P.K. Balasubramanyan, C.J.
1. The Bokaro Steel Ltd. was incorporated in the year 1961 under Section 617 of the Companies Act, 1956 for establishing a steel plant in the undivided State of Bihar. A large number of engineering, managerial, legal and clerical staff were employed and other workers were engaged. Even at the project stage in the year 1962, the employees of the establishment formed a co-operative society known as the 'Bokaro Steel Product Employees Co-operative Consumers Store, Ltd.. It was subsequently registered under the Bihar Co-operative Societies Act and its registration no was BGS 1/73. The society was registered with the object of (sic) the common interest of its members and for providing various facilities of to the members of the Constitution of the Co-operative Society was subsequently changed by amending the bye-laws and it came to be known as The Bokaro Steel City Central Consumers Co-operative Stores Ltd.' (hereinafter referred to as the 'Society). The society in its turn engaged certain workers or took in some employees. In the year 1995, a demand was made to the Bokaro Steel Ltd. (hereinafter referred to as the 'Company') to absorb the workers of the society as employees of the Company or to regularize them as the employees of the Company. The Company not having acceded to the request, the workers of the society through their Union, filed a writ petition, CWJC No. 690/97 in the High Court of Patna. The prayer therein was for the issue of a writ of mandamus commanding the Company to absorb the employees of the society in the services of the Company and to make payment of salary and extend other benefits similar to that of those working in the Company. By Judgment dated 7.12.1998, a learned Single Judge of the Patna High Court, declined to interfere taking the view that the questions sought to be raised were the questions of fact and they could more appropriately be decided in the forum created by the Industrial Disputes Act. Feeling dissatisfied with that decision, the Union filed an appeal, LPA No. 18/99. The appeal was heard by the Ranchi Bench of the Patna High Court. The appeal was dismissed by Judgment dated 15.9.1999 agreeing with the view of the learned Single Judge that the question had to be not decided by invoking the provisions of the Industrial Disputes Act. The Union challenged the said dismissal before the Supreme Court in Civil Appeal No. 4268/2000. By judgment dated 18.8.2000, the Supreme Court set aside the decisions of the learned Single Judge and that of the Division Bench and remanded the writ petitioner to the High Court for deciding the claim of the Union on merits. Thereafter a learned Single Judge, by judgment dated 17.12.2001, held that the writ petitioner-union was not entitled of the reliefs sought for and the employees of the society were not the employees of the Company. The Union filed the present appeal before the Division Bench challenging the decision of the learned Single Judge. By judgment dated 10.1.2002, the Division Bench, agreeing with the decision of the learned Single Judge dismissed the appeal, after hearing counsel for the Union. This dismissal was again challenged by the union before the Supreme Court in Petition for Special Leave of Appeal (Civil) No. 1771/2002 and the Supreme Court by judgment dated (sic) the appeal and setting aside the decision of the Division Bench and remanded the Letter Patent Appeal to the Division Bench of the High Court for disposal of the same on merits, requesting the High Court to dispose of the same expeditiously. It is pursuant to this order or remand by the Supreme Court that this appeal has again come up before us. With the consent of the counsel appearing on both sides, and in view of the direction of the Supreme Court, the entire matter was heard in detail and the same is being disposed of finally by this judgment.
2. The case of the union is that the affairs of the society are directly managed and controlled by the management of the company and the society is associated with the overall management and supply of essential commodities like, food articles and other commodities for consumption. The supply was being made to the employees of the company. The Company provided finance, accommodation, transportation, payment of salary to the workers of the society and other facilities including allotment of quarters, supply of electricity etc. The workers of the society were working for more than ten years in various posts. Since the society, from its very inception, was providing essential commodities to the employees of the company and the running of the society was really incidental to the running business or the industry of the company. The nature of the work was an indispensable one. The company had even recognized that fact in a bipartite agreement. The company had an obligation to supply the commodities and the company had agreed to continue the existing facilities such as providing of working capital, free transportation and so on. The management of the company had full administrative control over the affairs of the society. The company had, as per the bye-laws of the society, the right to nominate the Chairman, the Secretary and the Treasurer of the society. The Managing Committee in which was vested the authority to carry on the business of the society, was controlled by the Chairman. Thus, the Company had full and pervasive control over the affairs of the society. The shops of the society throughout the industrial area of the Bokaro were operating only by virtue of allotment of space made by the management of the Company and the allotment of the shops to the society was made by the company as per the Rules of the company. The conduct of the company also indicated that it had even objected to an administrator being appointed under the Bihar Co-operative Societies Act, unless the administrator was himself an officer of the company. The company was making payments to the society under the head 'subsidy' and that fund was used for payment of wages and other allowances to the employees of the society. It was impossible for the society to function without financial assistance from the company. The company also provided finances for purchase of essential commodities in the form of loans and refundable advances. The amount of subsidy was enhanced whenever it was felt necessary to do so, to meet the obligations of the society. The company had also provided fidelity insurance cover to the employees of the society and had insured all the employees of the society. The properties of the society had also been insured by the company. Thus, the company provided complete finance to run the shops of the society. Even the retirement dues were paid with the funds provided by the company and only after obtaining clearance from the company. Even the dues of the employees to the society were being adjusted against retirement benefits due to the employees of the company. In view of this, the workers of the society were really the workers of the company and the formation of the society and the entrusting of supply of essential commodities to it, was only a veil to cover up the fact that the workers of the society were the workers of the company and the Court was entitled to pierce the veil and direct the absorption of the workers of the society as workers of the company.
3. The company resisted this claim contending that the society was an independent co-operative society registered under the Co-operative Societies Act and it was governed by its bye-laws and the provisions of the Co-operative Societies Act. The jurisdiction vested with the authority under the Act to ensure that the society conducted itself in terms of the Co-operative Societies Act and in terms of the bye-laws of the Society registered under Section 14 of the Co-operative Societies Act. The membership of the society was not confined to the employees of the company. Even the employees of other Government undertakings situated in Bokaro could be the members of the society. Bye Laws 7 provided for this. The Managing Committee of the society had 15 members as provided in bye-laws 33 and out of the 15, the company had only a conditional right to nominate three members. The company had no control, leave alone , deep and pervasive control, over the affairs of the society. There was no relationship of master and servant between the company and the workers of the society. The authority under the Co-operative Societies Act had the authority over the employees of the society as well as over the society. The company had no right or control over the employees of the society. The fact that the company used to lend money to the society or paid subsidy to the society would not lead to the position that the company had administrative or financial control over the society. Insuring of the goods of the society and of the employees of the society was undertaken since substantial amounts were due to the company from the society, the society not having repaid the various loans taken by it and it was necessary for protection of the company and the amounts due to it. There was no statutory obligation on the Company to run a store or to supply articles to the employees of the company. The venture was that of the employees only. Thus, a company had no obligation to absorb all the workers of the society as the workers of the company. The writ petition was misconceived and was liable to be dismissed.
4. Learned Senior counsel, appearing on behalf of the union and the company took us elaborately through the pleadings in the case and the Annexures produced. In view of the clear direction of the Supreme Court while remanding the matter, it is for us to decide the question on the basis of the materials available and the arguments raised before us in the light of the various decisions brought to out notice.
5. It is settled by the decision in Hussainbhai v. Alath Factory Thezhilali Union, 1978 (4) SCC 257, that where a worker or group of workers labour to produce goods or services and these goods or services are for the business of another, that other is, in fact, the employer. That would be a case where the employer has economic control ever the workers' subsistence, skill and continued employment. If the employer chokes off, the worker is virtually laid off. The presence of intermediate contractors with whom alone the workers have immediate or direct relationship ex contractu is of no consequence, when, on lifting the veil or looking at the conspectus of factors governing employment, we discern the naked truth, though draped in different perfect paper arrangement, that the real employer is the Management, not the immediate contractor. It is also clear that the work done by the workmen in such a case must be an integral part of the industry concerned. Here, in this case, it cannot be said that the activities of the society are intrinsically connected with the industry of the company. The workers of the society cannot also be labouring to produce the goods or services of the company or for the business of the company. The society is constituted only for making available to the employees of the Company and its other members, at competitive prices, good quality consumable articles. The activity of the society is unconnected with the business of the company though it may relate to the welfare of the employees of the company.
6. It is also clear from the decision of the Supreme Court in M.M.R. Khan v. Union of India, 1990 (Supp) SCC 191, Parimal Chandra Raha v. Life Insurance Corporation of India, 1995 (Supp) 2 SCC 611, in Indian Petrochemicals Corporation Ltd. v. Shramik Sena, AIR 1999 SC 2577, and the earlier decision of the Labour Appellate Tribunal of India in Elphinstone Spinning and Weaving Mills Company Ltd v. S.M. Sable, 1953 (1) LLJ 752, that if an Institution like a Canteen is maintained in view of an obligatory provisions like the one in Factories Act for the use of the employees, such Canteen or Institution becomes a part of the establishment and the workers employed in such a Canteen are the employees of the management. The ratio of the cases also indicates that the obligation to provide facilities of a Canteen or other establishment may be explicit or implicit and whether the provision for Canteen services or other services has become a part of the service condition, is a question of fact to be determined on the facts and circumstances of each case. It is also clear that if there is a mere obligation to provide facilities to run a canteen, the canteen does not become part of the establishment. In the case on hand, we find that there is no statutory or non-statutory obligation on the company for supply of essential commodities to its employees. At best, it was intended to make available to the employees, their daily requirements in an area where at the inception, it was difficult to obtain fair and proper supply of essential commodities for their daily use. On the facts here, it has to be taken that the society was formed not under any statutory or non-statutory obligation on the part of the company. To that extent the ratio of the above decisions cannot be applied to hold that the society is an integral part of the company or the establishment.
7. In this context, it is contended by Mr. Ramamoorthy, Senior Counsel appearing on behalf of the Union, that the company and its management had deep and pervasive control over the activities of the society and the finances and other requirements* of the society were met by the company. Counsel for the company, on the other hand, submitted that the mere fact that subsidies were being paid to the society or that loans were being advanced would not enable the Court to come to the conclusion that the society is an integral part of the company or that there is a relationship of master and servant between the company and the employees of the society. Obviously, what is being done by the company was to provide subsidy to the society and also to advance loans to the society by way of financial assistance. There is nothing to show that at any time the company directly conducted the business of the society or invested money belonging to it in the business of the society. In other words, it could not be established before use on the materials that the business of the society was in fact being run by the company and the society was merely created as a front for hiding the real state of affairs. Even if we decide to pierce the veil, the facts do not justify a finding that the business of the society was really that of the company and the business that was being got done through the instrumentality of the society was that of the company.
8. We may notice at this stage the decision of the Supreme Court in All India Railway Institute Employees Association v. Union of India, (1990) 2 SCC 542. Therein, the Supreme Court noticed the difference between the employees of canteens run by the Railway establishment and in Railway Institutes and clubs. The Supreme Court held that the canteens were invariably a part of the establishment, but the same could not be said of the Institutes or Clubs. It was noticed that providing of institutes and clubs was not mandatory and they were not established as part of welfare measure for the Railway staff. In that situation, it was not possible to hold that there was a relationship of employer and employee between the Railway administration and the employees engaged in institutes and the clubs. But in Indian Overseas Bank v. Staff Canteen Workers' Union, AIR 2000 SC 1508, it was held that canteens run through contractor by the Indian Overseas Bank were really part of the establishment of the Bank and the cumulative effect of the facts established in that case indicated that the canteen workers were the employees of the Bank. That was a case in which the materials disclosed that the facility was restricted to the employees only and that a subsidized rate per employee was being provided and the working hours of the canteen was regulated and had to strictly conform to the working hours of the Bank. Any part of the capital required to run the canteen was contributed by none other than the Bank. Such facts do not exist in the case on hand. The member being in the society is not confined to the employees of the company. Here, all that the company was doing was granting loans to the society, a co-operative society registered under the Bihar Co- operative Societies Act and giving subsidy. A person qualified to be a member in terms of bye-laws 7 of the bye-laws of the society could acquire membership at his own expense. It appears to us that the facts of the case appear to be more in consonance with the facts available in the All India Railway Institute Employees Association, (1990) 2 SCC 542 referred to above.
9. In the decision in G.B. Pant University of Agriculture & Technology v. State of U.P., 2000 (7) SCC 109, it was held that the employees of a cafeteria run by the University were the employees of the University. The finding of fact rendered by the Labour Court that the University was a residential university which had 14 hostels and a cafeteria to provide food services to the residents of the hostel and others and that the Regulations framed by the University pertaining to hostel accommodation and the supplies of food, squarely warranted the conclusion that those establishments should be treated as essential requirements of the University and the employees of the cafeteria cannot but to be the employees of the university. The ratio of Parimal Chandra Raha was applied and the decision in All India Railway Institute Employees Association was distinguished. Here again, on the facts available, it does not appear possible to apply the ratio of the above decision to this case, to come to the conclusion that the employees of the society are the employees of the company.
10. At this stage, we may repeat that the society is registered as a co-operative society under the Bihar Co-operative Societies Act. It has bye-laws of its own. Its bye-laws have been registered in terms of Section 14 of the Act. The bye-laws provide for vesting of the management in a managing committee consisting of 15 members. The eligibility for memberships is laid down in bye-law 7 and the composition of the managing committee is laid down in bye-law 33. It is clear from bye-laws 7 and 33 that the employees of other Government undertakings located in Bokaro are also entitled to be members of the society. The Board of Directors of the society consists of 15 members. By way of an amendment, the Company was given the right to nominate three members to the Board of Directors of the society on the conditions referred to therein. The right to nominate the Chairman, the Secretary and the Treasurer of the society was available to the company provided the company subscribed 50% of the issued share capital or 25% debentures or a loan like amount of Rs. 2,50,000/- free' of interest and it provided sufficient accommodation required by the society at a nominal rent and other facilities of transport etc. Thus, the right to nominate the three members to be the Chairman, the Secretary and the Treasurer was conditional on the company taking 50% of the shares in the society and advancing interest free loan to the society. The balance 12 members of the Managing Committee were to be elected from the members under bye-law 33 of the bye-laws. Apart from this, the control over the affairs of the society and its management vested in the authorities under the Co-operative Societies Act. The control over the employees vested in the managing committee of the society subject to the over all authority of the general body in the terms of the Co- operative Societies Act and subject to the control exercised by the Authorities under the Co-operative Societies Act. The company had no control over the employees of the society or its affairs except to have a say in the nomination of three of the members of the managing committee. In the context of the relevant provisions of the Co-operative Societies Act, it cannot be said that the company exercised deep and pervasive control over the society or its employees or even its business. The society had members who were not employees of the company. The society could sell its articles to the public and sales were not confined to the employees of the company. The working hours, were regulated by the society itself subject to its Bye-laws and the Co-operative Societies Act. The mere fact that loans were being advanced or subsidies were being provided or accommodations were being made available cannot enable us to hold that the company exercised deep and pervasive control over the society. The fact that the company had not statutory obligation to run a co-operative society like the one in question, is also a relevant fact to be considered. The further fact that it is not shown that the facilities provided by the co-operative society were really part of the: service conditions of the employees of the company is also a relevant aspect. Thus, considered as a whole, we are not in a position to agree with learned counsel for the Union that on piercing the veil, it can be held that the employees of the society were really the employees of the company.
11. In this context, we think that it is necessary to refer to two decisions of the Supreme Court relied on by the learned counsel for the company. Union of India v. J.V. Subhaiah, AIR 1996 SC 2890, was a case that related to the employees of the Railway Co-operative Stores/Societies. Therein, a three Judge Bench of the Supreme Court found that the employees of Railway Co-operative Stores/Societies were governed by the bye-laws of the society subject to control and sanction by the Registrar under the Co-operative Societies Act and to them the service regulations of the Railways was not applicable. Their appointment was subject to the bond prescribed by the Registrar under the Co- operative Societies Act and in that context, the employees of the Railway Co-operative Societies could not be considered to be the employees' of the railway administration. Their Lordships overruled the decision in M.M.R. Khan v. Union of India, AIR 1980 SC 191. Their Lordships pointed out that in M.M.R. Khan's case recognised co-operative canteens were organized as part of the statutory duty under Section 46 of the Factories Act and the ratio of that decision was inapplicable to the case where an independent co-operative society governed by the State Co-operative Societies Act is registered and the business is carried on by that Co-operative Society. It appears to us that the ratio of the above decision squarely applies to the case on hand. Hence also, the Co-operative Society is admittedly governed by the Bihar Co- operative Societies Act and there is no statutory obligation on the company to establish and run a society like the one in question. The decision in Reserve Bank of India v. Workmen, (1996) 3 SCC 267 relied on by counsel for the company also related to workmen engaged in canteens of Reserve Bank of India, canteens run by the Implementation Committee (Canteen Committee) Co-operative Society or contractors, as a welfare measure and not under any statutory or by legal obligation on the Bank to run a canteen. Their Lordship noticed that there was no right vested in the Bank to supervise or control the employees of the canteen or to take disciplinary action against them. In such a situation, the nomination of a few representatives to the Implementation Committee (Canteen Committee) by the Reserve Bank of India or the granting of subsidy or the providing of facilities by the Bank on certain conditions, could not bring about the existence of a master and servant relationship between the canteen workers and the Bank. Hence, such workers were held to be not the workers of the Bank and not entitled to regularisation. This decision rendered by the three Judges of the Hon'ble Supreme Court distinguishing the decision in M.M.R. Khan and that line of authorities, appears to us to apply to the fact situation available in the present case.
12. Mr. Ramamoorthy. sought to contend that the observations in paragraph 107 of the judgment in Steel Authority of India Ltd. v. National Union Waterfront Workers, (2001) 7 SCC 1, would enable us to get over the two binding decisions rendered by three Judges, cited above and relied on by counsel for the company. But on going through paragraph 107 of Steel Authority of India Ltd. case we are not in a position to accept the above submission of Mr. Ramamoorthy. The said paragraph only shows that on an analysis of the case law it could be said that the cases fall under three categories : (1) cases where contract labour is engaged ; (2) Where the contract was found to be a sham and nominal, rather a camouflage and (3) where in discharge of a statutory obligation of maintaining a canteen in an establishment the principal employer availed the services of a contractor. Admittedly, the first and third of the situations referred to, do not apply to the case on hand. According to Mr: Ramamoorthy, this case would fall under the second category where the contract can be treated as a sham or a camouflage. On an appreciation of entire factual situation and the aspects noted by us above, it is not possible for us on the facts established to hold that the society registered under the Bihar Co-operative Societies Act was only a camouflage or a front and that it was really the company that was running the society. In that situation, we feel that we are bound by the two decisions of the Supreme Court relied on by learned Counsel for the company. Even otherwise, on the facts established in the case, we are not in a position to accept the arguments of learned counsel for the union that there existed a relationship of master and servant between the company and an employee of the society.
13. The result of the above discussion is that we have necessarily to deny relief to the writ petitioner. In view of this position, we are not considering the argument of counsel for the respondents that proper reliefs have not been prayed for in the writ petition and that no effective relief can be granted by this Court on the prayers made in the writ petition. We, therefore, confirm the decision of the learned Single Judge and dismiss the appeal. We make no order as to costs.
R.K. Merathia, J.
14. I agree.