobacco and leaves and is paid certain amounts for the wages of the workers employed and for his own trouble. We can, therefore see no difficulty in holding that the so-called contractor is merely an employee or an agent of the appellants as held by the appeal Court and as such employee or agent he employs workers to roll beedis on behalf of the appellants. The work is distributed between a number of so-called independent contractors who are told not to employ more than nine persons at one place to avoid regulations under the Factories Act. We are not however, concerned with that aspect of the matter in the present appeals. But there can be no doubt that the workers employed by the so-called contractors are really the workmen of the appellants who are employed through their agents or servants whom they choose to call independent contractors.... In Birdhichand Sharma's case : (1961)IILLJ86SC , supervision was made through a system of rejecting the defective beedis, at the end of the day. In the present cases we have not got the full terms of the agreement and it is, therefore, not possible to say that there was no kind of supervision or control over the workers and that the so-called independent contractors had to accept all kinds of beedis whether made upto standard or not. It is hardly likely that the so-called independent contractor will accept beedis which are not upto the standard; for that is usually the system which prevails in this trade as will be apparent from the facts of the many beedi manufacturing cases to which we have referred.
As we have pointed out already, the facts in the above case are more favourable to the contentions of the petitioners, but notwithstanding the same, the Supreme Court has held that the beedi rollers are the workers of the trade mark holders. In the present case, there is not even an averment in the affidavits of the petitioners that the raw materials are sold by the petitioners to the contractors. All that is stated is that the petitioners issue raw materials for the manufacture of beedis to the contractors and the rate per thousand beedis is negotiated by the trade mark holder with the contractors, which after payment of wages to the beedi rollers would leave them a margin of profit. It is also clear that the beedis will have to be rolled according to the specifications given by the trade mark holder. We asked the learned Counsel for the petitioners to tell us the actual terms of the arrangement between the trade mark holder and the contractor. But' the learned Counsel Mr. Venugopal, frankly conceded that these arrangements were only oral. In such a situation, it is impossible to hold that the so-called contractors are really independent contractors in the sense that as soon as the petitioners (trade mark holders) have issued the raw materials to them, they have no further concern with or control or supervision over the actual process of the manufacture. As pointed out by the Supreme Court in Bridhickand Sharma v. First Civil Judge, Nagpur and Ors. : (1961)IILLJ86SC , the quantum of supervision will really depend upon the nature of the work to be performed and having regard to the facts referred to above, it cannot be said the petitioners herein have no right of supervision or control over the so-called contractors or over the actual beedi rollers. In so far as Srinivasan, J., in Public Prosecutor v; Neelamegam Pillai (1964) I L.L.J. 275, held that the only measure of control or supervision that was exercised by the manager was to see that the quantity of tobacco supplied to the workers was not misused and that the product turned out by them was in good condition and that that would not be sufficient to constitute control and supervision to make the worker a workman contemplated in the Factories Act, the same is opposed to the decision of the Supreme Court in Bridkichand Sharma v. First Civil Judge, Nagpur and Ors. : (1961)IILLJ86SC , as well as Management of D.C. Dewan Mohideen Sahib and Sons v. Secretary, United Beedi Workers' Union, Salem and Anr. : 59ITR574(SC) , referred to already, and therefore cannot be considered to be good law. Further, that decision was rendered with reference to the definition of the term 'worker' in Section 2(1) of the Factories Act, which is narrower in scope than the definition of the term' 'employee' in the Act.
24. In view of these considerations, we are clearly of the opinion that the so-called contractors of the trade mark holders are not independent contractors in the sense that the beedi rollers employed by them are their employees and they have nothing whatever to do with the trade mark holders, that they are merely agents or representatives , of the trade mark holders and that therefore the trade mark holders are the employers with respect to such beedi rollers.
25. In each of the affidavits filed in support of W.P. Nos. 3028 and 3268 of 1968 and W.P. No. 849 of 1969, the petitioner has stated that the petitioner does not employ any worker for the purpose of manufacturing beedis, but it is buying beedis at the rate of Rs. 7-25 per thousand and it has to spend another Re. 0.75 per thousand on packing and other incidental expenses. In addition to this statement, the petitioner has also stated in paragraph 2 of the affidavit that the petitioner is manufacturing beedis under what is known as 'contract system' and has further stated in paragraph 3 of the affidavit that in Salem District the trade mark holder issues raw materials for the manufacture of beedis to the contractors and the rate per thousand beedis is negotiated by the trade mark holder with the contractors which, after payment of wages would leave them a margin of profit. In view of these statements contained in paragraph 3 of the affidavit, we do not see any difference between the cases of these petitioners and other petitioners, solely because the petitioners in these cases have stated in paragraph 2 of their affidavits that the firm is buying beedis at the rate of Rs. 7.25 per thousand. It is significant to note that there is no mention about the sale of raw materials by the trade mark holder to the so-called contractors; nor the price for which they are sold; nor is there any mention as to what happens to those raw materials. The petitioner in W.P. No. 3028 of 1968 states that for the purpose of securing its turnover of seven lakhs of beedis, it has entered into agreements with six contractors who employ their own workmen without any reference of approval from the petitioner-firm for the manufacture of beedis; that there are three contractors, two at Kancheepuram and one at Ranipet; that the petitioner-firm sells the tobacco and leaves to the independent contractors who manufacture beedis by employing their own workmen and sell them to the petitioner-firm; that as regards the three other independent contractors at Visharam, Timiri and Kaveripakkam, a different procedure is adopted in that the petitioner-firm supplies the tobacco as well as the leaves to these contractors who in their turn engage workmen for the manufacture of beedis; and that to these contractors a lump sum commission is paid every month. We are of the opinion that these averments also do not make any difference. Here again, it is significant to note that there is no reference in the affidavit as to the course which the raw materials undergo in the hands of the contractors and at what price the raw materials are being sold and how the same is realised. The fact that a lump sum commission is being paid to three other contractors every month would not also make any difference. In the affidavit filed in W.P. No. 849 of 1969, in paragraph 3, the petitioner stated that it sells raw materials to independent contractors against cash payments and finished products are purchased from the independent contractors at rates mutually agreed from time to time by paying cash and that receipts are issued by the petitioner-firm for sale of raw materials to the independent contractors. Here again, no further particulars are given; nor other materials produced before the Court. Consequently, this writ petition also does not stand on a different footing.
26. In view of the considerations mentioned above, we hold that the trade mark holders in these cases will be employers of the beedi rollers and they will have to discharge the obligations imposed on them and it is not open to them to put forward the contention that the so-called contractors to whom beedi leaves and tobacco are issued alone are the employers and not the petitioners.
27. We wish to make it clear at this stage itself that we are expressing this conclusion of ours with reference to the pleadings in this case. In a particular case, if it is established that the so-called contractor is really independent in the sense that he purchases raw materials from the trade mark holder and subsequently sells beedis to the trade mark holder, both of them constituting independent transactions and not involving any trade secret in the form of mixture of tobacco or requiring the contractor to utilise the raw materials supplied by a particular trade mark holder for the manufacture of beedis to be sold to that trade mark holder, it may be that the trade mark holder cannot be said to be the employer with reference to the contract labour and. it is the contractor who would be the employer. As a matter of fact, the very definition of 'principal employer' in Section 2 (m) will be inapplicable to such a case, because the contractor cannot be said to engage or employ contract labour on behalf of or for the trade mark holder. It is only in view of these features, this Court in Abdur Rahim v. State of Madras, represented by the Secretary, Department of Industries, Labour and Co-operation, Fort St. George, Madras (1961) 2 M.L.J. 42, referred to the already struck down Section 2 (g) (i) of the Madras Act which included in the definition of 'Employer', 'a proprietor or a registered. user of a trade mark registered under the Trade Marks Act, 1940 (Central Act V' of 1940), in relation to beedi'.
This Court pointed out:
On the terms of the definition, a person who merely purchased beedis in the market, and sold them by using his own trade mark would be liable for the defaults of the person from whom he purchased the beedis. The learned-Advocate-General contended that the-definition in Section 2 (g) (i) should be read in conjection with the provisions of Section 4 (3) (e) which enacts that the supplier of the beedis should be exclusively connected with the proprietor or registered user of the trade mark, and that therefore, the statute aimed at those cases in which beedis were manufactured by an independent contractor exclusively for the proprietor of a trade mark. No such restricted interpretation could be given to Section 2 (g) (i). In its actual application the provision will produce perhaps unintended, results contrary to the constitutional guarantees. Suppose a manufacturer of beedis supplied to various owners, who have separate trade marks; it will be unreasonable to hold that one-trade mark owner should be answerable for the beedis manufactured for another. Yet that is what would happen, if the definition is ' allowed to remain. In our opinion the definition contained in Section 2 (g) which included the proprietor or the-registered user of trade mark is unreasonable and unrelated to the mischief sought to be remedied. The case of a proprietor of a trade mark who is substantially interested and has control over the affairs of another beedi industrial premises would be covered by the second limb of the definition, and there -would really be no necessity for the third. It is not necessary for the purpose of securing proper conditions of work for the beedi workers that all purchasers of beedis manufactured by them if they happen to market under their own trade mark should be made liable as their employers.
28. After having expressed this genera! conclusion of ours, we shall now proceed to consider the attack on the different sections of the Act. In the first place, Sections 3 and 4 dealing with the requirement as to the taking out of a licence for an industrial premises were challenged. Except for putting forward a contention that in view of the fact that the contractors are independent contractors, the obligation for taking out a licence is cast only on them and not on the trade mark holders and that the language of Section 4 (3) is appropriate only to a contractor and not a trade mark holder no other argument was advanced before us with reference to these two sections. We are unable to hold that there is anything in Section 4(3) of the Act to conclude that the matters enumerated therein would be applicable only to a contractor and not to a trade mark holder. From our conclusion that the so-called contractor is only an agent or representative of the trade mark holder, it follows that the obligation for taking out a licence is cast only on the trade mark holder. Mr. Venugopal contended that under the agreements entered into between the trade mark holder and the contractor, the latter is at liberty to have the 'beedis rolled in any place he likes and engage any beedi roller he likes and the trade mark holder may not even be aware of the premises in which beedis are being rolled and therefore it would 'be unfair and unreasonable to hold that the trade mark holder alone has to apply for and obtain a licence. We are not able to find any difficulty in enforcing these provisions as against the trade mark holders. Certainly it is open to a trade mark holder to enter into an agreement with a contractor providing that the contractor should not have the beedis rolled in any place other than an industrial premises in respect of which a licence should be taken out in the name of the trade mark holder. The fact that the trade mark holder does not stipulate such a term at present is not sufficient to hold that Sections 3 and 4 dealing with the necessity to take out a licence are incapable of being applied to trade mark holders. All that is necessary for the implementation of these provisions hat the trade mark holder will have to stipulate in the agreement with the contractors that in respect of the industrial premises in which beedi rollers are engaged in converting his raw materials into finished products a licence should be obtained in the name of the trade mark holder. Mr. Venugopal contended that the Act itself does not impose any such obligation on the contractor, when it chooses to preserve the contract system. In our opinion, this argument is fallacious. The Act is applicable to the contractors as well and consequently for the purpose of obeying and implementing the provisions of the Act, a trade mark holder is certainly entitled to stipulate in the contract that he enters into with the contractor to that effect. Hence, we do not see any substance in this argument of Mr. Venugopal.
29. The next ground of attack with regard to Sections 3 and 4 is based on an unreported decision of the Andhra Pradesh High Court W.P. Nos. 2587 etc. of 1968. in Thakur Savdeker (P.) Ltd. v. Union of India by the Secretary, Ministry of Law and seven Ors. W.P. No. 1235 of 1969. In that judgment a Bench of the Andhra Pradesh High Court has held that Sections 3 and 4 of the Act are unworkable. The learned Judges have held:
Now it will be seen that only an industrial premises requires to be licensed under Section 3 of the Act. Under Section 4, an application for licence has to be made to the competent authority, who after considering the matters enumerated in Section 4 (3) of the Act, either grants or refuses a licence. An appeal is provided under Section 5 against the refusal to grant or renew a licence. But Section 4, the licensing provision, does not provide for deciding any dispute with regard to the question as to whether any place or premises is an establishment or an industrial premises. There is also no criteria laid down for determining what constitutes an establishment and what constitutes an industrial premises. It should be noticed that the Act is not applicable to self-employed persons in private dwelling houses. Therefore in the absence of a machinery for deciding the dispute whether a particular place or premises is an establishment or an industrial premises or a private dwelling house where business is carried on by the owner or cocupier thereof with the assistance of the members of his family, there is scope for arbitrary and discriminatory enforcement of the provisions of the Act. Unless therefore a provision is made for determining the aforesaid question, it is not open to the authorities to insist upon obtaining a licence as required by Sections 3 and 4 of the Act.
For the purpose of coming to this conclusion, the Andhra Pradesh High Court relied on the decision of the Supreme Court in State of Andhra Pradesh v. Raja Reddy : 3SCR28 , and held:
It is now well settled that the restrictions imposed on the guaranteed right should be reasonable both in its substantive and procedural aspects. The method by which a restriction is sought to be imposed and the procedure provided for putting the provisions of the Act into operation should be reasonable and the exercise of the fundamental right cannot be curtailed without providing for a notice and an opportunity to be heard. That this is the correct legal position is established by the decision in Kantilal Habulal and Bros. v. H.C. Patel : 1SCR735 .
In the instant case, as we have seen, the Act does not provide for giving a notice or an opportunity to make representations and for deciding whether a particular place or premises constitutes an establishment or an' industrial premises, and the executive authority on its own determination that a place or premises is an industrial premises, can enforce the provisions of the Act even in respect of a place or premises which does not fall within the description of an industrial premises. For the foregoing reasons, we hold that the provisions of Sections 3 and 4 of the Act, offend Articles 14 and 19(r)(g) of the Constitution and are therefore void and unenforceable.
With great respect to the learned Judges, we are unable to accept this reasoning and the conclusion of the High Court of Andhra Pradesh. In the first place, Section 4 requires the person concerned applying for a licence in writing for an industrial- premises. Therefore, at the stage of the application, the applicant, proceeds on the basis that the premises, in question is an industrial premises, as contemplated by the Act and therefore the question of there being any criterion for deciding whether such a premises is an industrial premises or not by the competent authority does not arise. On the other hand, if any person is prosecuted under Section 33 of the Act for not taking out a licence in respect of an industrial premises, the question whether the premises is an industrial premises as contemplated by the Act or not will have to be decided by the Criminal Court before which the prosecution is launched. Therefore, we are unable to agree with the reasoning of the High Court of Andhra Pradesh for holding that Sections 3 and 4 of the Act are not valid.
30. Apart from this, the High Court of Mysore at Bangalore in its judgment dated 24th June, 1971 in Mangalore Ganesh Beedi Works v. State of Mysore W.P. Nos. 159, 310, 806 etc. of 1970 and 1456 of 1971. W.P. No. 806 of 1970 and Bharath Beedi works v. State of Mysore and Ors. W.P. No. 1486 of 1970, W.P. Nos. 159 etc. of 1970, W.P. No. 1456 of 1971, disagreeing with the decision of the High Court of Andhra Pradesh, has held that Sections 3 and 4 of the Act are not unconstitutional. For the purpose of coming to this conclusion, the learned Judges relied on the decision of the Supreme Court in Kishan Chand Arora v. Commissioner of Police, Calcutta and Ors. : 3SCR135 and pointed out:
The licensing authority is required by Sub-section (8) of Section 4 of the Act to communicate his reasons in writing when he refuses to grant or renew a licence. Section 5 of the Act provides for an appeal to the appellate authority against such order. The preamble and provisions of the Act afford enough guidance to the licensing authority and the appellate authority in the matter of disposal of applications for linceces. The insistence on the passing of a speaking order while refusing an application for the grant or renewal of a licence and the provision for an appeal against such order, are Sufficient safe-guards against any arbitrary exercise of power by the licensing authority. It is no doubt true that conferment of arbitrary power on a licensing authority without necessary guidance would be violative of Articles 14 and 19 (1) (g) of the Constitution. But when the said power is sufficiently controlled by necessary guidance and there are other built-in safeguards preventing the abuse of power, it would be valid.
We are in entire agreement with the decision of the High Court of Mysore on this point.
31. As far as this Court is concerned, it has held in Abdur Rahim v. State of Madras represented by the Secretary, Department of Industries, Labour and Co-operation, Fort St. George, Madras (1961)2 M.L.J. 42, referred to already, dealing with Sections 3 and 4 of the Madras Act, which are identical with Sections 3 and 4 of the Act, that the said sections are valid. This Court pointed out:
It cannot, therefore, be said that the mere requirement that the beedi industrial premises should be licensed would be invalid. But any system of licensing which leaves the issue of the licence to the unfettered discretion of the executive would amount to a permit system and would be invalid restraint on the exercise of the fundamental right. That, however, cannot be said of the powers granted under Sections 4 and 5 of the Act.
Under Section 4 of the Act, the authority could only act in conformity with, the provisions of the Act, failing which, the aggrieved party could appeal. If even the appellate authority acts arbitrarily, it would be open to this Court to correct such errors under Article 226. A quasi judicial power cannot be said to be either naked or arbitrary. It has to be exercised objectively in accordance with the standards laid down by the statute. There could therefore be no valid objection to the regulation of beedi business by reason of the provisions of Sections 3 to 5 of the Act.
Nothing was suggested to us to hold that this view of this Court requires any reconsideration, and, as we have already,, pointed out, Mr. Venugopal relied solely on the judgment of the High Court of Andhra Pradesh, referred to in this behalf already.
32. As we have pointed out already, Mr. Venugopal did not have any complaint against Sections 8 to 16 of the Act which are applicable to industrial premises, except for pointing out that some of the sections have been couched in passive voice and do not indicate on whom the obligation lies. We do not have any doubt whatever that the obligation is imposed on the employer as defined in the Act, who will be different persons depending upon whether the case falls under Section 2 (g) (a) or Section 2(g) (b).
33. The next attack of the petitioners relates to Sections 7 to 23. The argument of the learned Counsel for the petitioners is that even today in industrial premises, the beedi rollers are not required to come at specified hours or to work for any specified hours and inasmuch as the Act has preserved the existing system, these sections are not workable. We are clearly of the opinion that this argument again is fallacious. Ex hypothesi, these sections are applicable only to industrial premises and they do not apply to dwelling houses. Consequently, the only question is, if an industrial premises exists, whether there is any difficulty in applying or enforcing these provisions, whether it is the trade mark holder or the independent contractor, who is considered to be the employer in respect of the industrial premises in question. There can be no impediment to implementing these provisions. The very language of the statute compels the employers to fix working hours, pay overtime wages for over-time work, give interval of rest, spread over hours of work, grant weekly holidays and display and linaintain notice of periods of work. The fact that these requirements are not Com-plied with at present is no argument against their applicability in future. The very language of the provisions in question requires the employer to comply with these requirements and there ore whether the employer happens to be a trade mark holder or an independent contractor, he will have to comply with the said requirements and there is nothing inherently impossible in giving effect to these statutory requirements. Therefore, we are unable to agree with the contention advanced on behalf of the petitioners and to hold that these sections are in any way open to challenge. Mr. Venugopal then argued that if these sections were enforced that might put an end to the contract system as such, which is sought to be preserved by the Act. We are unable to accept the premises underlying this argument, namely, that the Act preserves the contract system as it exists. All that can be said is that the Act takes note of the existing contract system and seeks to introduce changes into the same in the interests, and welfare of the labour. In such a situation, it cannot be contended that the provisions in question are in any way opposed to or destructive of the contract system as such.
34. It was next contended by Mr. Venugopal that these provisions would constitute an unreasonable restriction in excess of the legislative competence under Article 19 (6) of the Constitution of India, in so far as it interferes with the fundamental right of the petitioners to carry on their business guaranteed by Article 19 (1) (g). There are two answers to this contention. The first is, certainly these statutory provisions are for the benefit of a large body of workers engaged in the industry and therefore these restrictions are imposed in the interests of the general public, as contemplated by Article 19 (6) of the Constitution of India. It is too late in the day to contend that such a welfare legislation for the benefit of the labour cannot be undertaken within the scope! of Article 19 (6) of the Constitution. Secondly, the constitutional validity of the identical provisions of the Madras Act has been upheld by this Court in the decision referred to already, and the said decision is binding on us.
35. The provisions that are next challenged are Sections 26 and 27 which we have extracted already. As we have pointed out already, Section 26 itself does not give any indication whether it applies to a home worker or not. But it is only Explanation II to Section 27 () which brings in the home worker, thereby implying that the home worker falls within the scope of Sections 26 and 27. We are clearly of the opinion that Sections 26 and 27 cannot be applied to a home worker. We have already referred to the provisions contained in Section 17 relating to working hours, which states that no employee shall be required or allowed to work in any industrial premises for more than nine hours in any day or for more than forty-eight hours in any week. The proviso to that section contemplates an adult employee being allowed to work in such industrial premises for any period in excess of the limit fixed under that section, subject to the payment of overtime wages, if the period of work, including overtime work, does not exceed ten hours in any day and in the aggregate fifty-four hours in any week. Section 18 provides for wages for overtime work. Section 19 equires that the period, of work for employees in an industrial premises each day shall be so fixed that no period shall exceed five hours and that no employee shall work for more than five hours before he has had an interval for rest, of at least half an hour. Section 20 requires that the periods of work of an employee in an industrial premises shall be so arranged that inclusive of his intervals for rest under Section 19, they shall not spread over more than ten and a half hours in any day. Section 21 requires that every industrial premises shall remain entirely closed, except for wetting of beedi or tobacco leaves, on one day in the week which day shall be specified by the employer in a notice exhibited in a conspicuous place in the industrial premises. It is in the context of these statutory provisions alone that Sections 26 and 27 have to be understood all these provisions constitute integral parts of a single scheme. The statute requires that an employee should not be allowed to work beyond a certain number of hours in a day. It is only because of this, provision is made that such hours of work should be spread over as prescribed. Again, it is only because that an employee is required to work continuously for a number of days for specified hours each day, the statute compulsorily provides for weekly holidays. Consequently for the purpose of getting the benefit of annual leave with wages, an employee must be a person who has been continuously working day after day for a certain number of hours each day, as prescribed by the statute. If, in a particular case, the requirements as to the working hours, interval of rest, spread over and weekly holidays cannot be complied with, it will naturally follow that the requirement as to annual leave with wages also cannot be complied with. To a home worker, Sections 17 to 23 can have no application, because they apply only to persons employed in an industrial premises. Consequently, Sections 26 and 27 also cannot have any application to home workers. In the case of home workers, there is no question of their being required to work only for a specified number of hours in a day and those hours being spread over and the dwelling house remaining entirely closed on a day in a week. Therefore, to them to the provision regarding annual leave with wages will have no application. The learned Advocate-General sought to contend that the rules framed under the Act enabled one to find out the turnover of the home workers and since they are paid only piece rate, the provision regarding the annual leave can be applied to them also. We are unable to accept this argument. The question is not one of finding out the wages for annual leave as contemplated by Section 27 (1) of the Act. On the other hand, the real question is, whether the provisions of Sections 26 and 27, as they stand, can ever be applied to the home workers at all. For the reasons indicated above, we are of the opinion that Sections 26 and 27 cannot have any application to the home worker.
36. Apart from this, in our opinion, Sections 26 and 27 are unconstitutional even in respect of the employees in industrial premises as constituting unreasonable restrictions on the fundamental right of the employees to carry on their business. From the very opening of Section 27 (1), it is clear that Sections 26 and 27 go together. As the language of Section 26 stands now, there is absolutely no requirement that any particular employee should have worked for any particular period in a calendar year for getting the benefit of the annual leave with wages. A combined leading of Sub-sections (1), (2) and (3) of Section 26 will lead to the conclusion that even if an employee has worked for eleven days in a calendar year, he would be entitled to a day's annual leave with wages. This will be in addition to the weekly holidays he would have enjoyed. The very concept of annual leave with wages requires that an employee should have worked for a minimum period of days in a calendar year so that he may get the benefit of the annual leave with wages. Section 26 does not require that an employee should have worked for any particular minimum period in a calendar year for getting the benefit of annual leave. The provisions contained in Section 26 (r) of the Act can be usefully compared with Section 26 (1) of the Madras Act which is as follows:
Section 26 : Annual leave with wages : (1) Every employee who has worked for a period of not less than 240 days in a beedi industrial premises during a calendar year shall be allowed in the subsequent calendar year, leave with wages for a number of days calculated--
(i) in the case of an adult, at the rate of one day for every twenty days of work performed by him during the previous calendar year ;
(ii) 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.
From a comparison of these two sections, it is clear that the draftsman of the Act, while borrowing the provisions contained in Section 26 (1) of the Madras Act, omitted to include the most crucial and important requirement of that section, namely, an employee should have worked for a period of not less than 240 days during a calendar year. It may be an oversight. None-the-less as the language stands Section 26 of the Act applies irrespective of the number of days an employee has worked during a calendar year. As we have pointed out already even if he has worked for eleven days in a calendar year, he will be entitled to one day as annual leave with wages. Certainly there can be no justification whatever for such a provision and therefore the said provision constitutes an unreasonable restriction on the fundamental right of the employers to carry on their business. Hence, our conclusion is that Sections 26 and 27, as they stand, are wholly unenforceable against the trade mark holders, whether with reference to home workers or with reference to employees working in any industrial premises.
37. Mr. Venugopal also challenged the validity of Section 29 (3) of the Act. Section 29 (1) states that the State Government may permit the wetting or cutting of beedi or tobacco leaves by employees outside the industrial premises on an application made to it by the employer on behalf of such employees. Sub-section (2) provides that the employer shall maintain in the prescribed form a record of the work permitted under Sub-section (1) to be carried on outside the industrial premises. Sub-section (3) is as follows:
Save as otherwise provided in this section, no employer shall require or allow any manufacturing process connected with the making of beedi or cigar or both to be carried on outside the industrial premises:Provided that nothing in this sub-section shall apply to any labourer who is given raw material by an employer or a contractor for being made into beedi or cigar or both at home.
The argument of the learned Counsel with regard to this sub-section is the same as has been advanced with regard to the other provisions of the Act, namely, that the trade mark holder has no knowledge as to where the contractor is having his place of business or where the manufacturing process is being carried on by the contractor and that the trade mark holder will have to search for the premises where such process is being carried on, on the pain of penalty provided for by the Act. In view of the conclusion we have already come to, namely, that the so-called contractors are not really independent contractors and so they are not employers, we do not find any difficulty in giving effect to the provision of this sub-section.
38. There was a faint attack on Section 28 which provides for the application of the Payment of Wages Act, 1936 to the industrial premises under the Act, on Section 37 which provides for the application of the Industrial Employment (Standing Orders) Act, 1946 and the Maternity Benefit Act, 1961 to the industrial premises, on Section 38 which applied Chapter IV and Section 85 of the Factories Act and on Section 39 which applies the provisions of the Industrial Disputes Act, 1947 to the industrial premises. Once the definition of 'industrial premises' under the Act excludes the private dwelling house and the application of the provisions of Sections 8 to 16 to such industrial premises has not been contended to be either unworkable or unreasonable, we are unable to see any substance in this faint argument. Of course, we shall be dealing later in this judgment with Sub-section (3) of Section 37 of the Act, independently, in its application to the home workers.
39. The next section whose validity has been vehemently attacked is Section 31 of the Act which we have already extracted. The contention of Mr. Venugopal is that the section uses the expression 'employed for a period of six months or more' and since the Supreme Court has interpreted the word, ''employed' as constituting master and servant relationship, this section cannot be enforced against the trade mark holders in respect of the beedi rollers engaged by the independent contractors. Mr. Venugopal pointed out that the trade mark holder might not even be aware of the particular beedi roller employed by the independent contractor and for any failure to comply with the requirement of the section on the part of the independent contractor over whom the trade mark holder had no control, the trade mark holder would be made liable and such a vicarious liability could not be imposed on the trade mark holder. For the reasons we have already indicated, this argument has no validity with respect to the contractors in the present writ petitions. As we have pointed out already, if there is really an independent contractor in the sense in which we have indicated, such an independent contractor will be an employer for the purpose of Section 3I and not the trade mark holder. But as far as home workers are concerned, we are clearly of the opinion that Section 3I can have no application. We are not resting our conclusion solely on the use of the expression, 'employed' occurring in Section 3I (1). On the other hand, our reason is that the very language of Section 31 and in particular, the expression, 'has been employed for a period of six months or more' contemplate continuous and regularity of working, day after day for certain hours and such a situation is not present in the case of home workers. Once a home worker has taken the raw materials to his or her dwelling house, it is open to such a home worker to do beedi rolling at any time he or she pleases for any length of time he or she is inclined to do. It may be on a particular day a home worker finds only five minutes time to do beedi rolling and for several succeeding days he or she does not find any time at all, but thereafter finds time to do beedi rolling for several hours in a day. With reference to such a situation, it cannot be stated that the home worker 'has been employed for a period of six months or more'. It is for this reason we hold that Section 3I has no application to a home worker.
40. The next attack of the petitioners is on Sub-section (3) of Section 37 which has been extracted already. The language of that sub-section uses the expression, 'establishment' and therefore it includes a private dwelling house. The proviso is restricted to a home worker. We are of the opinion that the said sub-section can have no application to a dwelling house and a home worker. Section 4 of the Maternity Benefit Act, 1961 requires that no employer shall knowingly employ a woman in any establishment during the six weeks immediately following the day of her delivery or her miscarriage. Sub-section (2) of that section provides that no woman shall work in any establishment during the six weeks immediately following the day of her delivery or her miscarriage. Sub-section (3) states that without prejudice to the provisions of Section 6, no pregnant woman shall, on a request being made by her in this behalf, be required by her employer to do during the period specified in Sub-section (4) any work which is of an arduous nature or which involves long hours of standing, or which in any way is likely to interfere with her pregnancy or the normal development of the foetus, or is likely to cause her miscarriage or otherwise to adversely affect her health. The period referred to in Sub-section (3) is prescribed in Sub-section (4) which is (a) the period of one month immediately preceding the period of six weeks, before the date of her expected delivery; (b) any period during the said period of six weeks for which the pregnant woman does not avail of leave of absence under Section 6. Section 5 deals with the right to payment of maternity benefit, according to which, every woman shall be entitled to, and her employer shall be liable for, the payment of maternity benefit at the rate of the average daily wage for the period of her actual absence immediately preceding and including the day of her delivery and for the six weeks immediately following that day. The other sections of the Act make ancillary and consequential provisions. Since a home worker in a beedi industry is not required to work regularly for any prescribed period of hours in a day or even day after day for any specified period, from the very nature of the case, the provisions contained in the Maternity Benefit Act, 1961 are unworkable with regard to such home workers, and therefore they will have no application to them.
41. Consequently, we hold that Sub-section (3) of Section 37 is inapplicable to home workers in a beedi industry and. in so far as the said sub-section makes the provisions in the Maternity Benefit Act, 1961 applicable to such home workers, the said provision is invalid and unconstitutional as offending the fundamental right of the employers to carry on their business.
42. There is only one other section whose validity has been specifically challenged, though not raised in the affidavits. That is Section 7 (1) (c) and 7 (2) of the Act. Section 7 (1) deals with the powers of Inspectors appointed under the Act and one of the powers enumerated in Section 7 (1) (C) is:
7(1) Subject to any rules made by the State Government in this behalf, an Inspector may, within the local limits for which he is appointed--(c) enter, with such assistants as he thinks fit, at all times any place or premises including the residence of employees if he has reasonable grounds for suspecting that any manufacturing process is being carried on or is ordinarily carried on in any such place or premises.
Section 7 (2) is as follows:
7(2) If an Inspector has reasonable grounds for suspecting that any manufacturing process is being carried on in any establishment in contravention of the provisions of this Act, he may, after giving due notice to the employer or, in the absence of the employer, to the occupier, enter such establishment with such assistants, if any, as he may think, fit.
We are clearly of the opinion that Section 7. (7) (C) is void and inoperative. There is absolutely nothing in the scheme of the Act to show as to what purpose that clause is intended to achieve in addition to the provisions contained in Sub-section (2) of Section 7. This again is a case of an attempted copying of the provisions contained in the Madras Act, but done clumsily. Section 7(1) of the Madras Act is as follows:
7(1) Subject to any rules made in this behalf, an Inspector appointed under this Act shall, for the purposes of the enforcement of this Act, have power to do all or any of the following things within the local limits for which he is appointed--(c) to enter at all reasonable times any place or premises including the residences of employees when he has reasonable grounds for suspecting that any beedi industry is being carried on or is ordinarily carried on in any such place or premises.
Thus, it will be seen the guidance provided for and the restrictions imposed on the power of entry of the Inspector under Section 7 (1) (c) of the Madras Act are absent in Section 7 (1) (c) of the Act. Power of entry into others' premises which includes a dwelling house in this context, is a very serious matter and a power to do such a thing will have necessarily to be defined and the circumstances under which that power can be exercised have also necessarily to be clearly indicated. The provisions contained in the Madras Act had two specific and definite features. One is, the power of the Inspector referred to above is for the purpose of enforcement of the Act and such a provision is missing in Section 7 (1) (c) of the Act. Secondly, the power is to enter a premise only 'at all reasonable times'. The provisions of the Act contained in Section 7 CO (1) omit the word 'reasonable' and the power is conferred in the widest possible terms enabling the Inspector to enter the premises 'at all times'. The Madras Act relates Sub-section (2) of Section 7 to Section 7 (1) (c) of the Act. The said sub-section is as follows:
7 (2) For the purposes of Clause (C) of Sub-section (1), an Inspector may, after giving due notice to the employer, or in the absence of the employer, to-the occupier, enter the beedi industrial premises, with such assistants, if any, as he thinks fit.
On the other hand, Sub-section (2) of Section 7 of the Act does not relate it to the power of the Inspector under Section 7 (1) (c). But the same is in very general and wide terms and does not indicate the purposes for which the Inspector is authorised to enter the premises. All that Sub-section (2) of Section 7 of the Act provides is that the Inspector must have reasonable grounds for suspecting that any manufacturing process is being carried on in any establishment in contravention of the' provisions of the Act. We are clearly of the opinion that the word, 'suspecting' is too vague to constitute any real guidance in the matter and the sub-section itself does not indicate the purposes for which an entry can be made. As a matter of fact Sections 7 (1) (c) and 7 (2) appear to overlap each other, neither of them containing the necessary guide-lines for exercising the power of entry and prescribing the conditions under which alone the power can be exercised. In view of these circumstances, we hold that Section 7 (1) (c) as well as Section 7 (2) of the Act are ultra vires the Parliament, since they are in excess of the requirements of Articles 19 (5) and 19 (6) of the Constitution of India. As we have pointed out already, this section is not specifically referred to in the affidavits filed in support of these writ petitions, but the question was argued before us and the learned Advocate-General, having regard to the fact that the question involved was one of construction of the statutory provisions on their language, did not object to the question being raised and gone into by this Court.
43. Apart from these provisions, no other provision was specifically challenged before us on behalf of the petitioners. However, Mr. Venugopal, learned, Counsel for the petitioners, repeatedly advanced a general argument before us. According to him, the Act preserves the contract system as well as the home work system and if the provisions of the Act are to be enforced, the contract system as well as the home work system will come to an end. In this context, he contended that the Act imposed numerous and onerous obligations on the trade mark holders with reference to their contractors without at the same time imposing any obligation on the contractors or beedi rollers. For instance, the learned Counsel contended that there is no provision in the Act (a) to compel a worker to work for the minimum of nine hours; (b) to compel a worker to work overtime for the period stipulated in the Act; (c) to compel him to turn out a minimum rate of production of beedis per day; (d) to maintain the quality or standard of work; and (e) to maintain good conduct. As part of this argument, he put forward a contention that the petitioners (trade mark holders) have entered into agreements with their contractors on the basis of the existing system and to call upon the contractors to enforce the provisions of the Act will amount to the trade mark holders unilaterally committing breach of the terms of the agreements, since the Act itself does not impose a corresponding obligation on the contractors. We are unable to accept this argument of the learned Counsel on any of the grounds mentioned above. As we have pointed out already, the learned Counsel for the petitioners frankly represented to us that the alleged agreements between the trade mark holders and the contractors were only oral. Therefore, we do not have any means of knowing what exactly the terms of the agreement between the parties are. Secondly, the Act is binding on all persons concerned and therefore it cannot be contended that when the provisions of the Act are to be enforced, there is no obligation on the workmen (beedi rollers) to comply with the requirement of the statute mentioned above. When we pointed this out to the learned Counsel, the learned Counsel invited our attention Section 40 (1) of the Act which states:
40(1) The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the terms of any award, agreement, or contract of service whether made before or after the commencement of this Act:Provided that where under any such award, agreement, contract of service or otherwise an employee is entitled to benefits in respect of any matters which are more favourable to him than those to which he will be entitled under this Act, the employee shall continue to be entitled to the more favourable benefits in respect of that matter notwithstanding that he receives benefits in respect of other matters under this Act.
and contended that in view of this provision, it would not be open to the trade mark holders to alter the terms of the agreements between them and the contractors and similarly between the contractors and the beedi rollers. We are unable to accept this argument also for the simple reason that the provisions of this section will apply only to benefits in respect of matters which are more favourable to an employee than those to which he will be entitled under the Act and the present situation in which a beedi roller is entitled to come and go at any time he pleases or likes and he need not come even for several days consecutively cannot be said to be a benefit in respect of which provision has been made under the Act. Lastly, it is a fallacy to assume that the Act preserves the contract system or home work system. All that the Act does is to take note of the existence of the contract system and the home work system and try to improve the conditions of service of the beedi rollers under both the systems. Therefore, for the purpose of implementing the provisions of the Act which are admittedly in the interests of the beedi rollers, the parties concerned will have to so adjust their mutual relationship as to give effect to the same. The Act applies to everybody concerned and therefore it is as much binding on the trade mark holder as on the contractor and the beedi roller. Hence, it is open to the trade mark holder to enter into an agreement with the contractor incorporating therein necessary stipulations for the purpose of discharging his obligations under the Act and there cannot be any controversy except whether the liability flowing from the discharge of that obligation should be borne by the trade mark holder or the contractor which necessarily is a subject matter of negotiation and mutual adjustment between the parties. For these reasons, we hold that the mere fact that a particular system was prevalent at the time when the Act came into force is no ground for deciding that the Act did not intend to interfere with that system, for the purpose of giving effect to the various provisions it has made.
44. In support of his contention that the contractors are really independent contractors and independent employers and at the same time they can be contractors for more than one proprietor or trade mark holder, Mr. Venugopal relied on an award of the Industrial Tribunal, Madras, dated 8th November, 1958, in I.D. No. 12 of 1958 relating to the petitioner in W.P. No. 2701 of 1968 and the decision of one of us in W.P. No. 1685 of 1967 dated 18th July, 1969 declining to interfere with the award of the Industrial Tribunal, Madras in I.D. No. 42 of 1966 dated 31st January, 1967 under Article 226 of the Constitution of India. According to the petitioners, in the award in I.D. No. 12 of 1958, it was held by the Industrial Tribunal that there was no prohibition against branch managers to taking beedi manufacturing works under other proprietors and it was not likely that that proprietor would have allowed his servants to undertake from other masters. In I.D. No. 42 of 1966, it was held that the relationship between the parties involved in that reference was only that of a buyer and seller as contradistinguished from that of an employer and employee and consequently the Industrial Disputes Act did not apply to that case. For several reasons we are of the opinion that these awards do not in any way help the case of the petitioners concerned. We have already pointed out that in the common counter-affidavit filed by the second respondent in all the writ petitions, in paragraph 2 thereof, while admitting that the facts stated in paragraphs 1 to 8 of the affidavits of the petitioners are substantially correct, it is stated that in actual practice the contractor undertook manufacture of beedi only for one factory or trade mark holder. Consequently, it cannot be said that the position contended for by the petitioners has been admitted by the respondents herein, in this behalf. Apart from this, we have already referred to the fact that the trade mark holders distinguish their respective products with reference to secret mixture of tobacco. Therefore neither a contractor nor a beedi roller at the same time can be working for more than one trade mark holder; because of the possibility of abuse involved in using the mixture of tobacco of one proprietor or trade mark holder for rolling the beedis meant for another. At least to the extent to which the trade mark holder is interested in seeing that his mixture of tobacco is used only for rolling his beedis and not for rolling the beedis of others, he has a right to inspect and supervise the actual manufacturing process itself as indicated by vis already.
45. The second reason is, those two awards dealt with the definition of the term 'workman' occurring in Section 2 (s) of the Industrial Disputes Act, 1947. As far as the present case is concerned, the definition of the term, 'employee' in the Act is much wider. We have already extracted that definition and it includes any labourer who is given raw materials by the employer or contractor for being made into beedis or cigar or both at home and any person not employed by the employer or contractor but working with the permission of or under agreement with the employer or contractor. In so far as this definition brings within its fold persons not employed by the employer or contractor, but working with the permission of or under agreement with the employer or contractor, it is far wider in scope than the definition of the term 'workman' occurring in Section 2 (s) of the Industrial Disputes Act, 1947. Consequently, those two awards will not have any bearing in deciding the question involved in the present case.
46. Thirdly, those awards were rendered on the basis of the evidence placed before the Tribunals concerned and it cannot be said that such evidence is available in the present case except to the extent to which we have indicated with reference to the admission contained in paragraph 2 of the common counter-affidavit of the second respondent in these writ petitions. As we have pointed out already, such admission will take within itself only the broad features of the manufacturing system and not all the other details.
47. Fourthly, in the judgment in W.P. No. 1685 of 1967, while declining to interfere with the award of the Industrial Tribunal, Madras, dated 31st January, 1967, made in I.D. No. 42 of 1966, one of us pointed out the salient features which were the distinguishing features in that case for the Tribunal holding that the parties to the industrial dispute were in the position of a buyer and seller and not an employer and employee. In that writ petition, in support of the contention that as between the parties there was only the relationship of master and servant and not buyer and seller, as was held by the Tribunal, reliance was placed on the decision of the Supreme Court in Management of D. C. Dewan Mohideen Sahib and Sons v. Secretary, United Beedi Workers' Union, Salem and Anr. : 7SCR646 , referred to already. While dealing with that contention, this Court pointed out the following distinguishing features:
(1) In the case before the-Supreme Court, there was no actual sale and purchase between the parties and the entire thing was one of a matter of adjustment. At the time when the manufacturer of the beedis sold leaves and tobacco, no purchase price was paid by the vendee and subsequently, when the manufactured beedis were re-sold, the price of the manufactured beedis was fixed and from it a notional price for the leaves and tobacco was deducted, leaving the balance as the wages of the workmen and the commission of the agents. In the case before this Court, the evidence and the finding of the Tribunal based thereon was-that the leaves and tobacco were paid for by the individuals concerned and subsequently when they sold the manufactured beedis, they received the consideration therefor.
(2) In the case before the Supreme Court, if the beedis were not rolled, the raw materials had to be returned to the appellants in that case. But in the case before this Court, there was no such evidence that if the beedis were not rolled, leaves and the tobacco were to be returned to the proprietor.
(3) In the case before the Supreme Court, the price of raw materials fixed by the appellants therein as well as the price of the finished products always remained the same and never fluctuated according to the market rates. But in the case before this Court there was evidence before the Tribunal and the Tribunal also recorded a finding with reference to such evidence that there was fluctuation in the price of leaves and tobacco sold by the first respondent therein to the ten individuals and others.
(4) In the case before the Supreme Court,' the appellants therein had control over their branch managers because one of the conditions of the agreement was that at the time more than nine beedi rollers should work in the premises of the intermediary. In the case before this Court, there was no evidence to that effect. But, on the other hand, the Tribunal pointed out that there was no material whatever to show that the first respondent had any control over the ten alleged branch managers and the 211 workmen employed by them.
(5) In the case before this Court, there was evidence to show that the first respondent used to reject some of the beedis produced by the ten individuals and once they were rejected, they were at liberty to sell these beedis to anybody they liked. On the other hand, in the case before the Supreme Court, no such factor was present.
(6) In the case before the Supreme Court great reliance was placed on the impecunious nature of the so-called independent contractors, while in the case before this Court, there was evidence to show that these ten individuals, who were called branch managers, paid for tobacco and leaves purchased by him and according to the evidence placed before the Tribunal, the quantity of the leaves and tobacco purchased by them depended upon the availability of cash with them.
48. In view of these circumstances, we are of the opinion that the award in I.D. No. 42 of 1966 cannot be of any avail to establish the case of the petitioners herein.
49. Finally, Mr. Venugopal contended that if the provisions of the Act were enforced, the petitioners' businesses would come to a stand-still. In support of this contention, in paragraph 14-A (b) of the affidavits filed in support of the writ petitions, the petitioners have given some figures as to what would be the cost of liability on the petitioners, in respect of the construction of latrines or urinals, construction of washing facilities and supply of first aid boxes and according to them, the same would be in the region of Rs. 37,500. In paragraph 14 (II) of the affidavits, the petitioners have given some figures as to the margin of profit they are left with in respect of 1,000 beedis for granting the various kinds of leave contemplated under the Act and giving the benefits of the maternity leave etc. They have further stated that as against a monthly profit of Rs. 7,500 the liability alone would be Rs. 20,500 so that the petitioners would be ruined. We have no means of verifying whether these facts are correct or not. Mr. Venugopal contended -that if the counter-affidavit filed on behalf of the second respondent had questioned the correctness of the figures, the petitioners, would have placed necessary materials to establish their case before this Court. In view of the conclusion we have arrived at, it is unnecessary to go into this question. We are definitely of the opinion that the petitioners have exaggerated the extent of their liability. As we have pointed out already, the petitioners have referred to the margin of profits which they are getting just now and the expenses they have to incur in enforcement of the provisions of the Act. There is absolutely nothing to show that if the petitioners were to incur additional expenses by way of providing facilities which are meant for the benefit of the employees, they will not be able to recoup the same by raising the selling price of the beedis manufactured by them. Simply because the petitioners will have to incur additional expenses for providing benefits to the employees, which are admittedly in the interest of the general public, it cannot be contended that the provisions of the Act are violative of the fundamental right of the petitioners to carry on their business or they are in excess of the permissible limits under Article 19 (6) of the Constitution. Apart from' this, this Court, has upheld the constitutional validity of the corresponding provisions of the Madras Act which are very similar to the provisions of the Act in Abdur Rabim v. State of Madras, represented by the Secretary of Industries, Labour and Co-operation, Fort St. George, Madras (1961) 2 M.L.J. 42, which is binding on us.
50. It only remains to refer to three other decisions, apart from the decisions of the High Court of Andhra Pradesh and the High Court of Mysore referred to already, on the provisions of the Act. The first decision is that of the High Court of Bombay in Chotabhai Purushottam Patel, Beedi Manufacturers of Bhandara and Ors, v. State of Maharashtra, by Secretary Industries and Labour Department, Sachiyalaya, Bombay and Ors. : (1972)ILLJ130Bom In that decision Section 2 (g) (a) and 2 (m) were held invalid and consequently the words 'in relation to other labour' occurring in Section 2 (g) (b) had to be treated as deleted and the rest of the Act was upheld as legal and valid and was declared to be read with the two classes mentioned above as being absent in the section of definitions. The High Court also held that Sections 26 and 27 of the Act would not at all apply to home workers as understood under the Act. They further held that Section 21 (3) and Sections 26 and 27 would not apply to employees in industrial premises who do 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. We have already held, for the reasons given by us that Sections 26 and 27 of the Act cannot be applied either in respect of home workers or in respect of the employees working in industrial premises. As far as clauses 2 (g) (a) and 2 (m) are concerned the High Court of Bombay proceeded on the basis that the contractor was an independent contractor and the provisions of the Act logically taken to their conclusions meant that the principal employer was made liable civilly as well as criminally in respect of every facility that was made available to all the employees including the workers; and even when, therefore, a genuine case of a contractor existed and that contractor having received full payment from the principal employer, failed to make payments to his employee, it would amount to principal employer not making payment or failing to make payment of wages and he might have to face a litigation before the Payment of Wages Authority as that Act is made applicable to this industry by Section 28 of the Act, and he would further be liable to be prosecuted under Section 33 of the Act; and that if such a performance was repeated twice not by the same contractor but by two contractors independently, it would be a second offence of the principal employer. We have already expressed our opinion that the contractors involved in these writ petitions are not really independent contractors. We have also referred to the circumstances under which a person other than the trade mark holder can be held to be an employer for the purpose of the provisions of the Act.
51. The next decision is that of the High Court of Kerala in Ckirukandoth Ghandrasekhoran v. Union of India (1972) I L.L.J. 340. That is a judgment of a single Judge and there are no detailed discussions in the judgment and the major portion of the decision is based upon concessions made before the Court. In view of this, we are unable to derive much assistance from this judgment.
52. The third is the decision of the High Court of Gujarat in Gujarat Beedi Karkhana Owners' Association and Ors. v. Union of India and Ors. : (1972)ILLJ253Guj . By that judgment the validity of the entirety of the Act had been upheld by that High Court.
53. Having regard to this conflict between the various decisions brought to our notice, we have approached the question independently, based on the pleadings before us, the language in the statutory provisions and the history behind the same.
54. We have already pointed out that the majority of the provisions of the Act is made expressly applicable only to industrial premises which does not include a dwelling house. We have also held that Sections 26 and 27, as the language now stands, are incapable of being applied whether to a home worker or to an employee in an industrial premises. We have further held that Section 31 and Section 37 (3) will have no application to a home worker. In view of this conclusion of ours it may be possible that a trade mark bolder hereafter may adopt only the home work system, without the contract system or factory system. If such a situation arises, it would be for the Legislature to consider as to what steps should be taken to improve the service conditions of home workers. In this context, it is relevant to extract the following portion from the Report of the Committee which investigated into the conditions of the Industrial Labour under the chairmanship of Mr. D.V. Rege, I.C.S., appointed by the Government of India in 1944 to which we have made a reference already:
To conclude, matters requiring immediate attention in the beedi and cigar industries are the unhealthy working conditions, long hours of work, employment of women and children, deduction from wages and the subcontract system of organisation. It is desirable to abolish the out-work system and to encourage establishment of big factories, in the beedi and cigar industries, if protective labour legislation is to be enforced with any degree of success. In view of the large number of women workers in the beedi industry, appointment of a women factory inspector in the important beedi making provinces is desirable.
We may also point out that for the purpose of mutually adjusting their relationship with regard to the additional liability to be borne, by virtue of the enforcement of the provisions of the Act, the trade mark holder and the contractor will have to incorporate suitable stipulations in the agreement between them. Even after incorporating such stipulations, if the manufacture and sale of beedis prove to profitable, the contract system may continue. Otherwise, the contract system may come to an end and the home work system alone may prevail, as pointed out already. However, these are not matters with which we are concerned at present and we are called upon only to interpret the provisions of the Act and decide their constitutional validity.
55. Under these circumstances, our ultimate conclusion with regard to the writ petitions filed by the trade mark holders in beedis as well as the contractors in beedis is that the Act is valid except with regard to Sections 7 (1) (c), 7 (2), 26 and 27 and Sections 31 and 37 (3) in so far as they relate to home workers.
56. After arriving at the conclusion as aforesaid, we have now to refer to three writ petitions, namely, W.P. No. 3211 of 1970, W.P. No. 3730 of 1970 and W.P. No. 3641 of 1970. After a large number of writ petitions were admitted by the Court and interim stay of operation of the Act was granted by this Court, the State of Tamil Nadu in Memorandum No. 111765/C/III/69-4, Labour Department dated 1st June, 1970, directed the Madras Act to be enforced. The contention of the petitioners in W.P. No. 3211 of 1970 and W.P. No. 3641 of 1970 is that once the Central Act was enacted and was brought into force in the State of Tamil Nadu by the notification issued by the State of Tamil Nadu, the Madras Act must be deemed to have been repealed and consequently that cannot be enforced. It is unnecessary to go into this question in detail, in view of the fact that the writ petitions themselves are now being disposed of by us and admittedly the memorandum of the Government referred to above was issued only during the operation of the order of stay passed by this Court which will now come to end, in view of our disposal of the writ petitions themselves. Consequently, W.P. No. 3211 of 1970 and W.P. No. 3641 of 1970 are dismissed.
57. As far as W.P. No. 3730 of 1970 is concerned, the contention of the petitioner is that since the High Court of Andhra Pradesh has held that Sections 3 and 4 of the Act are ultra vires the Act being a Central enactment, the said two sections cannot be enforced in any part of the country. We are unable to accept this argument. Apart from the fact that the decision of the High Court of Andhra Pradesh is under appeal to the Supreme Court and we ourselves have taken the view that Sections 3 and 4 of the Act are valid and legal, it cannot be said that simply because one High Court has held that a certain provision of the Central enactment is ultra vires or invalid it automatically ceases to apply to the territories other than those within the jurisdiction of that particular High Court. If this argument is to be accepted, we can immediately see the anomaly. The decision of the High Court of Andhra Pradesh with regard to Sections 3 and 4 has not been concurred with by the High Court of Mysore in the decision referred to already and we ourselves have taken a different view. Therefore, a question may possibly arise that in view of this conflict of decisions among different High Courts, which High Court's decision will prevail over the whole of the country. Then again, there is a decision of the High Court of Gujarat upholding the validity of the entire Act. Under these circumstances there is no logic in the argument of the petitioner and no principle or authority Was brought to our notice by the learned Counsel for the petitioner in support of the contention. Hence, this writ petition also fails and is dismissed.
58. The other writ petitions will be allowed to the extent indicated already, namely, by declaring that Sections 7(1)(c), 7(2), 26 and 27 and Sections 31 and 37 (3) in so far as they relate to home workers are ultra vires and illegal and unenforceable against the petitioners.
59. Then, there remains the writ petitions filed by the manufacturers of cigars and cigar rollers. The case of the manufacturers of cigars, as set out in the affidavits filed in support of their writ petitions can be briefly stated as follows : The manufacturers employ persons rolling cigars in their own premises, these persons are being assisted by some other persons brought by the rollers, called helpers ; in addition the manufacturer engages certain employees for the purpose of stripping and splitting the mid ribs of tobacco leaves and certain others in the process of affixing ring labels to the finished goods; and the persons in the process of stripping and splitting and those engaged in affixing ring labels take away the materials to their own homes for doing the particular process for which they have been engaged. Paragraphs 5 to 7 of the affidavit filed in W.P. No. 40 of 1969 deal with the manufacturing process. W.P. No. 125 of 1969 has been filed by 100 cigar workers connected with the petitioner in W.P. No. 40 of 1969. The facts stated by them are also the same as stated in the affidavit filed by the petitioner in W.P. No. 40 of 1969. On these facts they contend that the Act is ultra vires and unconstitutional and that each cigar worker is an independent contractor and not an employee of the manufacturer. In support of this contention reliance is placed substantially on three features. The first is, there are no fixed hours during which a cigar roller is required to work. The second is, there is no personal covenant between the cigar roller and the cigar manufacturer, requiring that the cigar roller himself must do the rolling, since he is allowed to bring helpers. The third is, the very leaves handed over to the cigar rollers are used by those cigar rollers. Apart from these three factors, reliance has also been placed upon a number of awards of the Labour Court and Industrial Tribunal, namely, the award of the Labour Court, Madras, in I.D. No. 13 of 1958, the award of the Labour Court, Madurai in I.D. No. 19 of 1963, the award of the Additional Labour Court in I.D. No. 40 of 1965, the award of the Industrial Tribunal, Madras in I.D. No. 44 of 1967 and the award of the Labour Court, Madurai in I.D. No. 16 of 1968, in each one of which it was held that there was no relationship of master and servant between the cigar manufacturer and the cigar roller.
59-A. Reliance has also been placed on the decision of this Court (Srinivasan, J.) in Public Prosecutor v. Neelamegam Pillai (1964) I L.L.J. 275. We have already referred to the decision of Srinivasan, J., mentioned above. As far as the five awards of the Labour Court and Industrial Tribunal are concerned, they dealt with the definition of 'workman' under Section 2 (s) of the Industrial Disputes Act and the awards themselves were based on the evidence placed before the respective Labour Courts or Industrial Tribunal. In view of the fact that the definition- of the term ' employee' in Section 2 (e) of the Act is much wider in scope and ambit than that of the definition of the term 'workman' in Section 2 (s) of the Industrial Disputes Act, 1947, and the detailed evidence available before the Labour Courts and the Industrial Tribunal is not available before us, we are not prepared to hold that either the decision of Srinivasan, J., in the case referred to above or the awards of the Labour Courts or the Industrial Tribunal in any way advance the case of the 'petitioners. Consequently, we proceed to examine the question only on the basis of the pleadings. On the pleadings we are unable to hold that any of these cases on such provisions of the Act is violative of the fundamental right of the petitioners. It is admitted that except with regard to the process of stripping and splitting the mid ribs and affixing ring labels to; the finished products which are done in private dwelling houses, all other parts of the manufacturing process are being! carried on only in the premises of the manufacturers. So long as the manufacture is being carried on in such premises, the same falls within the cope of ' Industrial premises ' as defined in the Act and all the provisions of the Act will apply to the said premises. We have already referred to the circumstances relied on in support of the contention that the relationship of master and servant does not exist between the cigar manufacturer and the cigar roller. It may be that there are no fixed hours for each worker to work in the manufacturing premises. : But none-the-less the manufacturing premises is kept open only for fixed hours and it is only during those fixed hours, the workers will have to come to the said premises and roll cigars. Secondly, helpers are brought into the premises only with the consent of the manufacturers. As we have pointed out already, the definition of the term 'employee' under the Act includes those persons, even though not employed by the employer, who work with the permission of the employer. Consequently, helpers also will come within the scope of the term, ' employee ' as defined in the Act. No argument was advanced before us contending that Parliament was incompetent to define the expression ' employee' in such a manner. Therefore, from the very nature of the case, helpers also will become employees. The fact that the very leaves are used by the very rollers will not in any way help the case of the petitioners. Nothing was brought to our notice that either it was the practice of the trade or the term of engagement between the manufacturer and the cigar roller that the particular leaves wetted in the previous night should be used by that roller only, in rolling cigars and under no circumstances can the same be used by any other roller. Under these circumstances, we are of the opinion that none of the features mentioned by the learned Counsel for the petitioners compels us to hold that the cigar rollers who are working in the premises of the manufacturers, which premises are kept open only for specified and fixed hours during the day, are not employees of the manufacturers and the premises in which they are working will not constitute ' industrial premises'.
60. The only other question to be considered in this context is, whether the persons who take the cigar leaves for stripping and splitting the mid ribs to their dwelling houses and those persons who take the rolled cigars to their residences for affixing ring labels can be considered to be employees of the manufacturer or not. We are of the opinion that their case differs basically from the case of the home workers in relation to beedis. When a worker takes the leaves for stripping and splitting the mid ribs, it is not the case of the petitioners that the said worker can attend to that work at any time he or she likes in his or her residence and bring them back to the premises of the manufacturer at any time he or she likes. From the very nature of the manufacturing process, it is clear that within the prescribed time of taking the leaves to their homes, the workers should do the stripping and splitting and bring them back probably the very next day. Similarly once the cigars have been rolled, the manufacturer will supply only such number of rolled cigars to the workers as will enable them to affixing labels and bring them back within the prescribed period. It cannot be that the domestic worker has got a choice to keep the rolled cigars in his or her house for any length of time he or she likes and affix the ring labels at any time he or she likes and bring the cigars to the manufacturer's premises at any time he or she likes. Taking into account the ordinary commercial practice and the interests of the manufacturers to see that the cigars once manufactured should go out of the premises into the market as quickly as possible, there should be an understanding that the ring labels should be affixed within a prescribed time and the cigars returned to the manufacturer. As we have already pointed out, the number of cigars taken out for this purpose will have to be retable to the number of hours a worker is able to spare in the house and therefore the general argument advanced with regard to home workers in beedi industry is not available to the case of these workers in cigar industry. Further, in the affidavit filed by the petitioner in W.P. No. 40 of 1969, it is stated that the petitioner-firm engages about 120 persons for the purpose of stripping and splitting the mid ribs of tobacco leaves and about 12 persons in the process of affixing the ring labels to the .finished cigars. There is no averment whatever in the affidavit that those 120 persons and 12 persons need not by themselves do the work for which they are engaged and they can have the work done by somebody else, when they take the leaves and rolled cigars to their respective houses. In view of this, we are not able to equate the relationship between these persons and cigar manufacturers with that of home workers and the trade mark holders in the beedi industry. Consequently, there are no materials before us to hold that such persons are independent contractors and not employees of the cigar manufacturers. Therefore, we are unable to make any distinction between these workers and the workers who actually roll cigars in the premises of the manufacturers. Nothing was brought to our notice to make the implementation of the provisions of the Act to the petitioners' premises impossible, having regard to the nature of work done in the said premises.
61. One other argument that was advanced on behalf of the workers, namely, the petitioners in W.P. No. 125 of 1969 is that it requires nearly six years for a person to acquire capacity to roll cigars and for this purpose only an experienced cigar roller brings an assistant, probably a member of the family, who works with him and enables the worker to earn much more and that in the event of the enforcement of the Act, the manufacturer may not allow any worker to bring a helper and therefore the same cannot be said to be beneficial to the interests of the workers. We are unable to' accept this argument. The interests of the workers cannot be judged from the context of the particular system prevailing in a particular area and it has to be judged; generally. Further, we are unable to see how the enforcement of the provisions of the Act will not be in the interests of the workers themselves. As we have pointed out already, having regard to the definition of the term 'employee' under the Act, even a helper becomes an employee, and all the provisions of the Act will apply to him also. If and when a manufacturer allows a helper to work in his premises that helper becomes an employee and all the benefits available under the Act to the other employees will be available to the said helper also. If, on the other hand, a manufacturer does not allow a helper to work in his premises that does not in any way affect the benefits granted to the experienced worker who is allowed to work in the premises. The only fact that was brought to our notice in this behalf is that with the helper an experienced worker is able to roll a larger number of cigars than what he himself can do and to that extent, the experienced worker will be prejudiced. But, in our opinion, this is no ground for holding that the provisions of the Act cannot be applied to the industrial premises, because, in such an event, what an experienced worker was previously getting is shared between him and the helper, who himself becomes an employee in his individual right, and such a circumstance is not sufficient to invalidate the provisions of the Act.
62. In paragraphs 10 and 11 of the affidavit filed in support of W.P. No. 40 of 1969, the petitioner has given some figures as to the liability he will have to incur by implementing the provisions of the Act by way of providing facilities referred to for the industrial premises and by way of giving holidays with wages to the workers concerned. For the reasons indicated by us with regard to the beedi industry, we are unable to hold that the mere fact that the petitioners will have to incur additional expenses for the purpose of implementing the Act will be a ground for declaring the provisions of the Act as unconstitutional and in excess of the powers of Parliament under Article 19 (5) of the Constitution of India. Our reasoning with regard to Section 7 (1)' (c), Section 7 (2), Section 26 and Section 27 applies to the cigar industry as much as to the beedi industry. But Section 31 of the Act does not stand on the same footing as to the home worker in cigar industry as in the case of beedi industry. We have already referred to the general features of the home working system with regard to beedi industry. But no material was placed before us to show that the same practice or procedure is available with regard to home workers in cigar industry. Only two aspects of the manufacturing process such as stripping and splitting the mid ribs and affixing ring labels are said to be done in the residential houses of the workers and we have already indicated that with reference to such persons, there must be an understanding with regard to the time within which the work has to be done. No case has been put forward in the affidavit filed in support of the writ petition; nor any fact which emerges from any of the decided cases was brought to our notice showing that such domestic workers are not continuously employed or they are incapable of being continuously employed for a period of six months and more, as contemplated by Section 31. Therefore, Section 31 will apply in its entirety to all the workers in the cigar industry.
63. We, therefore, hold that with regard to these petitioners Sections 7(1) (c), 7 (2), 26 and 27 are unenforceable as against them. Consequently, there will be a declaration in these writ petitions that Sections 7(1) (c), 7 (2}, 26 and 27 of the Act are ultra vires and illegal and unenforceable against the petitioners, and the writ petitions will stand allowed to the extent.
64. There will be no order as to costs in any of these writ petitions.