AIR INDIA STATUTORY CORPORATION v. UNITED LABOUR UNION AND ORS.

The following Judgments of the Court were delivered by

K. RAMASWAMY, J ..Leave granted. E These appeals by special leave arise from the judgment of the Division Bench of the Bombay High Court dated April 28, 1992 made in Appeal No. 146 of 1990 and batch. The facts in appeal arising out of S.L.P. 7417/92, are sufficient to decide the questions of law that have arisen in these appeals. The appellant initially was a statutory authority under inter- F national Airport Authority of India Act, 1971 (for short, '!AA! Act') and on its repeal by the Airports Authority of India Act, 1994 was amalgamated with National Airport Authority (for short, the 'NAA') under single nomenclature, namely, !AA!. The IAAI is now reconstituted as a company under Companies Act, 1956. ·' G The appellants engaged, as contract labour, the respondent union's members, for sweeping, cleaning, dusting and watching of the buildings owned and occupied by the appellant. The Contract Labour (Regulation and Abolition) Act, 1970 ( for short, the 'Act') regulates registration of the establishment of principal employer, the contractor engaging and supplying H the contract labour in every establishment in which 20 or more workmen

AIR INDIASfATIITORY CORPN. '· UNION !ABOUR UNION (KRAMASWAMY,J.) 597

are employed on any day of the preceding 12 months as contract labour. A The Act had come into force from September 5, 1970. The appellant had 9btained on September 20, 1971 a certificate of registration from Regional Labour Commissioner (Central) under the Act. The Central Government exercising the power under Section 10 of the Act, on basis of recommen- dation and in consultation with the Central Advisory Board constituted B under Section 10(1) of the Act, issued a notification on December 9, 1976 prohibiting "employment of contract labour on and from December 9, 1976 for sweeping, cleaning, dusting and watching of buildings owned or oc- cupied by the establishments in respect of which the appropriate govern- ment under the said Act is the Central Government." However, the said prohibition was not to apply to "outside cleaning and other maintenance c operations of multi- storeyed buildings where such cleaning or maintenance cannot be carried out except with specialised experience." It would appear that Regional Labour Commissioner (Central) Bombay by Jetter dated January 20, 1972 informed the appellant that the State Government is the appropriate Government under the Act. Therefore, by proceedings dated D May 22, 1973 the Regional Labour Commissioner (Central) had revoked the registration. By Amendment Act 46 of 1982, the Industrial Disputes Act, 1947 (for short, the 'ID Act') was made applicable to the appellant and was brought on statute book specifying the appellant as one of the industries in relation to which the Central Government is the appropriate E Government and the appellant has been carrying on its business "by or under its authority" with effect from August 21, 1982. The Act was amended bringing within its ambit the Central Government as appropriate Government by amendment Act 14 of 1986 with effect from January 28,

1986. F Since the appellant did not abolish the contract system and failed to enforce the notification of the Government of India dated December 9, 1976, the respondents came to file writ petitions for direction to the appellant to enforce forthwith the aforesaid notification abolishing the G contract labour system in the aforesaid services and to direct the appellant to absorb all the employees doing cleaning, sweeping, dusting, washing and watching of the buildings owned or occupied by the appellant-estab- lishment, with effed from the respective dates of their joining as contract labour in the appellant's establishment with all consequential rights/benefits, monetary or otherwise. The writ petition was allowed by the H

p. 598

A learned single Judge on November 16, 1989 directing that all contract workers be regularised as employees of the appellant from the date of filing of the writ petition. Preceding thereto, on November 15, 1989, the Govern- ment of India referred to the Central Advisory Board known as Mobile Committee under Section 10(1), which recommended to the Central Government not to abolish the contract labour system in the aforesaid B services. Under the impugned judgment dated April 3, 1992, the learned judges of the Division Bench dismissed the appeal. Similar was the fate of other appeals. Thus these appeals by special leave.

Shri Ashok Desai, the learned Attorney General, Shri Andhyarujina, C the learned Solicitor General, appearing for Union of India and the appellant respectively, contended that the term "appropriate Government" under Section 2(1)(a) of the Act, as on December 9, 1976, was the State Government. The appellant was not carrying on the business as an agent of the Central Government nor the Central Government was its principal. This Court, in Heavy Engineering Mazdoor Union v. The State of Bihar & D Ors., [1969] 3 SCR 995 (for short, the "Heavy Engineering case"), had interpreted the phrase "the appropriate Government" and held that the . Central Government was not the appropriate Government under the ID Act. The ratio therein was followed in Hindustan Aeronautics Ltd. v. 171e Workmen & Ors., [1975] 4 SCC 679; Rashtriya Mill Mazdoor Sangh v. Model Mills, Nagpur & Anr., [1984] Supp. SCC 443 and Food Corporation of India E Workers' Union v. Food Corporation of India & Ors., [1985] 2 SCC 294. It is thus firmly settled law that the appropriate Government was not the Central Government untill the Act was amended with effect from January 28, 1986. Ther~fore, the view of the High Court that the appropriate Government is the Central Government is not correct in law. The learned Attorney General further argued that the interpretation of this Court in F Heavy Engineering case has stood the test of time and the parties have settled the transaction on its basis. It would, therefore, not be correct to upset that interpretation. The learned Solicitor General contended that the notification published by the Central Government under Section 10 of the Act on December 9, 1976 was without jurisdiction. The Advisory Board G independently should consider whether the contract labour in each of the aforestated services should be abolished taking into consideration the perennial nature of the work, the requirement of number of employees is the respective specified services in the establishment of the appellant. The Advisory Board had not adverted to the prescribed criteria of Section 10(2) to the appellant's establishment. Mobile Committee after detailed examina- H

AIRINDIASTATIJTORY CORPN. "· UNION LABOUR UNION (K.RAMASWAMY,J.] 599

tion, had recommended to the Central Government not to abolish the contract labour system in the afore..,aid services. It was contended that the notification dated December 9, 1976 is without authority of law or, at any rate, clearly illegal; and so that direction by the High Court to enforce the offending notification is not correct in law. It was further contended that, after the Amendment Act had come into force from January 28, 1986, the Central Government being the appropriate Government, had accepted the recommendation of Mobile Committee of not abolishing the contract labour system. The notification dated December 9, 1976, no longer remained valid for enforcement. The High Courf, therefore was not right in directing the appellant to enforce the notification. Alternatively, it was contended that even assuming that the notification is valid and enforceable, it would be effective only from January, 1986. However, by abolition of contract labour system, the workmen would not automatically become the employees of the appellant. In Dena Nath and Ors. v. National Fertiliser Ltd. and Ors., [1992] 1 SCC 695, this Court had held that the High Court, in exercise of its power under Article 226, has no power to direct absorp- tion of the contract labour as its direct employees. The impugned judgment was expressly disapproved in Dena Nath's case. Therefore, its legality has been knocked off its bottom. It was further contended that the Act, on abolition of the contract labour system, does not envisage to create direct relationship between the principal employer and the contract labour. The erstwhile contract Jabour have to seek and obtain industrial award under the ID Act by virtue of which the appellant would be entitled to satisfy the E Industrial Court that there was no need to absorb all the contract labour but only smaller number is required as regular employees. On recording finding in that behalf, the Industrial Court would make bis award which would be enforceable by the workmen. This Court in Gujarat Electricity Board v. Hind Mazdoor Sabha & Ors., [1995] 5 SCC 27 had pointed out the lacuna in the Act and given directions of the manner in which the in- F dustrial action has to be taken on abolition of the contract labour system. The High Court, therefore, was not right in its direction that the workmen require to be absorbed in the respective services of the establishment of the appellant. It is also contended that the appellant, though • initially was a statutory Corporation under the !AA! Act, on its abolition and constitu- tion as a company, is entitled to regulate its own affairs on business G principles and the direction for absorption would lead to further losses in which it is being run. The learned Solicitor General bas, therefore, sub- mitted a scheme under which its subsidiary, namely, Air Cargo Corporation would take the workmen and absorb them into service, subject to the above regulation. It has to consider as to how many of the contract labour require H

p. 600

A to be absorbed. Prescription of qualification for appointment was necessary the principle of reservation adopted by the Central Government requires to be followed; their names require to be called from Employment Ex- change. The workmen should be absorbed on the principle of "last come first go" subject to their fitness, qualifications and probation etc.

B Shri K.K. Singhvi and Mrs. Indira Jai Singh, learned senior counsel and AK. Gupta learned counsel for the respondents, contended that the appellant is an industry carrying on its business of Air Transport Services. Prior to the !AA! Act, it was under the control of Civil Aviation Depart- ment, Government of India; after the !AA! Act, the appellant has been carrying on its industry by or under the authority of the Central Govern- ment. The relevant provisions in the !AA! Act would establish the deep and pervasive control the Central Government has over the functions of the appellant. Whether the appellant is an industry carrying on business by or under the authority of the Central Government, must be determined keeping in view the language of the statute that gave birth to the Corpora- tion, and the nature of functions under the !AA! Act etc. The appellant's working sy;tem under the !AA! Act and the control the Central Govern- ment is exercising over the working of the industry of the appellant do indicate that right from its inception the appellant has been carrying on its business, by or under the authority of the Central Government. Rightly understanding that legal position, the Central Government had referred the matter to the Central Advisory Board under Section 10(1) of the Act and on the basis of its report had issued the notification dated December 9, 1976 abolishing the contract labour system in the aforestated services. Therefore, it is valid in law. The Bench in Heavy Engineering case, narrowly construed the meaning of the phrase "the appropriate Government" placing reliance on the common law doctrine of "principal and agent". The public law interpretation is the appropriate principle of construction of the phrase "the appropriate Government". In view of internal evidence provided in the !AA! Act and the nature of the business carried on by the appellant by or under the control of the Central Government, the appropriate Government is none other than the Central Government. In particular, after the development of law of "other authority" or "instrumentality of the State" under Article 12 of the Constitution, the ratio in Heavy Engineering case is no longer good law. In Hindustan Aeronauties Ltd. and Food Corporation H . of India cases, this Court had not independently laid any legal preposition.

AIRINDIASTATUTORYCORPN.» UNION LABOUR UNION(K.RAMASWAMY,J.] 601

Food Corporatio11 of India's case was considered with reference to the A regional warehouses of the FCI situated in different States and in this functional perspective, this Court came to the conclusion that the ap- propriate Government would be the State Government.

This Court in Sukhdev Singh & Ors. v. Bhagatram Sardar Singh & B Anr., [1975] 3 SCR 619; R.D. Setty v. Airp01t Authority & Ors., [1979] 3 SCR 1014; Ma11aging Director, U.P. Warehousi11g Co1poratio11 & Anr. v. VN. Vajpayee, (1980] 2 SCR 773; Ajay Hasia Etc. v. Khalid Mujib Sehravardi & Ors. Etc., [1981] 2 SCR 79 - wealth of authorities - had held that settled legal position would lend to interpret the phrase "appropriate Government" C in public law interpretation; under the Act the Central Government is the appropriate Government to take a decision under Section 10 of the Act to abolish the contract labour system. It is further contended that the Central Government, after notifying abolition of contract labour system is devoid of power under Section 10(1) to appoint another Advisory Board to consider whether or not to abolish the same contract labour system in the ,D aforesaid services in the establishments of the appellant. The recommen- dation of the Mobile Committee and the resultant second notification were, therefore, without authority of law. The two Judge Benches in Dena Nath and Gujarat Electricity Board's cases have not correctly interpreted the law. After abolition of the contract labour system, if the principal employer omits to abide by the law and fails to absorb the labour worked in the establishments of the appellant on regular basis, the workmen have no option but to seek judicial redress under Article 226 of the Constitution. Judicial Review being the basic feature of the Constitution, the High Court is to have the notification enforced. The citizen has a fundamental right to seek redressal of their legal injury by judicial process to enforce his rights in the proceedings under Article 226. The High Court, therefore, was right to dwell into the question and to give tile impugned direction in the judgment. The workmen have a fundamep.tal}'ight to life. Meaningful right to life springs from continued work t9 earli their livelihood. The right to employment, therefore, is an integral facet of right to life. When they were engaged as contract labour and were continuously working in the estab- lishments of the appellant, to make their right to social and economic justice meaningful and effective, they required to be continuously engaged as contract labour so long as the work is available in the establishment. When work is of perennial nature and on abolition of contract labour H

p. 602

A system, they are entitled, per force, to be absorbed on regular basis transposing their erstwhile contractual status into that of an employer- employee relationship so as to continue to take out their livelihood by working under the employer and be entitled to receive salary prescribed to that post. Thereby they became entitled to be absorbed without any hiatus with effect from the date of abolition. If any action is needed to be taken thereafter against the employee, it should be only in accordance with either the statutory rules or the ID Act, if applicable. In either event, the right to absorption assures to the workmen the right to livelihood as economic empowerment, right to social justice and right to dignity of person which are the concomitants of social democracy. These facets of constitutional rights guaranteed to the workmen as their Fundamental Rights should be kept in view in interpreting the expression "appropriate Government" and the duty of the appropriate Government enjoined under Section 10(1) of the Act a!ld other regulatory provisions in relation to the employment of the workmen. Therefore, the view in Dena Nath's case is not correct in law and requires to be overruled.

There is no hiatus in the operation of the Act on abolition of the Contract labour system under Section 10. The object and pureose of the Act are two-fold. As long as the work in an industry is not perennial, the E Act regulates the conditions of the workmen employed through the con- tractor registered under the Act. The services of the workmen are chan- nelised through the contractor. The principal employer is required to submit the number of workmen needed for employment in its establishment who are supplied by the contractor, an intermediary; but the primary responsibility lies upon the principal employer to abide by law; the violation F thereof visits With penal consequences. The Act regulates systematic opera- tion. Wages to the contract labour should be paid under the direct super- vision of the principal employer. The principal employer is enjoined to compel the contractor to pay over the wages and on his failure, the principal employer should pay and recover it from the contractor/inter- G medkry. The principal employer alone is required to provide safety, health and other amenities to ensure health and safe working conditions in the establishment of the principal employer. This would clearly indicate the pervasive control the principal employer has over the contract labour employed through intermediary and regulation of the work by the workmen during the period of service. On advice by the Board that the work is of

AIRINDIASfATITTORYCORPN.•. UNION LABOUR t:NION (KRAMASWAM\,J.) 603

perennial nature etc. and on being satisfied of the conditions specified under Section 10(2), the appropriate Government takes a decision to abolish the contract labour and have the decision published by a notifica- tion. It results in abolition of the contract labour. Consequently, the linkage of intermediary/contractor is removed from the operational structure under the Act. It creates direct connection between the principal employer and the workmen. There is no escape route for the principal employer to avoid workmen because it needs their services and the workmen are not meant to be kept in the lurch. The words "principal employer" do indicate that the intermediary/contractor is merely a supplier of labour to the principal employer. On effacement of the contractor by abolition of the contract labour system, a direct relationship between the principal employer and the workmen stands knitted. Thereby the workman becomes an employee of the principal employer and it relates back to the date of engagement as a contract labour. The details of the workmen, requirement of the work force, duration of the work etc. are regulated under the Act and the Rules. D The Act, Rules and statutory forms do furnish internal and unimpeachable evidence obviating the need to have industrial adjudication; much less there arises any dispute. There is no machinery for workmen under the ID Act to seek industrial adjudication. If any industrial adjudication is to be sought, it would be only by a recognised union in the establishment of the appellants who are unlikely to espouse their dispute. Therefore, the methodology suggested in Gujarat Electricity Board's case, by another Bench of two Judges apart from being unworkable and incongruous, is not correct in law. On abolition of the contract labour, the principal employer is left with no right but duty to enforce the notification, absorb the workmen working in the establishment on contract basis transposing them as its regular employees with all consequential rights and duties attached to a post on which the workman working directly under the appellant was entitled or liable. The Act gave no option to pick and choose the employees at the whim of the principal employer. The view of the High Court, therefore, is correct to the extent that the notification should be enforced with effect from the date of abolition, namely, December 9, 1976. The subsequent amendment with effect from January 28, 1986 is only a recog- nition of and superimposition of pre-existing legal responsibility of the Central Government as the appropriate Government. It does not come into being only from the date the amendment came into force. Consequently, H

604 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R/ A the workmen, namely, the memberlV'f the respondent· Union must be. declared to be the employees with effect from the respective dates on which they were discharging their duties in the respective services of the appellant's establishments either as Sweeper, Duster, Cleaner, Watchman etc. The view, therefore, of ti)e High Court to the extent that they should B be absorbed with effect from the date of the judgment of the learned single Judge, is not correct in law. Therefore, to do complete justice, direction may be given to absorb the workmen with effect from the date of abolition, i.e., December 9, 1976 under Article 142 of the Constitution.

The respective contentions would give rise to the following ques- C lion~:

1Copy pinpoint1. What is meaning of the word "appropriate Government under Section 2(1)(a) of the Act?

2Copy pinpoint2. Whether the view taken in Heavy Engi.neering case is correct in law?

3Copy pinpoint3. Whether on abolition the contract labour are entitled to be ab- sorbed; if so, from what date?

4Copy pinpoint4. Whether the High Court µnder Article 226 has power to direct their absorption; if so, from what da(e?

5Copy pinpoint5. Whether it is necessary to make a reference under Section 10 of the ID Act for adjudication of dispute qua absorption of the contract labour?

6Copy pinpoint6. Whether the view taken by this Court in Dena Nath and Gujarat F State Electricity Board's case is correct in law.?

7Copy pinpoint7. Whether the workmen have got a right for absorption and, if so, what is the remedy for enforcement?

Section 2(1)(a) of the Act defines "appropriate Government" to G mean·

""(i) in relation to an establishment in respect of which the ap- propriate Government under the Industrial Disputes Act, 1947 (Act 14 of 1947), is the Central Government, the Central Government;

H (ii) in relation to any other establishment, the Government of the

AIR !NDIASTATIJTORY CORPN.>. UNION !ABDUR UNION (K.RAMASWAMY,J.) 605

State in which that other establishment is situated" A

Prior to Amendment Act 14 of 1986, the definition was as under :

"2(1)(a) "Appropriate Government" means-

(1) in relation to - B (i) any establishment pertaining to any industry carried on by or under the authority of the Central Government, or pertaining to any such controlled industry as may be specified in this behalf by the Central Government, or c (ii) any establishment of any railway, Cantonment Board, major port, mine or oil-field, or

(iii) any establishment of a banking or insurance company,

the Central Government, D

(2) in relation to any other establishment the Government of the State in which that other establishment is situate."

Section 2(a)(i) of the ID Act defines "appropriate Government" thus; Unless there is anything repugnant in the subject or context, "ap- E propriate Government" means, iµ relation to any Ind trial Disputes con- cerning any industry carried on by or under the authority of the Central Government or by a railway company for concerning any such controlled industry as may be specified in this behalf by the Central Government ...." and Indian Airlines and Air India Corporation established under Section F 3 of the Air Corporation Act 1953 are enumerated industries under Amendment Act 46 of 1982 which came into force with effect from 21.8.1984.

In Heavy Engineering case (supra), industrial dispute was referred under Section 10 of the ID Act by the State Government of Bihar to the G Industrial Tribunal for its .adjudication. The competency of the State Government was questioned by the Mazdoor Union contending that the appropriate Government to refer the dispute was the Central Government. The High Court negatived the contention and had upheld the validity of reference. On appeal, a Bench of two Judges had held that the wqrds H

p. 606

A "under authority of' means pursuant to the authority, such as an agent or a servant's acts under or pursuant to the authority of its principal or master. The Heavy Engineering Company cannot be said to be carrying on its business pursuant to the authority of the Central Government. Placing reliance on common law interpretation, the Bench was of the opinion that the Company derived its powers and functions from its Memorandum and Articles of Association. Though the entire share capital was contributed by the Central Government and all the shares were held by the President and officers of the Central Government were in-charge of the management, it did not make any difference. The company and the share-holders are distinct entities. The fact that the President of India and certain officers hold all its shares did not make the company an agent either of the President or of the Central Government. The power to decide how the company should function; the power to appoint Directors and the power to determine the wages and salaries payable by the company to its employees, were all derived from the Memorandum of Company and D Articles of Association of the .Company and not by the reason of the Company being agent of the Central Government. The learned Judges came to that conclusion on the ba~is of concession and on private law of principal and agent and as regards a company registered under the Com- panies Act, on the basis of the power of internal management. In Hindustan E Aeronautics Ltd case (supra), learned Judges merely followed the ratio of " Heavy Engineering case. It further concluded that the enumeration of certain statutory Corporations in the definition would indicate that those enumerated Corporations would come within the definition of the "ap- propriate Government" without any further discussion. In Rashtriya Mill Mazdoor Sangh's case, a Bench of three Judges, while interpreting Section F 32(iv) of the Payment of Bonus Act, considered the purpose of the expres- sion "unrler the authority of any department of the Central Government for purpose of payment of bonus". The meaning and scope of the expression "industry carried on by or under the authority of any department of the Central Government", was examined and it was held that the industrial undertaking retains its identity, personality, and status unchanged though in its management, the Central Government exercised the power to give a direction under Section 16 and the management is subjected to regulatory control. It is seen that the above decision was reached in the context in which the payment of bonus was to be determined and paid to the employees by the department. In Food Corporation of In,dia's case (supra),

AIRINDIASfATlITORYCORPN.>. UNIONIABOURUNION[KRAMASWAMY,J.) 607

a Bench of two Judges was to consider whether regional office of the Food A Corporation of India and the warehouses etc. were an "establishment" within the meaning of Section 2(i)(e) of the Act and whether FCI is an industry carried on by or under the authority of the Central Government. Following the aforesaid three decisions, it was held that a bare reading of the definition would indicate that the "establishment" defined under the Act B means inter alia any place, any industry, trade, business, manufacture warehouse, godown or the place set up by the Corporation where its business is carried on. Though for the purpose of industrial disputes the Central Government is an appropriate Government in relation to Food Corporation of India, its establishments at various places is not under the control of the Government of India. Therefore, appropriate Government c under the Industrial Disputes Act is the State Government. In that behalf, the learned Judges, undoubtedly, relied upon Heavy Engineering case. It would thus be seen that the construction adopted on the phrase "ap- propriate Government" under the ID Act was considered with reference to its functional efficacy. The Heavy Enginee1ing case, as held earlier, had D proceeded on common law principles and the concession by the counsel.

As noted, the appellant, to start with, was a statutory authority 'Jut pending appeal in this Court, due to change in law and in order to be in tune with open economy, it became a company registered under the E Companies Act. To consider its sweep on the effect of Heavy Engineering case on the interpretation of the phrase 'appropriate Government', it would be necessary to recapitulate the Preamble, Fundamental Rights (Part Ill) and Directive Principle (Part IV) - trinity setting out the conscience of the Constitution deriving from the source "We, the people", a charter to establish an egalitarian social order in which social and economic justice with dignity of person and equality of status and opportunity, are assured to every citizen in a socialist democratic Bharat Republic. The Constitu- tion, the Supreme law heralds to achieve the above goals under the rule of law. Life of law is not logic but is one of experience. Constitution provides an enduring instrument, designed to meet the changing needs of each succeeding generation altering and adjusting the unequal conditions to · pave way for social and economic democracy within the spirit drawn from the Constitution. So too, the legal redressal within the said parameters. The words in the Constitution or in an Act are but a framework of the concept which may change more than the words themselves consistent with the H

p. 608

A march of law. Constitutional issues require interpretation broadly not by play of words or without the acceptance of the line of their growth. · Preamble of the Constitution, as its integral part, is designed to realise socio economic justice to all people including workmen, harmoniously blending the details enumerated in the Fundamental Rights and the Direc- B tive Principles. The Act is a social welfare measure to further the general interest of the community of workmen as opposed to the particular interest of the ind.ividual entrepreneur. It seeks to achieve a public purpose, i.e., regulated conditions of contract labour and to abolish it when it is found to be of perennial nature etc. The individual interest can, therefore, no C longer stem the forward flowing tide and must, of necessity, give way to the broader public purpose of establishing social and economic democracy in which every workman realises socio-economic justice assured in the Preamble, Articles 14, 15 and 21 and the Directive Principles of the Constitution.

D The founding fathers of the Constitution, cognizant of the reality of life wisely engrafted the Fundamental Rights and Directive Principles in Chapters III and IV for a democratic way of life to every one in Bharat Republic, the State under Article 38 is enjoined strive to promote the welfare of the people by securing and protecting as effectively as it may, a social order in which justice, social, economic and political shall inform all the institutions of the national life and tu minimise the inequalities in income and endeavour to eliminate inequalities in status, facilities and opportunities, not only amongst individuals but also amongst groups of people residing in different areas or engaged in different vocations. Article 39(a) provides that the State shall direct its policies towards securing the citizens, men and women equally, the right to an adequate means of livelihood; clause (d) provides for equal pay for equal work for both men and women; clause (e) provides to secure the health and strength of workers. Article 41 provides that within the limits of its economic capacity and development, the State shall make effective provision to secure the right to work as fundamental with just and humane conditions of work by suitable legislation of economic organisation or in any other way in which the worker shall be assured of living wages, conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities to the workmen. The poor, the workman and the common man can secure and realise economic and social freedom only through the right to work and right to adequate means of livelihood, to just and humane H

AIR INDIA STATUTORY CORPN. '· UNION LABOcR UNION (K.RAMASWAMY,J.] 609

conditions of work, to a living wage, a decent standard of life, education and leisure. To them, these are fundamental facets of life. Article 43A, brought by 42nd Constitution (Amendment) Act, 1976 enjoins upon the State to secure by suitable legislation or in any other way, the participation of workers in the management of undertakings, establishments or other organisations engaged in any industry. Article 46 gives a positive mandate to promote economic and educational interest of the weaker sections of the people. Correspondingly, Article 51A imposes fundamental duties on every citizen to develop the scientific temper, humanism and to strive towards excellence in all spheres of individual and collective activity, so that the nation constantly rises to higher levels of endeavour and achieve- ment. To make these rights meaningful to workmen and meaningful right to life a reality to workmen, shift of judicial orientation from private law c principles to public law interpretation harmoniously fusing the interest of the individual enterprenuer and the paramount interest of the community. Article 39A furnishes beacon light that justice be done on the basis of equal opportunity and no one be denied justice by reason of economic or other disabilities. Courts are sentinal in the qui vive of the rights of the people, D in particular, the poor. The judicial function of a Court, therefore, in interpreting the Constitution and the provisions of the Act, requires to build up continuity of socio-economic empowerment to the poor to sustain equality of opportunity and status and the law should constantly meet the needs and aspiration oi the society in establishing the egalitarian social order. Therefore, the concepts engrafted in the statute require interpreta- E tion from that perspectives, without doing violence to the language. Such an interpretation would elongate the spirit and purpose of the Constitution and make the aforesaid rights to the workmen a reality lest establishment of an egalitarian social order would be frustrated and Constitutional goal defeated. F Keeping this broad spectrum in view, let us consider whether the interpretation given in Heavy Engineering case is consistent with the scheme and spirit of the Constitution. In Rajasthan State Electricity Board, Jaipur v. Mohan Lal & Ors., [1967] 3 SCR 377, a Constitution Bench, composing the learned Judges who formed the Bench in Heavy Engineering case, G considered the issue of interpretation and Bhargava, J. speaking on behalf of the majority, had held that "other authority" within the meaning of Article 12 of the Constitution need not necessarily be an authority to perform governmental functions. The expression 'other authority' is wide enough to include within it every authority created by a statute on which H

p. 610

A powers are conferred to carry out governmental functions or the "functions under the control of the Goverrunent". It is not necessary that some of the powers conferred be Governmental sovereign functions to carry on com- mercial activities. Since the State is empowered under Articles 19(1)(g) and 298 to carry on any trade or business, it was held that Rajasthan State B Electricity Board was "other authority" under Article 12 of the Constitution. The significance of the observation is that an authority under the control of the State need not carry on Governmental functions. It can carry on commercial activities. At this juncture, it is relevant to keep at the back of our mind, which was not brought to the attention of the Bench which decided Heavy Engineering case, that Article 19(2) of the Constitution C grants to the· State, by clause (ii) thereof, monopoly to carry on, by the State or by a Corporation owned or controlled by the State, any trade, business, industry or service whether to the exclusion, complete or partial, of citizens or otherwise. The narrow interpretation strips the State of its monopolistic power to exclude citizens from the field of any activity, to carry on any trade, business, industry or service, total or partial. A reverse trend which would deflect the constitutional perspective was set in motion by the same Bench in Fraga Tools Corporation v. C. V. !manual, [1969] 3 SCR 773 decided on February 19, 1969, 24 days prior to the date of decision in Heavy Engineering case; in which it was held in main that writ under Article 226 would not lie against a company incorporated under Companies Act and the declaration that dismissal of the workmen was illegal, given by the High Court was set aside. But the operation of the above ratio was put to stop by the Constitution Bench decision in Sukhdev Singh & Ors. v. Bhagat Ram & Anr., [1975] 2 SCR 619. In that behalf, the interpretation given by Mathew, J. in a separate but concurrent judgment is of vital significance taken away the State action from the clutches of moribund common law jurisprudence; it set on foot forward march under public law interpretation. Mathew, J. had held that the concept of State had undergone drastic change. It cannot be conceived of simply as a cohesive machinery yielding the thunderbolt of authority. The State is a G service Corporation. It acts only through its instrumentalities or agencies of natural and juridical person. There is a distinction between State action and private action. There is nothing strange in the notion of the State acting through a Corporation and making it an agency or instrumentality of the State with an event of the welfare State. The framework of the civil service H administration became increasingly insufficient for handling new tasks

AlRINDIASTATIJTORYCORPN.,. UN!ONIABOURUNION(K.RAMASWAMY,J.j 611 , which were often of a specialised and highly technical character. Develop- A ment of policy of public administration, through separate Corporations which would operate largely according to business principles and separate- ly accountable though under the Memorandum of Association or Articles of Association become the arm of the Government. Though their employees are not civil servants, it being a public authority and State B { Corporation, therefore, is subject to control of the Government. The public corporation, being a corporation of the State, is subject to the constitution- al limitation as the State itself. The governing power, wherever located, must be subject to the fundamental constitutional limitations. The Court, therefore, had laid the test to see whether the Corporation is an agency or instrumentality of the Government to carry on business for the benefit of C the public. Thus, the ratio in Praga Tools case, no writ would lie against the Corporation is no longer a good law. Though Corporation is not a statutory body, as it is not a authority, it is an instrumentality of the State.

In R.D. Shetty v. International Aiport Authority of India & Ors., [1979] D 3 SCR 1.014, this Court had held that due to expansion of welfare and social service functions, the State increasingly controls material and economical resources in the society involving large scale industrial and commercial activities with their executive functions affecting the lives of the people. It regulates aJld dispenses special services and provides large number of benefits. When the Government deals with the public, it cannot act ar· E bitrarily. Where a corporation is an instrumentality or agency of the Government, it would be subject to the same constitutional or public law limitation as the Government. The limitations of the action by the Govern- ment must apply equally when such actions are dealt with by Corporation having instrumentality element with public and they cannot act arbitrarily. F Such a functioning cannot enter into relationship with any person it likes ·at its sweet will. Its action must be in conformity with some principle which meets the test of reason and relevance. Therefore, the distinction between a statutory corporation and the company incorporated under the Com- panies Act was obliterated. G In Managing Director, U.P. Warehousing Copn. v. V.N. Vajpayee, [1980] 2 SCR 773, Chinnappa Reddy, J. in his separate but concurrent judgment laid down the relevant principles. The Government establishes and manages large number of industries and institutions which have be- come biggest employer and there is no good reason why the Government H

p. 612

A should not be bound to observe the equality clause of the Constitution in a matter of employment and its dealings with its employees; why the Corporation set up or owned by the Government should not equally be bound and why instead such Corporation would become citadels of patronage and arbitrary action. Such a distinction perhaps would mock at B the Constitution and the people; some element of public employment is all that is necessary to take the employee beyond the reach of rule which denies him the protection of Articles 14 and 16. Independence and integrity of the- e!fiployees in the public sector should be secured as much as the independence and integrity of the civil servants. It was, therefore, held that a writ would lie against the warehousing corporation. c Jn Ajay Hasia Etc. v. Khalid Mujib Sehravardi & Ors. Etc., [1981] 2 SCR 79, a Constitution Bench was to consider whether a Society registered under the J & K Societies Registration Act would be a State under Article 12 of the Constitution amenable to the reach of the writ jurisdiction. The D Constitution Bench laid the following test to determine whether the entity is an instrumentality or agency of the State; (1) if the entire share capital of the corporation is held by the Government, it would go a long way towards indicating that the corporation is an instrumentality or agency or Government; (2) where the financial assistance of the State is so much as to meet almost entire expenditure of the corporation, it would afford some indication of the corporation being impregnated with governmental char- acter; (3) it must also be relevant factor whether the corporation enjoys monopoly status which is State conferred or State protected; (4) existence of deep and pervasive State control may afford an indication that the corp9ration is a State agency or instrumentality; (5) if the functions of the corporation are of public importance and closely related to governmental functions, it would be a relevant factor in classifying the corporation as an instrumentality or agency of Government; (6) specifically, if a department of Government is transferred to a corporation, it would be a strong factor supportive of the inference of the corporation being an instrumentality or agency of Government. In Delhi Transport C01poration v. D. T.C. Mazdoor Corpn., AIR (1991) SC 101, it was held that the State has a deep and pervasive control over the functioning of the society and, therefore, is an agency of the State. In Som Prakash Rekhi v. Union of India & Ors., [1981] 2 SCR 111, it was held that the settled position in law is that any authority under the control of the Government of India comes within the definition of a State. Burmashell Oil Co. was held to be an instrumentality of the State

AIR INDIA STATUTORY CORPN. '· UNION LABOUR UNION [K.RAMA,WAMY,J.) 613

thou&h it was a Government company. The authority in administrative law is a body having jurisdiction in certain matters of public nature. Therefore, the ability conferred upon a person by law is to alter his case by his own will directed to that end. The rights, duties and liabilities or other legal relation, either of himself or other persons must be present to make a person an authority. When the person is an agent or functions on behalf of the State, as an instrumentality, the exercise of the power is public. Sometimes, the test is formulated by asking whether corporation was formed by or under the statute. The true test is not how it is founded in legal personality but when it is created, apart from discharging public functions or doing business as the proxy of the State, whether there is an element of ability in it to effect the relations by virtue of power vested in it by law. In that case, it was held that the above tests were satisfied and the company was directed to pay full pension.

In Manmohan Singh Jaitla v. Commissioner, Union Tenito1y of Chan- digarh & 01~., [1984) Supp. sec 540, it was held that JD educational institution receiving 95% of the grant- in-aid from the Government is "other authority'' under Article 12 of the Constitution. It was, therefore, held that the termination of the service without enquiry was without jurisdiction. Dismissal from service without enquiry was declared illegal under Article

226. In P.K Ramachandra Iyer & Ors. v. Union of India & Ors., [1984) 2 SCC 141, !CAR, a Society registered under the Societies Registration Act, .E was held and adjunct of the Government of India. It was financed by the Government of India. Its budget was voted as part of the budget of the Ministry of Agriculture. It was held that it was the State under Article 12 and was amenable to jurisdiction under Article 32 of the Constitution. The Project and Equipment Corporation of India which is a subsidiary owned by State Trading Corporation was held by this Court inA.L. Kalra v. Project and Equipment Corpn. of India Ltd., [1984) 3 SCC 316, to be an agency of the Government within the meaning of Article 12 of the Constitution of India. In Central Inland Water Transport Corpn. Ltd. & AllT. v. Brojonath Ganguly & Anr., [1986) 3 SCC 156, a Government company incorporated under Companies Act was held to be an instrumentality or agency. In this case, this Court construed the Fundamental Rights under Articles 14 to 17, the Directive Principles under Articles 38, 41 and 42, the Preamble of the Constitution and held that the River Steam Navigation Co. Ltd. was carrying on the same business as the corporation was doing. A scheme of arrangement was entered into between the corporation and the company. H

p. 614

A They were managed by the Board of Directors appointed and removable by the Central Government. It was, therefore, held that it was an agency or instrumentality of the State under Article 12. In that behalf this Court pointed out that the trade or business activity of the State constitutes public enterprise; the structural forms in which the Government operates in the field of public enterprise are many and varied. They may consist of governmental department, statutory body, statutory corporation or Govern- ment companies etc.; immunities and privileges possessed by bodies so set up by the Government under Article 298 are subject to Fundamental Rights and Directive Principles to further the State policy. For the purpose of Article 12, the Court must see necessarily through corporate veil to ascertain behind the veil the face of instrumentality or agency of the State. If the instrumentality or agency of the State has assumed the garb of a governmental company, as defined in Section 3(7) of the Companies Act, it does not follow thereby that it ceases to be an instrumentality or agency of the State. Applying the above test, it was held that Inland Water D Transport Corporation was State.

When its correctness was doubted and its reference to the Constitu- tion Bench was made in Delhi Transpott Corpn. case (supra), while holding that Delhi Road Transport Authority was an instrumentality of the State, it was held that employment is not a bounty from the State nor can its E; survival be at their mercy. Income is the foundation of any Fundamental Rights. Work is the sole source of income. The right to work become as much fundamental as right to life. Law as a social machinery requires to remove the existing imbalances and to further the progress serving the needs of the Socialist Democratic Republic under the rule of law. Prevail- ing social conditions and actualities of the life are to be taken into account to adjudge the dispute and to see whether the interpretation would sub- serve the purpose of the Society.

In Lucknow Development Authority v. M.K Gupta, [1994] 1 SCC 243, the question was whether a Government Authority is amenable to the regulation of Consumer Protection Act. It was held in paragraph 5 and 6 that a Government or a semi-Government body or local authority are amenable to the Act as much as any other private body rendering similar service. This is a service to the society and they are amenable to public accountability for health and growth of society, housing construction or building activities, by private or statutory body rendering service within the meaning of Section 2(0) of the said Act. In Star Enterprises & Ors. v.

AIRINDIASTATIITORYCORPN.,. UNIONIABOURUNION(K.RAMASWAMY,J.J 615

C.l.D.C. of Maharashtra Ltd., [1990] 3 SCC 280, it was held that the State A or its instrumentality entering into commercial filed must act in consonance with the rule of law. In paragraph 10, it was held that judicial review of administrative action has bec_ome expensive and its scope is becoming , wider day by day. The traditional limitations have been vanishing and the sphere of judicial scrutiny is being expanded. State activity too is becoming fast perversive as the State has descended into the conunercial field and B joint public sector undertaking has grown up. The State action must be justified by judicial review, by opening up of the public law interpretation. Accordingly, it was held that the action of company registered under the Companies Act was amenable to judicial review.

In LIC of India & Anr. v. Consumer Education & Research Centre & c Ors., [1995] 5 SCC 482, it was held that in the contractual field of State action, the State must act justly, fairly and reasonably in the public interest commensurate with the constitutional conscience and socio-economic jus- tice; insurance policies of LIC, terms and conditions prescribed therein involve public element. It was, therefore, held in para 23 at page 498 that D every action of the public authority or the person acting in public interest or any act that gives rise to public element, should be guided by public interest. It is the exercise of the public power or action hedged with public element that becomes open to challenge. If it is shown that the exercise of the power is arbitrary, unjust and unfair, it should be n" answer for the E State, its instrumentality, public authority or person whose acts have the insignia of public element, to say that their actions are in the field of private law and they are free to prescribe any conditions or limitations in their actions. They must be based on some rational and relevant principles. It must not be guided by irrational or irrelevant considerations. Every ad- ministrative decision must be hedged by reasons. At page 501 in para 28 it was held that though the dispute may fall within the domain of contractual obligation, if would not relieve the State etc. of its obligation to comply with the basic requirements of Article 14. To this extent, the obligation is of public character, invariably in every case, irrespective of there being any other right or obligation. An additional contractual obligation cannot divest the claimant of the guarantee under Article 14 of non-arbitrariness at the hands of the State etc. in any of its actions.

In G.B. Mahajan & Ors. v. Jalgaon Municipal Council & Ors., [1991] 3 sec 91 at 109, para 38, it was held that in interpretation of the test of reasonableness in Administrative Law, the words 11 void11 and "voidable 11 H

p. 616

A found in private law are amenable to public law situations and "carry over with them meanings that may be in apposite in the changed context. Some - '

such thing has happened to the words 'reasonable' or reasonableness etc." In Shrisht Dhawan (Smt.) v. M/s. Shaw Brothers, [1992] 1 SCC 534 at 553, para 20 the private law principle of fraud and collusion in Section 17 of B the Contract Act was applied to public law remedy and it was held "that fraud in public law is not the same as fraud in private law. Nor can the ingredient, which has established fraud and commercial transaction be of assistance in determining fraud in administrative law. It has been aptly observed in Khwaja v. Secreta1y of State for the Home Department & Ors., C (1983) 1 ALL. E.R. 765 that it is dangerous to introduce maxims of common law as to the effect of fraud while determining fraud in relation to the statutory law." In Khwaja's case (supra), it was held "despite the wealth of authority on the subject, there is nowhere to be found in the relevant judgments (perhaps because none was thought necessary) a defini- tive exposition of the reasons why a person who has obtained leave to enter by fraud is an illegal entrant. To say that the fraud 'vitiates' the leave or that the leave is not 'in accordance with the Act' is, with respect, to state a conclusion without explaining the steps by which it is reached. Since we are here concerned with purely statutory law, I think there are dangers in introducing maxims of the common law as to the effect of fraud on common law transactions and still greater dangers in seeking to apply the concepts of 'void' and 'voidable'. In a number of recent cases in your Lordships' House, it has been pointed out that these transplants from the field of contract do not readily take root in the field of public law. This is well illustrated in the judgment of the Court of Appeal in the instant case of F Khwaja (1982) 1 WLR 625 at 630; of (1982) 2 ALL ER 523, .at 527, where Donaldson LJ spoke of the appellant's leave to enter as being 'voidable ab initio', which I fmd, with respect, an impossible difficult legal category to comprehend". Thus, the limitations in private law were lifted and public law interpretation of fraud was enlarged.

G In must be remembered that the Constitution adopted mixed economy and control over the industry in its establishment, working and production of goods and services. After recent liberalised free economy private and multi-national entrepreneurship has gained ascendancy and entrenched into wider commercial production and services, domestic con- H sumption goods and large scale industrial productions. Even some of the public

AIRINDJASTATIITORYCORPN.>. UNIONJ.A1!0URUNION(K.RAMASWAMY,J.) 617

Corporations are thrown open to the private national and multi-national investments. It is axiomatic, whether or not industry is controlled by Government or public Corporations by statutory form or administrative clutch or private agents, juristic persons, Corporation whole or Corpora- , tion sole, their constitution, control and working would also be subject to the same constitutional limitations in tlie trinity, viz., Preamble, the Fun- damental Rights and the Directive Principles. They throw open an element of the public interest in its working. They share the burden and shoulder constitutional obligations to provide facilities and opportunities enjoined in the Directive Principles, the Preamble and the fundamental rights enshrined in the Constitution. The word 'control', therefore, requires to be interpreted in the changing commercial scenario broadly in keeping with the aforesaid constitutional goals and perspectives. c From the above discussion, the following principles would emerge :

(1) The constitution of the Corporation or instrumentality or agency or Corporatirn aggregate or Corporation sole is not of sole material relevant to decide whether it is by or under the control of the appropriate Government under the Act. • (2) If it is a statutory Corporation, it is an instrumentality or agency of the State. If it is a company owned wholly or partially by a share capital, floated from public exchequer, it gives indicia that it is controlled by or under the authority of the appropriate Government.

(3) In commercial activities carried on by a Corporation estab- lished by or under control of the appropriate Government having protection under Articles 14 and 19(2), it is an in- F strumentality or agency of the State.

(4) The State is a service Corporation. It acts through its in- strumentalities, agencies or persons - natural or juridical. G (5) The governing power, wherever located, must be subject to the fundamental constitutional limitations and abide by the principles laid in the Directive Principles.

(6) The framework of service regulations made in the appropriate rules or regulations should be consistent with and subject to H