MOHAN SINGH & ORS Vs. THE CHAIRMAN RAILWAY BOARD & ORS

Tags Regularisation Service Law / Matter , Provident Funds

Supreme Court of India (Division Bench (DB)- Two Judge)

Appeal (Civil), 5874-5875 of 2015, Judgment Date: Aug 03, 2015

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL Nos. 5874-5875 OF 2015
(ARISING OUT OF S.L.P. (C) NOS. 1624-25 OF 2014)

MOHAN SINGH & ORS. … APPELLANTS

VERSUS

THE CHAIRMAN RAILWAY BOARD & ORS. … RESPONDENTS

J U D G M E N T

VIKRAMAJIT SEN,J.

1 Leave granted.

2 The legal nodus that arise in the present Appeals before us are
whether the existing canteen at Moradabad Division of the Northern Railway
i.e., the subject Canteen, is located in a ‘Factory’ within the meaning of
Section 46 of the Factories Act, 1948; and consequently, whether the
services of the staff employed in the subject Canteen ought to be
regularized. These Appeals have been preferred against the Judgment passed
by the Division Bench of the High Court of New Delhi in LPA No. 19 of 2012,
whereby the Orders passed in Writ Petition No. 6582 of 2003 and Review
Petition No. 670 of 2011 have been set aside and it has been held that the
subject Canteen is a ‘Non Recognized and Non Statutory’ canteen.

3 We shall briefly narrate the facts leading up to the present lis. The
Appellants are employed in the subject Canteen, which has been running
within the precincts of the Divisional Railway Manager (hereinafter
referred to as “the DRM”), Moradabad since 1940 and has been catering to
more than 100 employees, (in fact, well over 500) since its establishment.
In 1963, the Respondent No. 1, namely the Chairman, Railway Board, issued a
Circular No. E(W) 63/GN 1-2 dated 09.07.1963 for setting up of canteens as
a welfare measure, whenever and wherever the staff strength exceeds 100.
The existing Staff Canteen, i.e. the subject Canteen continued to operate
smoothly, even thereafter. It is the uncontroverted case of the Appellants
that when the subject Canteen underwent severe financial losses in 1971, it
was the Respondent No. 3, i.e. the DRM of Northern Railways, Moradabad
Division, who decided to constitute a committee of three senior Railway
Divisional Officers to examine whether the affairs of the subject Canteen
could be taken over by the Railways. It was decided by the said committee
that the affairs of the subject Canteen be revived; and an ad hoc committee
comprising five Railway Officers, which was to be replaced later on by a
regular management committee, be appointed to manage the affairs of the
said Canteen. It was in these circumstances that the subject Canteen was
formally taken over by the Respondent Railways with effect from 18.01.1972.
Subsequently, Respondent No.1 issued Circular No. E (W) 83 CN1-8 dated
13.04.1987 laying down that prior approval of the Railway Board would be
mandatory for setting up of a new canteen as well as for increasing the
staff strength of existing canteens. The Appellants assert that the mandate
laid down in the Circular of 1987 was not applicable to the subject Canteen
as it was validly operational since 1940, and was also in consonance with
the Circular of 1963. Ergo, no prior approval was required to be taken
from the Railway Board since the subject Canteen was not a new canteen. It
appears that thereafter on 19.09.1996, Respondent No. 2, the General
Manager of Northern Railways wrote a letter to the Railway Board requesting
it to accord recognition to the subject Canteen in the interest of the
welfare of the employees. However, vide Order dated 9.09.2002, the
Ministry of Railways rejected this request on the premise that if
recognition were to be granted to the subject Canteen, the existing staff
would nevertheless not be absorbed automatically, and they would have to
compete with other eligible candidates. The Ministry then ordered status
quo to be maintained in respect of the subject Canteen. The said proposal
was thereafter discussed in the Permanent Negotiating Machinery (PNM)
meeting held on 22.12.2003, wherein it was decided that since the Railway
Board had already rejected the proposal for recognition due to the changed
priorities of Railways and cutting down of non-planned expenditure, the
proposal for recognition of any canteen under the provisions of the
Factories Act, 1948, or the Railway Manual could not be considered.

4 Aggrieved thereby, the Appellants filed a writ petition before the
Delhi High Court, seeking directions to the Railways to recognize the
subject Canteen and regularize the services of the PS, who were the then
Canteen staff, as employees of Railways. The learned Single Judge,
relying heavily upon the view of this Court in M.M.R. Khan v. Union of
India (1990) Supp SCC 191, allowed the Writ Petition on 13.01.2011 and held
that since the subject Canteen at Moradabad has been operational for over
seventy years, by then catering to more than 900 employees, and in the
absence of any other canteen in the Moradabad Division, the Railways could
not be permitted to take advantage of their failure to comply with the
requirements of Section 46 of the Factories Act and treat this Canteen at
Moradabad as a ‘Non-Statutory Canteen’. Against the Order of the learned
Single Judge, a Review Petition was preferred by the Respondents which was
dismissed on 2.12.2011. The Respondents then filed an appeal contending,
inter alia, that the subject Canteen was a ‘Non-Statutory and Non-
Recognized’ Canteen and that it could not be treated as a ‘Statutory
Canteen’ under the Factories Act, 1948 as no manufacturing process was
being carried on in the DRM Office at Moradabad. In the appeal, the
Division Bench, vide the impugned Judgment dated 16.03.2012, reversed the
decision of the learned Single Judge. It held that the provisions of
Section 46 of the Act would not get attracted in the instant case only
because the number of the persons employed in the DRM Office, Moradabad,
exceeds two-hundred fifty, unless the concerned establishment squarely fell
within the definition of ‘Factory’ as defined under Section 2 (m) of the
Act. The Division Bench acknowledged that the dictum laid down by this
Court in M.M.R. Khan has become locus classicus on the subject of
regularisation of employees of several canteens being run in the different
Railway establishments. All the same, it added that in order to avail the
benefit emanating from M.M.R. Khan the Appellants would have to prove the
sine qua non of a ‘Statutory Canteen’, i.e. that the subject Canteen is
being run in a premises which is a factory within the four corners of
Section 46 of the Act. The Division Bench then took note of Section 46 of
the Act, which enjoins that ‘manufacturing process’ must, inter alia, be
carried on in the premises of a ‘factory’.

5 We shall, first, consider the concomitants of a ‘Non-Statutory and
Non-Recognised Canteen’, which aspect has been duly cogitated upon by this
Court in M.M.R. Khan where this Court has adumbrated the basic
characteristics of a ‘Non-Recognized and Non-Statutory Canteen’ thus –

“38. (iii) Non-statutory Non-recognised Canteens: The difference between
the non-statutory recognised and non-statutory non-recognised canteen is
that these canteens are not started with the approval of the Railway Board
as required under paragraph 2831 of the Railway Establishment Manual.
Though, they are started in the premises belonging to the railways they are
so started with the permission of the local officers. They are not required
to be managed either as per the provisions of the Railway Establishment
Manual or the Administrative Instructions (supra). There is no obligation
on the railway administration to provide them with any facilities including
the furniture, utensils, electricity and water. These canteens are further
not entitled to nor are they given any subsidies or loans. They are run by
private contractors and there is no continuity either of the contractors or
the workers engaged by them. More often than not the workers go out with
the contractors. There is further no obligation cast even on the local
offices to supervise the working of these canteens. No rules whatsoever are
applicable to the recruitment of the workers and their service conditions.
The canteens are run more or less on ad-hoc basis, the railway
administration having no control on their working neither is there a record
of these canteens nor of the contractors who run them who keep on changing,
much less of the workers engaged in these canteens. In the circumstances we
are of the view that the workers engaged in these canteens are not entitled
to claim the status of the railway servants”.

6 It cannot be controverted that the subject Canteen has been running
since 1940 within the precincts of the office of the DRM, Moradabad and has
been under the direct control and supervision of the DRM. The Management
Committee appointed for administration of the subject Canteen comprises
office bearers of the Canteen Management Committee, duly elected in union
elections held from time to time. Further, no private contractor or co-
operative society has ever been engaged for running or operating the
subject Canteen. The Appellants contend that the joining and leaving the
canteen staff has always been sanctioned and regulated by the Controller,
i.e. the Assistant Personnel Officer of the Northern Railways. The prices
of the food items supplied in the subject Canteen as well as the salaries
of the staff are also fixed by the said Assistant Controller Personnel
Officer. Even the renovation of the Canteen, in 2005, was carried out at
the directions of the Northern Railways, which bore all the expenses
incurred in this exercise. It further appears that the Appellants have
been provided with uniforms, medical aid, free travelling passes,
residential accommodations, privileged ticket orders etc. by the Railways.
Thus, it seems amply clear from this factual matrix that the Respondents
have remained in control of the management and operation of the subject
Canteen.

7 For a canteen to qualify as a ‘Recognized Canteen’ it is imperative
to obtain the approval of the Railway Board. Since the proposal for
approval, admittedly, had been rejected by the Railway Board vide Order
dated 9.9.2002, it follows that the subject Canteen does not qualify as a
‘Recognized Canteen’. It thus, becomes crucial for us to examine whether
the subject Canteen is a ‘Statutory Canteen’ as postulated in the Factories
Act, 1948.

8 Section 46 of the Factories Act, 1948 which provides for setting up
of a ‘Statutory Canteen’ reads as follows:
46. Canteens.—
(1) The State Government may make rules requiring that in any specified
factory wherein more than two hundred and fifty workers are ordinarily
employed, a canteen or canteens shall be provided and maintained by the
occupier for the use of the workers.
(2) Without prejudice to the generality of the foregoing power, such rules
may provide for—
(a) the date by which such canteen shall be provided;
(b) the standards in respect of construction, accommodation, furniture and
other equipment of the canteen;
(c) the foodstuffs to be served therein and the charges which may be made
thereof;
(d) the constitution of a managing committee for the canteen and
representation of the workers in the management of the canteen;
(dd) the items of expenditure in the running of the canteen which are not
to be taken into account in fixing the cost of foodstuffs and which shall
be borne by the employer;
(e) the delegation to the Chief Inspector, subject to such conditions as
may be prescribed, of the power to make rules under clause (c)

9 The statute does not exempt factories belonging to the Central
Government from its reach; Parliament obviously expected them to conform to
what it perceived as essential to welfare of the workforce. It is evident
from a perusal of the definition of canteens and factories that Government
factories have not been conceived of as beyond the concept of a ‘factory’,
nor do we find any justification for it to be otherwise. Thus, what emerges
from the above provision is that when an establishment is a ‘factory’
within the meaning of Section 2(m) of the Act, and there are more than two-
hundred fifty workers employed therein, the Occupier is obliged to set up a
canteen and conform to the statutory rules made in that behalf. Section
2(n) of the Factories Act, 1948 defines ‘Occupier’ of a factory ‘as a
person who has ultimate control over the affairs of the factory’. Sub
Section (iii) of Section 2(n) states that ‘in the case of a factory owned
or controlled by the Central Government or any State Government, or any
local authority, the person or persons appointed to manage the affairs of
the factory by the Central Government, the State Government or the local
authority, as the case may be, shall be deemed to be the occupier’. It
cannot be controverted that each of the five units of the Northern
Railways, including the Moradabad Division, is managed by a respective
Divisional Railway Manager. Thus, for the purposes of Section 2(n) of the
Act, it can be fairly inferred that the DRM, by virtue of being in control
of the affairs of Moradabad Division, should be deemed to be the ‘Occupier’
of that unit of the Northern Railways.

10. Learned Counsel for the Respondents has duly admitted that Moradabad
Division is a part of the Northern Railways, but contends that the whole of
Northern Railways cannot be declared as ‘Factory’. We are presently
concerned only with the Moradabad DRM, which may well be dissimilar to the
other Divisional Offices of the Northern Railways, where manufacturing
activity is absent. Therefore, we do not find merit in the said argument.
Section 4 of the Factories Act, 1948 gives power to the State Government
to, either suo motu or upon receiving an application in this behalf by an
occupier, declare different departments to be treated as separate
factories. However, no such application can be said to have been made by
the Respondents or by the Northern Railways. In the absence of any clear
declaration in this respect, we cannot but assume that Moradabad Division
is a unit of Northern Railway and DRM is its occupier within Section 2(n)
of the Factories Act, 1948.

11 Further, it also appears that providing for a staff canteen was felt
necessary by the Respondents themselves and several representations were
made to the Railway Board from time to time for recognition of the subject
Canteen. Such conduct or approach is to be expected of every model
employer, as the Government must be. It is for this very reason that the
Divisional Personnel Officer made the first request to the Divisional
Superintendent for recognition of the subject Canteen on 12.06.1972.
Thereafter, the Respondent No. 2 addressed another letter to the Respondent
No. 1 on 19.09.1996, whereby it again stressed that running of a recognized
canteen in Moradabad is an imperative and important staff amenity. It is
evident that the Respondents were aware of the need for setting up and
continuing a recognised canteen.

12 The Factories Act, 1948 is a social legislation enacted for the
welfare of the workers. It deals with matters connected with the health,
safety, welfare, working hours of the workers, employment of young persons
and leave to be granted to workers. The idea behind providing Statutory
Canteen in a Factory is to create efficient, healthy, loyal and satisfied
labor force for the organization. We are of the view that if such a
responsibility has been cast on an occupier of a Factory under the law, it
remains obligatory upon DRM, Moradabad to maintain a statutory canteen so
long as the staff strength exceeds two-hundred and fifty.

13 Having discussed and noted the above statutory provisions, we also
find it necessary to examine the question whether the Moradabad Division of
the Northern Railways can be considered a factory in itself under Section
2(m) of the Factories Act, 1948. To answer the said question, we must
examine the definition of ‘factory’ under the Factories Act, 1948.
Section 2(m) - “factory” means any premises including the precincts
thereof—
(i) whereon ten or more workers are working, or were working on any day of
the preceding twelve months, and in any part of which a manufacturing
process is being carried on with the aid of power, or is ordinarily so
carried on, or
(ii) whereon twenty or more workers are working, or were working on any day
of the preceding twelve months, and in any part of which a manufacturing
process is being carried on without the aid of power, or is ordinarily so
carried on,-
but does not include a mine subject to the operation of the Mines Act,
1952 (35 of 1952), or a mobile unit belonging to the armed forces of the
Union, railway running shed or a hotel, restaurant or eating place.

14 It can be inferred from above that the following ingredients are
mandatory to constitute a premises including its precincts as "factory" -
Work i.e. manufacturing process should be carried on within the premises;
If the manufacturing process is being carried on with or without the aid of
power, the number of workers required to constitute a factory differs as
follows:
With the aid of power- 10 or more workers
Without the aid of power- 20 or more workers;
So far as the second requirement is concerned, it cannot be disputed that
the subject Canteen is situated within the precincts of the office of the
DRM, Moradabad and more than 1000 workers are working in those precincts.
The crucial question that arises in the present case then is whether any
“manufacturing process” is being carried on within the premises of the DRM
Office, Moradabad.
Manufacturing process has been defined under Section 2(k) of the Act as:
Any process for—
(i) making, altering, repairing, ornamenting, finishing, packing, oiling,
washing, cleaning, breaking up, demolishing, or otherwise treating or
adapting any article or substance with a view to its use, sale, transport,
delivery or disposal;
(ii) pumping oil, water, sewage or any other substance; or
(iii) generating, transforming or transmitting power; or
(iv) composing types for printing, printing by letter press, lithography,
photogravure or other similar process or book binding; or
(v) constructing, reconstructing, repairing, refitting, finishing or
breaking up ships or vessels; or
(vi) preserving or storing any article in cold storage.

15 The learned Counsel for the Respondent contends that no manufacturing
activity is carried out within the DRM Office of Moradabad, where the
subject Canteen is located. We, however, do not accept this contention.
It cannot be disputed that railway wagons are repaired and maintained at
the Moradabad Division. It is also not disputed that the Moradabad
Division carries on other activities such as repairing of faulty signals,
sanitation systems, loading and unloading of goods, supply of power
continuously for railway tracks, railway station etc. Thus, it has
perforce to be inferred that manufacturing process is being carried out at
the Moradabad Division.
16 The more important question that arises is whether the said
manufacturing activities are carried on within the premises of DRM Office,
Moradabad. Black’s Law Dictionary, 5th Edition defines ‘Premises’, so far
as estates and property are concerned, as lands and tenements. With regard
to the Worker’s Compensation Act, ‘premises of employer’ is not restricted
to permanent site of the employer’s business nor to property owned or
leased by him but contemplates any place under the exclusive control of the
statutory employer where his normal business is conducted or carried out.”
In Kamla Devi V. LaxmiDevi (2000) 5 SCC 646, in the context of the Delhi
Rent Control Act, this Court has held that even an open plot of land so
long as it has some structures on it, will fall within the meaning of
‘premises’. Extrapolating from these decisions, we are in no manner of
doubt that the DRM Office of Moradabad Division along with all the
appurtenant lands, yards, etc. are ‘premises’ within the contemplation of
the Factories Act. In Ardeshir H. Bhiwandiwala v. State of Bombay AIR
1962 SC 29, the Constitution Bench explained that "premises including
precincts" does not necessarily mean that the premises must always have
precincts. Even buildings need not have any precincts. The word "including"
is not a term restricting the meaning of the word "premises" but is a term
which enlarges the scope of the word "premises". A comprehensive reading of
the Factories Act, 1948 clearly shows that the word “premises” can refer to
an entire area, which may have several separate buildings, within it, or
which may correspond to an open yard. Further, an important point to
consider is that the definition of "manufacturing process" does not mandate
that the manufacturing activities should be carried on in one building
alone. What this definition really deals with is the nature of the work
done and not with where that work is to be done. It must, therefore, be
held that all the requirements of the term “factory” as defined under
Section 2(m) of the Act are satisfied on the facts of the present case.
Thus, the premises of DRM, Moradabad must be also treated as a factory
under the Factories Act, 1948 in which case Moradabad Canteen shall ipso
facto corresponded to a ‘Statutory Canteen’ within the meaning of Section
46 of the Act.

17 Once that conclusion is reached, the result with respect to status of
workers employed therein becomes obvious. In M.M.R. Khan, this Court has
held - “Since in terms of the Rules made by the State Governments under
Section 46 of the Act, it is obligatory on the Railway Administration to
provide a canteen, and the canteens in question have been established
pursuant to the said provision there is no difficulty in holding that the
canteens are incidental to or connected with the manufacturing process or
the subject of the manufacturing process. The provision of the canteen is
deemed by the statute as a necessary concomitant of the manufacturing
activity. Paragraph 2829 of the Railway Establishment Manual recognises the
obligation on the Railway Administration created by the Act and as pointed
out earlier paragraph 2834 makes provision for meeting the cost of the
canteens. Paragraph 2832 acknowledges that although the Railway
Administration may employ anyone such as a Staff Committee or a Co-
operative Society for the management of the canteens, the legal
responsibility for the proper management rests not with such agency but
solely with the Railway Administration…..We are, therefore, of the view
that the employees in the statutory canteens of the Railways will have to
be treated as Railway servants. Thus the relationship of employer and
employee stands created between the Railway Administration and the canteen
employees from the very inception.”

18 Therefore, in the light of the settled principle enunciated
hereinabove, we hold that the subject Canteen is a ‘Statutory Canteen’
under the Factories Act, 1948 and that the learned Single Judge had arrived
at the correct conclusion. In our opinion, the Division Bench of the High
Court was not correct in taking a contrary view. We, therefore, allow these
Appeals. We set aside the impugned Judgment passed by the High Court, and
direct the Respondents to treat the subject Canteen at Moradabad as a
Statutory Canteen either under Section 46 of the Act or the relevant
clauses of the Indian Railway Establishment Management. However, so far
as the Appellants are concerned, we find it difficult to condone or ignore
the fact that they were not appointed as per the regular recruitment
procedure. To pass an order regularizing the services of all workers
employed therein would necessarily imply ratification of appointments given
outside the Constitutional scheme. We, therefore, direct the Respondents
to consider regularizing the services of the Appellants presently serving
as canteen workers in consonance with the principles laid down in
Secretary, State of Karnataka v. Uma Devi AIR 2006 SC 1806 and take
requisite action within six months of the receipt of this Judgment.
Further, as and when the subject posts fall vacant the Respondents shall be
bound to fill the posts by a regular process of selection. The Appellants
in the present case shall be allowed to compete in the regular recruitment
and the Respondents shall grant to them appropriate age relaxation as well
as grant proper weightage for their having worked in the subject Canteen.

19 There cannot be any cavil that the necessity for canteen amenities
to be available where more than 250 workmen are engaged, is an essential
facet of human or labour rights. Managements and employers are duty bound
to provide these basic facilities.

20 Stay granted by this Court on 28.03.2014 stands vacated. There
shall be no order as to costs.

…..…………………………………J.
(VIKRAMAJIT SEN)

………………………………….…..J.
(PRAFULLA C. PANT)

New Delhi,
August 3, 2015.

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