Mangalore Ganesh Beedi Works Etc. Etc v. Union of India Etc.
.A
2:21
MANGALORE· GANESH BEED! WORKS ETC. ETC.
v.
UNION OF INDIA ETC.
January 31, 1974.
IA. N, RAY, C.J., H. R. KHASNA, K. K. MATHEW, A. ALAGIRISWAMI
AND p, N. BHAGWATI, JJ.]
Bcedi and Cigar Workers (Condition of Employment) A.ct, 196&.:-.f.r. 3,
4, 2(g)(a), 2(g)(li), 2(m), 26, 27 and 31~onstitutional validity of~on'
s1#Utiou of India, 1950-Art&. 14, 19(1)(g)-Legislative competence-14.ct if
falls within Entry 24 List II or Entries 22, 23 pnd 24 of List Ill, Seventh
Schedule-Rules laying down the mtJximum percentage of Beedis which can
be rejected, validity of-Sec. 37(3) i/ unworkable.
Interpretation-Reports of Conimission.J and Committees-Adniissibilily i11
evidence about the prev,ailing system and condition,, of industry.
The · beedi industry is widespread in the - country. Three systelns are
adopted for the manufacture of becdis. First. th.: factory system in whkh
the workers gather and work in a factory under the supervision Of the mantt
facturer who .is the owner of factory. Secondly, the contract system of em·
ployment wherein the proprietor gives the middleman quantities· of beedi lea·
ves and tobacco. The contractor manufactures beedis by employing di. eclly
labourers or by distributing material amongst the home workers. The third
system is that of the out workers. They roll beedis out of tobacco · aBd beedi
leaves suppli~ by the proprietor without the agem;y of middle man.
The special feature of the industry is the manufacture of beedis through
E . contractors and by distributing work in private dwelling houses where the wor
kers take raw-material given by the employers of contractors. The relation
ship between employers and employees is not well defined. The application·
of the Factories Act bas always met with difficulties. .The labour in the ·
industry is unorganised and is not able to look after its own interests, The
industry is highly mobile, The attempts of i!IOme of the states to legislate in
thi?.l behalf have not been successful. Anxiety has been expressed by several
committees and commissions, appointed by the Central Government and some
F of the State Government, to introduce ~ome regulation in the em11l .... ve·r-cm
rloyee relatiohship and to obtain certain benefits to the employees which have
been denied to them. They have reported extremely unsatisfactory and. un
heu.ltby working conditions long hours of work with low wages and anres
tricted emuloyment of wofnen and children. It was found that the contract
otnd bOme ·work systems enriched th~ nro;Jrictor <:t th·! expense of 1h Woi kers
and al-so deprived the worker':! of th;! b.lrgaining power in regard to conditions
of labour.
G It. is in this background that the Becdi an9 Cigar Workers (Conditfoni!I. of
f::mployment) Act, 1966, came into existence. The Act was pass~d to pro'ftde
fer the welfare of workers in Beedi and Cigar establishments and to regulate
lb~ conditionc; of their work. and for matters connected therewith.
. The ne.titioner,i and the appellants, proprietors of beCdi fat!ori~' a.nd
own-rs of trac!I! mark.and ~ome home workers. !mpl"ached the const1tuh.onahty·
of the Act. They contended; (i) being a legislation for regulating "beedi .and
c.igar indu~try it fell under Entrv 24 Ust TI o.f the &-vf"nth Srhedul"' an~. th~re ..
fore .Parlj:iment had. ~oJegi.slative C?mpct~i:ice to., enact the. mea~~r~~ <!.~).Sec
tions 3. and 4 of Act wh1rh required hcen~ in reo;nec;:t. of, .tn<'f~triij PTC:'
mises violate.d Art~.~.19(1).{p.) and. 14 slnc~ .. they.conf~rre.d ~!1{ettered p~wers
on the licensing p,utbority. without the rcqms1te safeguards: (111) the provu1ons.
2-954 SCI/74
222 SUPREME COURT REPORTS ( 1974 J 3 S.C.R.
of section 2(g)(a), 2(g)(b} and 2(m') read with section 2(c) and (f) created
a totally artificial and fictional definition of employer and thereby imposed·
vicarious liabilities upon a manufacturer of and trader in beedies in respect of
diverse matters which entailed civil and criminal liabilities and thereby imposed
unreasonable restrictions on the manufacturers in their right to carry on trade
::.nd business; (iv) sec. 26 and 27, dealing with lcavo and wages. during leave
pedod. cast unreasonable burden and imposed obligations which were not
cap<1ble of fulfilment and thus violated Art. 19(1)(f) and (g), and, in any
event. th= section'i were unenforceable with regard to hom! workers an·t
thciefOrc violated Art. 19(l)(f) and (g) so far as the same were applied 'to
home workers; (v) Sec, 31 which provided for one month's wages in lieu of
notice of dismissal was an unreasonable restriction; (vi) Rule 37 of the
Maharashtra Rules and nlle 29 of the Mysore Rules, dealing with rejection
of substandard beedies, framed under s. « of the Act, imposed unreasonable
restriction on the beedi and cigar manufacturers; and (vii) Sec. 37(3) which
made provision for maternity benefits to women employed in an establishment
was unworkable.
HELD : (Per Ray, C.J., Khanna, Mathew, and Dhagwati, JJ) : Parlia·
ment has legislative competence for enacting the law and the provisions of
the Act are valid and do not offend any provision of the Constitution.
Previous material in the shape of reports of commissions to review the
working of the· industry is adffiissible in evidence about the prevailing systen1
and conditions of industry.
Slate of Madras v. Rajagopalan, [1955} 2 S.C.R. 541, referred to.
(i) The Act does not fall within entry 24 List II or c_ntries 7 and 52
in List I. The tn1e nature and character of the legislation is for enforcing
better conditions of labour amongst those Whft are engaged in the manufacture
of heedis and cigars. It, therefore, falls within entries 2, 23 and 24. in List
III. The Act, in pith and substance is for welfare of labour. [233H, 234E]
(ii) Sections 3 and 4 of the Act arc not violative of Arts. 19(1)(g) and E
14.. These sections ·do not confer unfettered p0wers on the licensing autho-
rity without the requisite safegilards. The power to grant or refuse a licence
is sufficiently controlled by necessary guidance. There are safeguards pre
venting the abuse of power. The right Of appeal is a great safeguard. There
is machinery as weU as procedure for determining the grant or refusal of a
licence, (2358-C]
(iii) The provisions of Sections 2(g)(a), 2(g)(b) and 2(m) are constitu
tionally valid and do not imposo any unreasonable restriktion on the manufac· F
turer or trade-mark holder. There cannot be any question of unreasonable-
ness in cases where the manufactur@ or trade-mark holders themselves em-
ploY labour, because, there is direct relationship of master an(i servant.
When the contractors engaged Jabour for the principal employer the lia,bility
flrisct: by reason of contract labour engas;ed for or on behalf of Principal
cmploYcr. Where the contractor engages labour for the manufacturer it is
not unreasonable restriction to impose liability on the manufactur~r for the
labour engaged by the manufac~urer through the contractor. When the con- G
tractor en·gages labour for and on his own behalf and supplies the fini<;hed
product to the manufacturer )le will b~ the principal employer in relation to
sucl~ Ia9our and the: manufacturer will not be responsible for implementing
the nrovisions of the Act With regard to such Jabour emoloyl"d by the con-
tract. It will be a question of fact in each case as to who is the person for
whom the contract labour is engap:ed. If an independent Contractor em.,loy!
labour for himself the:· liability· will attach to him as the nrincipal employer
and: not to the manufacturer. The Act thus fastens liability on the t'Crson
who himself engages labour or the person for whom or on whose behalf H
labour ii engaged or where a person haa ultimate control over ·the affain of
the establishment by rea.\On of advancement of money or-of substantial interest
-in' the control of the affairs of thC establishment. '(2370. F:. 241A)
MANGALORE BEED! WORKS V. UNION 223
(iv) The provisions of sccti.ons 26 and 27 arc applicabl~ to home workers
und workers in industrial premises and are also capable of being made applic
able .wi~out any reasonable. restriction on the employers. -As a matter of·
fact Jt. is found that borne workers can turn out 700 to 1000 beedies a day.
The minimum wages prescribed by various states for these home workers are
between Rs. 2 to Rs. 4.30 'for rolling 1000 beedis. It will, therefore, not
cause unrcasonabl€'. financial burden on· account of leave wages. Tho home
workers . will get wages for the leave period corresponding to the number
of beedies manufactured by him for a particular employer. The hours of
work will be immaterial because if he works for less number of hours he
will obtain lesser pa_yment. There will be no difficulty in computing wa~s
for the annual leave period. The home worker will get leave wages corres-
ponding to his actual earnings just asi the worker in
the industrial premises will get leave wages corresponding to
his full-time earning, The basis of calculation of wages in the
case of home workers_ is the- daily average of his total full time earnings
for the days he has worked duri:'g the month immediately preceding bis
.leave, [248C-DJ
(v) The provisions contained in s. 31 cannot be said to be unreasonable
restrictions. Section 2(rr) of the Industrial Disputes Acts defines wages. Some
aid can also be had from the definition ot wages in the Payment of Wages·
Act that wages include leave wages. Therefore, the word 'wages' in sec 31
of the Act will mean wages which are calculated under s. 27 of the Act.
The calculation can be made both iil respect of workers in industrial premises
and home workers in establishments. [248G]
(vi) The rules are valid on ·the ground that the maximum limit of 5 per
cent for the rejection of Bcedis is based on experience in the industry, and,
secondly, the employer can reject more than 5 per cent by raising a dispute
before the appropriate authority. Rules about rejection and fixing maximum
limit of S p_er cent are reasOnable and fair. The rules are intended to elimi
nate explqitation of illiterate workers who are mostly women. [250A)
(vii) The reasonableness of section 37(3) has- not been challenged. There
is no difficulty with regard to the working of the Maternity Benefits Act, 1961,
in regard to maternity benefits to women employer in an establishment.
[252DJ
Cllinta1nan Rao & A11r. v, The Stflte of Madhya Pradesh, [1958] S.C.R.
134,0; Birdliichand. Sharma v. Fir~t Civil Judge Nagput & Ors. [1961] 3 S.C.R.
161. Bl!ikuse Yamas Kshatriya (P) Ltd. v. Union of India & Anr. [19611 1
S.C.R. 860, distinguished.
Shanker Balaji Waji v. State of Maharashtra, [1962] Supp. 1 S.C.R. 249,
held inapplicable.
Dewan Mahideen Saheeb v. UnitM Bidi Workers Union Salem [19641 7
S.C.R. 646 Cliintaman Rao's case: Silver Jubilee Tailoring House &: Ors. v.
Chief Inspectors of Shpps and EstAbUshment & Anr. referred to.
Syed Saheb & Sons v. State of Mysore (1972) Mysore Law Journal 450,
;ipproved.
Abdul Aue< Sahib and Sons, etc. v, The Union of India, [1973] I! M.L.J,
126, Chnablzai Purshi>ttam Patel, Beedi Manufqcturers of BllandartJ & Ors v.
State of Maharashlra, [1972) 1 L.L.J. 130; Chirukandtth Chandrastkharan v.
Union of India [1972} I L.L,J, 340, and Civil Appeals Nos, 1972 and 1968 of
1971 (Andhra Pradesh), over ruled.
AL~;GRlsWAMI, J, (concurring) : The Act is the result of a. co!llpromise
between the original intentions of the Government and the ~od1fi~bon.s they
H . had to make in the ·proposed measure as a result of cor'.cess1ons intended to
bring home worken within the scope of the Act, The original intention was
not to permit becdi rolling in private homes which ":'ill involve thou~nds of
labourers in thousands of far-fiung homes and the difficulty of applying the
224 SUPREME COURT REPORTS [ 1974 J 3 S.C.R.
provisions of the measure to them. ThC result is an Act which is likely to
give . rise to . many difficulties in its actual working. It is obvious on a
reading of the measure that its purpose is to rope in every possible person
whO. Could be brought in as an employer. But the result of the definition.•
1I'L thC Act is that everybody w-0uld be a principal employer and contractor ahd
every labour will be contract labour. [252H]
Clause 2(g)(b) is intended to cover cases where a person runs business
Bcnami. There can be no objection to such a provision. But merely because
a person lends or advances money or supplies goods he cannot be called ·an
employer. The words in.cl. 2(g)(b) "who has by reason of his advancing
1noney~ supplying goods or otherwise a substantial interest in the control of
affairs of any establishment" should be struck down, When section 26 pro·
vides that every employee in an establishment should be allowed in a calendar
year leave with wages at the rate of 1 day for every 20 days of work per.;
formed by him during the previous calendar year it leads to real difficulty.
The question is what i~ the \Vage which has to be paid to him during the period
of leave. A home worker might work for 1 hour on one day, 8 hours on
;.1nother day and not at all for a number of days, What would be the wages
payable to him? The difficulty of applying the Maternity Benefit Act is\again
apparent How can the provisions be applied to women who cannot be said
to ~ employed continuously for ;.i certain period before the confinement?
Under section 31, no employer shall dispense with the services of an employee
who has been employed for a period of 6 months or more except ·for a rea·
sonable cause and without giving such employees at least one month's notice
· or wages in lieu of such notice. It is not clear as to who will be the employer
competent to dispense with the ~ervices of the employee. [254A. 2SSC,
c56BI
While Courts should give effect to the intentions of the legislature it can
be' -done only if that is possible without doing violence to the actual language.
tiI the statute. The various definitions plainly soek to rope in everybody
who has anything to do with the manufacture of beedies and while trying to
give effect to the penal provisions in the statute considerable difficulties will
ar~c._ There will on the one hand be the actual occupier of the inctustrial
premises. There will be on the other hand a person who might have advanced
1noncy to him anti supplied goods to him and therefore may be substantially
interested in its control. The actual occupier himself might be" a contractor
nnd in .that case he as well as a person on whose behalf beedis are manufac
tured would be liable. Who in that C3Se, would b~ actually liable ? [254C]
The objection is not to an)' of the provisions on the i::rounds of unreason
~1blcness or unconstitutionality. Nobody can dispute the ne'ed for setting right
the evils. ·But, good intentions should not result in a ~legislation which
v:ould become ineffective and lead to a lot of fruitless litigation over the years.
If has to be held in agreement with the majority of the High Courts that
r-cctions 26. 27. 31 and 37(3) do not apply to the home workers. It woul<l
be ~ood in the interest of all concerned if the Act is amended as early as
pc~sible to remove all ·.ihe lacunae and th-e difficulties pointed out. The diftl~
c111ties have arisen bccauSe of an attempt blindly to apply t_he provision. .. which
\Viii be quite workable if ther :ire applied to conditions where the Factory Act
woril<l be applic::ble. [256FJ
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1553, 1614-
1618, 1769.of 1971and1131-1133 and 1440 of 1972. ·
<From the Judgment and Order dated. the 24th June, 1971.of the
Mysore High Court at Bangalore in Writ Petitions Nos. 806, 837, 1152,
1486, 1592, 1638, 1896, 159, 4152 and 3W of 1970 and 1456 of
1971). H
Civil Appeals Nos. 2516-2523, 2560, 2569, 2661-2164 of 1912 and
66-69, 72-75, 1307, 854-856, 857-859, 1203 and t204 of 1973.
MANGALOltE lll!mX WORICS v. UNION 225
.. ·(Frem tile iuclgment and O!Qci: .dated .the $th September, 1972 of
the Madias High Court in Writ Peiitiolis No&. 227, 4tZ, 2631 of 1969,
2692,2693,2695,2696,2698of1968,2680,2683,2688;2689,2691,
34n, 3478 of 1968, 531, 849, 1065 of 1969, 2681; 3480 o{ 1968, 40,
169 of 1969, 2854, 2856, 2855 of 1968, 4~8 of 1969, 2847, 2849, 2850,
2853 of 1968, 3268 of 1968, 211. 231, 276 of 1969, 2701, 2797 of
B i968, 212 of 1969, 2684 and 2763 of 1968). · · ·
Writ Petitions Nos. 127-132 of 1972 •.
(Under Article 32 of the Constitution for the enforcement of funda-
mental rights). ·
Civil Appeals Nos. 307-311 of 1972.
(AilJleals by Special Leave from the Judgment 'lllld Order dated the
30th November, 1971 of the Bombay High Court in Special Civil Ap
plication Nos. 2501 of 1968, 78~, 2848, 2845 and 2846 of 1969) ..
Civil Appeal No. 585 of 1971:
(Frblil the Judgment and order dated the 14th/15th October, 1970
D of the. (JUjata! High Court at· Ahmedabad in Special Civil Application
No'. 872 of 1968). ·.
Civil Appeals Nos. 1864-1873 of 1971 and 173 of 1973:
(From the Judgment and order dated the 16th/17th July, 1970 of
the Bombay High Court (Nagpur Bench at Nagpur} iin Special Ovil
AppHcationJl·Nos. 391 to 393 of 1969, 409 of 1968, 451, 453, 513, and
514 of 1969 and 453 of 1969). ·
Civil Appeals Nos. 1972-1988 of 1971.
(From. the Judgment and Order dated the 26th August, 1970 of the
Andl\ra Piadl'Sh High Court at Hyderabad in Writ Petitions Nos. 2587,
2818, 3007, 3009, 3058, 3156 3254, 31>18, 3776, 3824; 3825, 3826,
1 4364, 4'53, 5013, 5J74 of 1963 and 1235 of 1969).
Mr .. Soll Sorabjee with Mis M: Ramachahdran, Salindra Swarup,
I ... B. Dadachanii, 0. C. Mathur 4c Ravinder Narain for the Appellan.t
(in CAs: 1553171) & for Petitioners.
. M/s M. Ramochandran, Salindra Swarup, I. B. Dadachanji, 0. C.
G Mathur 4c Ravinder Narain for the Appellant (in CA 1769171).
Mr. K. N. Bhat, for the Appellant (iii CA. 1614171).
Mis D. V. Ptitel (m C.A. 1615).and S. V. Gupte (in C.A. 1616).
with Mis M. Ramachahdran, T. S.l'ai and A. S. Nambiar for the Ap
pellants' (in CA'S. 1615 & 1616171).
'lflk T. S~ Pai, M. Ramachahdrait and A. S. Nambiar for the Ap-
lf pellants (in CAs. 1617-1618171). ·
Mi.~. ~ Jl'tintit!P'~ wlih Mr. A.$, Namb/r fot m Amilants (in
Ch. 266t-Cl411Z, 66'69/73 lllld·857-859; 12<13' Ii 1204173)':
226 SUPREME COURT REPORTS [ 1974 J 3 S.C.R.
Mr. Vineet Kumar for the Appellant (in CAs. 1131-1133 & 1440/
72 and for Appellants (in CA 585/71).
Mr. K. K. Venugopal with Mrs. S. Gopalakrishnart for the Appel
lant (in CAs. 2516-23/72).
Mr. K. K. Venugopal with K. R. Nambiar for the Appellant in CAs.
2560-69/72 & 72· 75/73). B
Mr. Niren De with Mr. P. Paramashwara Rao for Respondent
No. 1.
Mr. Niren De with Mis R. N. Sachthey and S. P. Nayar for Res
pondent No. 1 (in CAS. 1614, 1616-1618/71, 1131-1133 & 1440/72
and for Respondent No. 2 (in CA 1615/71).
Mr. M. Veerappa, for Respondent No. 1 (in CAs. 1553, 1614, 1616,
1769) and for Respondents No. 1, 3, 4 and 5 (in CA. 1615), for Res
pondent Nos. 2 to 5 (in CAs. 1617-18) for Respondent (in CAs. 1131,
1132 & 1440), for respondent Nos. 2-3 (In CA. 1133) and for Res
pondent No. 2 (In WPs. 127-128172).
Mr. S. Govind Swaminadhan with Mr. A. V. Rangam and Miss A.
Subhashini for Respondent No. 2 (in CAs. 2516-23 2560-69, 2661-
64, 66-69, 72-75, 854-59 & 1203-1204) and for Respondent (in CA.
1307/73).
Mr. K. S. Ramamurthy with Mr. A. T. M. SamjJath for the Appel
lant (in CA. 1307).
M/s. K. s~ Ramamurthy and Mr. Y. S. Chitale with Mis T. s: Pai E
and A. S. Nambiar for the Petitioner in (WP. 127).
Mr. Y. S. Chitale with M/s M. Ramchandran, T. S. Pai and A. S.
Nambiar for t)lc Petitioner (in WP. 128).
Mis M. Ra111achandran, T. S. Pai and A. S. Nambiar for the Peti
tioner (in WP. 129).
Mr. A. S. Na111biar for the Petitioner (in WP. 130).
Mr. Niren De with Mis P. Parameshwara Rao, R. N. Sachthey, and
S. P. Nayar for the Appellants (in CAs. 1972-88/71) and for Respon
dent No. I (in WP. 127-128).
Mr. D. V. Patel with Mr. P. H. Parekh and Mrs. Sunanda Bhandar~
for the Appellants (in CA. 307-311172). G
Mr. Niren De and Mr. M. C. Bhandare (for the State of Maharashtra
in CA. 307 & 311) with Mis R. N. Sachthey and S. P. Nayar for Res
pondents Nos. 1-4 (in CAs. 307-308).
Mr. Niren De with Miss S. Chakravarthy and Mr. R. H. Dhebar
(for the State of Gujarat, Mis R. N. Sachthey and S. P. Nayar for Res-
pondent Nos. 1-3 (in CA. 585). H
Mr. Niren De (For Union,of India in CA. 1864171), Mr. M~C.
Bhandare, (for the State-of-Maharashtra in CAs. 1864-1873), with Mis
·'
MANGALORE BEED! WORKS V. UNION {Ray, CJ.) .2 21 .
R. N. Sachthey, and S. P. Nayar for the Appellants (in CA. 1864 to
1873/71) and for Respondent No. 2 {in CA. 173/73).
Mr. M. N. Phadke with Mr. Rameshwar Nath for Respondents Nos.
1-2 (in CA. 1871) and for Appellant (in CA. 173).
Mr. Rameshwar Nath, for Respondents No. 1 (in CAs. 18~9)
B and for Respondents Nos. 3, 5-9, 1.1-13, 15-17 and 20 (in CA. 1871).
Mr. M. Krishna Rao with Mr. B. Kant<1 Rao for Respondent No. 7.
Mis Narayan Nttttr and Ram Shtsh for the Interven~rs-Dharwar
Distt. Beedi Workers' Union, Hubli and Anr. (in CA. 1553).
Mr. R. P. Kapoor for Mr. /. N. Shroff for Interv.,ner-Statc of
c Madhya Pradesh (in CA. 1769).
Mis S. R. Bommai, I. B. Dadachanji and P. C. Bhartari for lnter
vener-Puttappa Veerappa etc. (in CA. 1553),
Mr. Rameshwar Nath for Intervener (in CA. 1864).
The Judgment ct A. N. RAY, C.J., H. R. KHANNA, K. K. MATHEW
and P. N. BHAGWATI, JJ. was delivered by RAY C.J. A. ALAGIRISWAMY,
J. aave a separate Opinion.
RAY, C.J. The provisions of the Beedi and Cigar Workers (Condi
toin of Employment) Act, 1966 refemid to as the Act are impeached
as unconstitutional in these petitions and appeals.
Broadly stated, the Act is challenged on these grounds. First,
Parliament has DCI legislative competence to enact this measure. It is
a legislation for regulating beedi and cigar industry. Therefore, it falls
under Entry 24 in State List II. Second, the restrictions imposed by
the Act violate freedom of trade and business guaranteed under
Article 19(i)(g.). The Act imposes unreasonable burdens in cases
where a manufacturec or trade mark holder of beedi has no master
and servant relationship and no effective control . on independent
cyllltractors or home-workers. The manufacturer or trade mark holder
;s rendered liable as the principal employer of contract labour. Third,
section 4 of the Act imposes conditions which are arbitrary, excessive
extraneous. Fourth, Section 7(i)(c) regarding entry into industrial
premises, sections 26, 27 regarding annual leave with wages, section 31
regarping ohe months's wages in lieu of notice, section 37 regarding
application of Maternity Benefits Act, 1961 and the rules for rejection
of beedis are unconstitutional. These provisions are unreasonable res
trictions on the freedclm of trade and business.
The petitioners and the appellants are of two characters. The majo
rity are proprietors of beedi factories s¢ owners trade mark registered
under the Trade Marks Act in relation to heedis. Some are home
WCll'kers.
The bccdi industry is widespread in this Country, The manufacture
of bc:ecli is done in ~. The tobacco is blended often y.oith some
other ingredient. A small quantity of it ·is put .on the bcedi leaf which
228 Sl!PllEME COUll.T Rl!POllTS . [ 1974 J 3. S.C,R.
is previously wet to render it llex.ible to prevent any Crushing of leaf
and is also cut to si~. .TU .. beedi leaf is then rolled keepilig the
. tobacco within it and its ends are then closed. . The beedis thus rolled
are collected and warmed or roasted after which they are ready for
packing, labelling and sale. Where the proprietor owns a trade mark,
the 11rade mark labels are affixed to the individual beedis ·as also on
the· packel!J.
The work of wetting and cutting of the wrappec leaves is one of the
items of work in the process. Pciwer is seldom employed for the
purpo6e. The industry depends entirely upon human labour. If more
than 20 workers are employed in a particular place for the manufacture
of beedis, the provisions of the Factories Act; 1940 will apply to the
premises.
Three systems are adopted in the manufacture of beedis. First, is
the factc.ry system. There the manufacture is an owner of the factory.
Workers gather and work under his supervision as his emplo;yees.
Second is the contract system of employment. That is the most pre-
valent form. Under this sys1em, the propriettor gives to the middle-
men quantities of beedi leaves and tobacco. The contractor on
receiving the materials manufactures beedis (i) by employing directly
labourers and manufacturing beedis or (ii) by distributing the mate
rial& amongst lhe home workers, as they are called, mostly women
who mnaufactllre beedis in their own homes with the assistani:e of
other members of their family including children. The third system is
that the outworkers. They roll beedis out of the tobacco and heedi
leaves supplied by the proprietor himself without the agency of middle
men. The beedis thus supplied whether by the outviorkers or contrac
tors are roasted, labelled and. packed by the proprietor and sold to
the public.
Under these systems, the contractor engages labourers less than the
statutory number to escape the application of the Factories Act .. Theze
is a fragmentation of the place of manufacture of beedis with a view
to evading the factory legislation. Sometimes there is no definite F
relatictnship of master and servant between the actual worker and the
ultimate proprietor. Branch managers of contractors are often men
of straw. The proprietor will not be answerable for the wages of the
outworkers because there is no privily of contract between them. A
large body of actual workers are illiterate women who could with im
punity be exploited by the proprietoPS and Contractors. There is in
this background an indiscriminate and undetectable employment of G
child labour. The contractor being himself dependent on the proprie-
tor has little means to have any organized system. Women and inllrm
persons can earn something by rolling beedis. The dependence of
these people particularlv the women shows that they have little bargain-
ing power against powerful prpprietnrs or contractors.
A typical contractor agrees with the proprietor to purcha_.e tobacoo H
and to pay fcir it at the ruling rate and to supply the proprietor with
such· quantlty of beedis 8S will be llxed. by the proprietor. Re also
unchetalccs not to use any tObiicoo odler than that supplied by the '
MANGALORE BEED! WORICS V. UNION (Ray, C.J.) 229
proprietor. The proprietor has the authority to send his representative
to inspect the place or places of manufacture. The contractor under
takes not to enter into any agreement of similar nature with any. o!J:!er
concern to make beedis,. The agreement stipulates that the contractor
wilrbe'the sole employer answerable in.regard to the disputes raised by
the workers.
. There was a Royal Commission on Labour in India in 193 l. The
findings were these. The making of beedi is an industry widely spread
over the country. It is partly carried on in the home but mainly in the
workshops in the bigger cities and towns. Every type of building is
used, but small workshops preponderate. It is there that the graver
problems mainly raise. Many of these places are small airless boxes.
There are no windows where workers are crowded. There are dark
semi basements with lamp and floors. Sanitary conveniences and
arrangements for removal of refuses are practically absent. Payment is
by piece rate. The hours are unregulated. Many smaller workshops
are open day and night. There are no intervals for meals. There are
no weekly holidays.
In 1944, the Government of India appointed a Ccltnmittee under
the Chairmanship of Shri D. V. Rege to investigate conditions of
industrial labour. The report referred to the contract system whereby
the factory owner engaged a large number of middlemen supplied
them with raw materials and purchased finished products from them.
The report found that unhealthy working conditions, long hours of
work, employment of women and children, deduction from wages and
tho sub-contract system of organisation required immediate attention.
It was desirable to abolish outworker system and to encourage estab
lishment of big industries if protective labour legislation was to be
enforced with success.
In 1946, the Government of Madras appointed a Court of Inquiry
into Jabour conditions in beedi, cigar, snuffcuring and tanning indus
tries. There were 90,000 workers depending on beedi industry in
Madras. Of these, 26,500 workers were women. Employment of
children in the Industry was universal. 2/5ths of the total workers
were children. Home workers were predominant. . There were full
time wor.kers but they were paid less than fair wages. Working con
ditions were extremely unsatisfactory from the standpoint of floor
space, sanitation, ventilation and lighting.
In 1954, the Government of India appointed Shri Natraj Inspector.
of Factories to assess the situation with a view to affording maximum
legislative protection to the workers. The Report was as follows.
Although the number of workers engaged in the manufacture of beedi
exceeded one lakh, only 17,544 were employed in factories. The
contract and home work systems enriched proprietor at .the expense
of the worker and also deprived the latter of his bargaining power in
regard to conditions of labour. The poverty as well as illiteracy of.
the workers was taken advantage of by the employers. There were
long hours of.work with low wages, deplorable working conditions and
unrestricted employment of women and children.
230 SUPREME COURT REPORTS [ 1974] 3 S.C.R.
The entire beedi industry was unorganiscd and scattered over the
entire state, employing a large force of women. It called for radical
reforms in the organisation. There was reluctance of the manufactu
rer to provide certain amenities to the workers such as rest sheds.
canteens, creches, ambulance room, etc. Under the indirect employ
ment system conditions obtaining in the industry were still worse. The
middlemen contractors did not observe any higher standards in the
premises than in those under the manufacturers. The Payment of
Wages Act applied to factories, but it was difficult to detect violations
of the Act because the prescribed registers were not maintained. The
Madras Maternity Benefit Act which applied to factories was rendered
practically ineffective as far as petty industry was concerned because
there was no record to prove that women were employed. The Report
stated that the employers succeeded in organised circumvention of all
existing legislation by resorting to splitting up of their factories into
smaller units run by contractors who had no knowledge in respect of
workin!! places .
. The conditions in working places were bad. The Report suggested
licensing of premises to fix responsibility of the employer for mainten
ance of minimum standards of ventilation, lighting and sanitation in
working places.
The employment of women and children, wai:es and wage struc
ture in the industry were all considered by the Committee. The Com
mittee recommended solution of unhealthy working conditions under
miserable environments, long working hours with its attendant evils.
unregulated employment of women and children and deduction from
wages. The contract of home work system of employment was found
to be designed solely for the promotion of trade but not the industry of
which the labour forms the integral part. It was, therefore, expected
that the beedi industry should carry the labour along with it as it
developed and was organised in such manner that it discharged its social
and moral responsibilities towards the workers.
It is in. this background that the Act came into existence. In Srate
of Madras v. Rajagopalan, [19551 2 SCR 541 this Court held that
the previous material in the shape of Reports of Commissions of re
view the working of the industry was admissible in evidence about the
prevailing system and conditions of industry.
The Beedi and Cigar Workers (Conditions of Employment) Act,
.J 966 is an Act to provide for the welfare of the workers in beedi and
cigar establishments and to regulate the conditions of their work and
for matters connected therewith. The special feature of the industry
was the manufacture of beedis through contractors and by distributing
work in the private dwelling house, where the worker.s took raw mater
ials given by the employers of contractors. The relationship between
employers and employees was not well defined. The application of
the factories Act met with difficulties. The labour in the industry was
unorganised and was not able to look after its own interests. The
industry was highly mobile. The attempt of some of the States . to
legislate in this behalf was not successful. The necessity for central
MANGALORE BEED! WOUS V. UNION (Ray, C.J.) 231
legislation was felt. A bill was mooted to provide for the regulation
of the contract system of work, licensing of beedi and cigar industrial
premises and matter like health, hours of work, spread over, rest
periods, over time, annual leave with pay, distribution of raw materials
cic. The anxiety was expressed by several Committees to introduce
some regulation in the employer-employee relationship and to obtain
certain benefits to the employees which were denied to them.
The so-called contractor or the employer as styled by the employe
es has been a matter of some concern to the employees as well as to the
State. There were certain good and bad points about the systems that
were prevalent in the manufacture of beedi. The contractor was very often
a man of straw. He was said to be the.creation of the principal employer
who put him forward on many occasions as a screen to avoid his own
responsibility towards the employees. Another broad grievance was
that there was double c.hecking and rejection of beedis or double cbbat,
out of which the second chhat at the principal employer's place was
invariably in the absence of the employee. This chhat was alleged
to be most irrational and depending upon the whim of the employer.
As far as the house work system was concerned there was an advant
age to the employee with some kind of disadvantage to the employer.
Persons who could spare time in their houses but could not move out
for the purpose of employment got ready employment and could
supplement their income from agriculture or other sources. They were
in a position to work as and when leisure was available. and like a
factory employee there was no dgour of attending the factory or work
at stated time and fur stated number of hours. It appeared that pil
fering was a vice of this industry. By pilfering tobacco which is the
most valuable ingredient, the employees were able to earn' some in
come by again rolling it into bcedis and selling them.
The relationship bctwee11 the proprietor, middlemen and outwork
crs came up for consideration in this Court in Chintaman Rao & Anr.
v. The .State of Madhya Pradesh [19581 SCR 1340. The proprietor
of a beedi factory was prosecuted under the Factories Act for non
compliance with the provisions of that Act. The proprietor pleaded
that the workers were not under his employment. The contention was
that the sattedars who were found in the factory were independent
contractors and not workers. The management issued tobacco and
sometimes beedi leaves to sattedars who manufactured beedis in their
own factories or by an arrangement with a third party. The satted
ars collected the beedis thus made ·and supplied to the factories for a
consideration_. It was held that the sattedars were independent con
tractors and not the agents. The enforcement of factory and labour
legislation could be rendered impossible by adopting the simple device
of disintegrating what normally will be a factory. The legislature
wanted to regulate the contract system. The legislation did not want
to stop the contract system. The provisions in the Act recognised the
contractor as a part and parcel of the boedi industry. The contractor
is referred to where the terms 'contract labour' or 'principal employer'
of 'employer' have been defined. Several functions which the employ
er. has to perform are also performed by the contractor. He delivers
tobacco and leaves to the home worker and collects the rolled beedis
"Z3-2 SUPREME COURT Rl!PORTS [ 1974 J 3 S.C.R.
,after application of cbhat. He makes payment to them. Therefore,
the contractor has been retained as an integral part though the attempt
is to eliminate the vices which crept into the industry.
The Madras High Court in M/s. K. Abdul Azeez Sahib and Sons,
.Four Horse Beedi Manufacturers, Vellore-4 and Ors. v. The Union of
.India (1973) II M.L.J. 126 held the definitions of employer and prin
.cipal employer in Section 2 (g) (a) and 2(m) of the Acfto be valid
but held that sections. 26 and 27 of the Act are wholly un~nforceablc
.against tho trade mark holders whether with reference tel" Mme work
.ers or with referenoe to employees .working in any industrial premises.
The Madras High Court held that since a worker in a beedi intlustry
is not required to work regularly for any prescribed period of hours
in a day or ·even day after day for any date specified period, from the
very nature of the case, the provisions in the Maternity Benefit Act,
1961 are unworkable with regard to such home workers, a:iid, there
fore, they will have no application to them. The Madras High Court
held that section 7(1) (c), 7(2), 26, 27,.31, and 37 (3) in so far
. as they relate to home workers are ultra. vires and illegal and unen
forceable against trade mark holders in beedis and contractors in the
manufacture of beedis. The Madras High Court held that section
7(1)(c), 7(2). 26 and 27 are ultra vires and illegal and unenforce
able against the p~titioiJer who are manufacturers .of cigar or .cigar
rollers.
The Bombay High Court in Mis. Chotabhai Purushottam Pate/ ..
Beedi Manufacturers of Bhandara & Ors. v. slate of Maharashtra by·
Secretary, Industries and Labour Department, Sachivalaya, Bombay
& Ors. (1"972) I L.L.J., 130 held that the provisions of section 2(g) (a)
and 2(m) of the Act are invalid t0 be in exc.,ss of the requirements
-of the situation because if the principal .employer is fared with the pro
position of bearing all the civil and criminal responsibilities of omission
.and. commission of contractors under him the inevitable result will be
that the manufacturer will give up the Gharkata system and may think
·of some other system less onerous under the Act. The Bombay High
Court also said that the words "in relation to ·other labour" contained
in section 2(g) (b) are to be deleted. The Bombay High Court fur
ther held that the provisions of sections 26 and 27 of the Act will not
apply to home workers at all.
The Mysore High Court in P. Syeii Saheb & Svns. v. State of
Mysore (1972) Mysore Law Journal 4~0 held that sections 3 and 4 of
the Act are constitutional and not violative of Articles .14 and 19
(l)(g) of the Constitution. Section 3 of the Act prohibitS establish
ment of an industrial premfaes without obtainin~ a licence grantee!
·under the Act. Section 4 of the Act provides for the procedure for
the issue. renewal and cancellation of a licence. The Mysore High
Court further held that sections 26 and 27 of the Act are not unreason
able restrictions and it is possible to find out whether a home worker
·has. qualified himself for annual leave and it is possible to ·make up
for the lost wages. The Mysore High Court also held that section 31
of the Act is valid and Rule 29 does not impose tinreasonable restrii:'
tion by' compelling the employer to aceept be'edis when they are sub'
MANGALORE BEED! WORKS V. UNION (Ray, C.J.) 233'
standard and the sub stand.ard beedis and cigars exceed 5 per cent. If
the employer finds that the sub standard beedis and ci2ars are above·
5 per cent then he has to refer the matter to the Inspector.
The Kerala High Court in Chirukandeth Chandrasekharan v. Unionc
of India (1972) 1 L.L.J. 340 held that the provisions of sections.
2(g)(a), 2(m) 3, 4, 21, 26 and 27 of the Act impose unreasonable
restrictions on business or trade and are violative of Article 19 ( 1 )(J()
of the Constitution. The Kerala High Court held that the words "in
relation to .other labour" occurring in section 2(g) (b) have also to.
he deleted. The Kerala High Court held sections 3 and 4 to be valid.
The Kerala-High Court held that sections 26 and 27 will not apply to·
home workers. The Kerala High Court struck down rule 29 of the
Kerala Rules on the ground that imposition of 5 per cent on the
maximum amount of rejection is an arbitrary percentage.; Kerala Rule
29 stated that no employer shall ordinarily reject more than 2-5 per
cent. The provision states that there can be rejection up to 5 per cent
for reasons recorded. in writing. This imposition of 5 per cent limit in·
the proviso was con~trued by the Kerala High Court to be unreason
able in.as much as the quality•of beedis would go down if the workers
are assured that more than 5 per cent will not be rejected.
The Andhra Pradesh High Court in Civil Appeals Nos. 1972 and
1988 of 1971, hekl. that sections 3 and 4 of the Act offend Articles 14
and 19 ( 1) (g) of the Constitution and are, therefore, void ..
The Andhr<t Pradesh High Court came to the conclusion that the pro
visions contained in sections 3 to 27 of the Act do not apply to home
workers. The High Court held that the Act is applicable to an in-
E . dependent contractor where he is employing labour for and on his own
behalf. There he is the principle employer. No ·artificial relationship
of master and servant arises as a result of the operation of the. defini
tions in section 2(g) (a) (b) and 2(m) of the Act. The Gujarat High
Court, in Civil Appeal No. 585 of 1971, upheld the provisions of the
Act to be constitutional.
The first contention on behalf of the petitioners and the appellants
is that the Act of 1966 is invalid on the ground of lack of legislative
competence. The High Courts of Madras, Kerala, Gujarat, Mysore
and Andhra Pradesh have rightly beld the Act to have constitutional
competence. Counsel on .behalf of the petitioners contended that entry
24 in list fl is the only legislative Entry for the piece of Legislation.
Entry 24 speaks of industries· subject to the provisions of Entries 7
and 52 of list J. Entry 7 in List I speaks of Industries declared by
Parliament .by .law to be necessary. for the purpose of defence or for
the prosection of war. Entry 52 in List I speaks of Jndusfries the
control of which by the Union is declared by Parliame.nt by law to
be expedient in the public interest. The legislation in. the present case
does_n0t fall within Entry 24.in .List II or Entries 7 and 52 fu List.I.
Entry 24 in List III. speaks of Labour including conditions of work,
provident funds, employers' libiljty, workmen's .compensation, . invali-.
dity and old:age .pension~ and maternity benefits. The .Act is for wel
fare of.lal>our. It is not an.Act.f-Or,indqstries. The.tru~ !)llture \Ind.
character of the legislation, -how.s that it is for enforcing better-
234 sunEME COURT REPORTS [ 1974 J 3 S.C.R.
1.::onditiorts of labour amongst those who are engaged in the manu
facture of beedis and cigars.
The scheme of the Act relates to provisions regarding health and
welfare, conditions of employment, leave with wages, extension of
benefits by applying other Act to Labour. To illustrate section 28
of the Act extends benefits of the Payment of Wages Act to industrial
premises, Section 31 of the Act provides for security of service, Sec
tion 37 of the Act extends the benefit of Industrial Standing Orders
Act, 1946. Again, section 37 (3) of the Act makes provisions of the
Maternity Benefit Act applicable to every establishment. Section
3 8 ( 1) of the Act applies the safety provisions contained in Chapter
IV of the Factories Act to industrial premises. Section 39(1) of the
Act makes the Industrial Disputes Act, 194 7 applicable to matters
·arising in respect of every industrial premises. Section 39(2) of the
Act provides thai disputes between an employee and an employer in
relation to issue of raw materials, rejection of beedis and cigars, pay
ment of wages for the beedis and cigars rejected by the employer, shall
be settled by such authority as the State Government may specify. An
Appeal is provided to the appellate authority whose decision is final.
Section 39(1) of the Act applies to industrial premises. Section
39(2) of the Act applies to every establishment.
The Act speaks of licensing of industrial premises. The benefits
under the Act are extended to both industrial premises and establish
ments. Establishments mean also places where home workers work.
The pith and substance of this Act is regulation of conditions of
employment in the beedi and cigar industry. The Act deals with
particular subject matter as regards the establishments and industrial
premises. These matters are regulation of conditions of employment
in the industry and the industrial relations between the employer and
the employee. Entries 22 to 24 in List III are wide enough to cover
this piece of labour welfaJ:e measure. Entry 22 deals with labour
welfare. Entry 23 deals with social security, employment and un
employment. Entry 24 deals with welfare of labour including condi
tions of work, provident funds, employer's liability, workmen's com
pensation, invalidity and old age pensions and maternity benefits. The
Act. is valid and falls within Entries 22, 23, and 24 of List III.
Sections 3 and 4 of the Act were challenged as violative of Article
19 ( 1) (g) and Article 14 on account of procedural unreasonableness
and conferment of unfettered powers on the licensing authority with
out the requisite safeguards. These two. sections require licence in
respect of industrial premises. Th_e provisions are applicable both to
trade mark holders as well as contractors. There is no difficulty with
regard to manufacturers to obtain licence in respect of industrial pre
mises. If contractors are employers of. Jabour for and on their own
behalf, the contractors will have to obtain licences for manufacture
of beedis in industrial premises. The relevant authorities have to re
fer to certain matters in the grant of refusal of a licence. These mat
ters as set out in section 4 of the Act are (a) suitability·of.tbe place
of premises which is proposed to be used for the manufacture of beedi
.or cigar or both (b) the previous experience of the applicant, (c) the
E .
MANGALOl\E BEEDI WORKS V. UNION (Ray, C.l.) 235
financial resources of the applicant including his. financial capacity to
meet the demands arising out of the provision of the laws for the time
being in force relating to the welfare of labour (d) whether the appli
cation is made bonafide on behalf of, the applicant himself or aoy
other person and ( e) welfare of the labour for the locality in the inter
est of the public generally and such other matters as may be prescribed.
The licensing authority is required to communicate. his reason in writ
ing when he refuses to grant a licence. Section 5 of the Act pro
vides an appeal to the appellate authority against such order. The
power to grant or refuse a licence is sufficiently controlled by necessary
guidance. There are safeguards preventing the abuse of power. The
right to appeal is a great safeguard. The various matters indicated in
;ection 4 in regard to the grant of licence indicate not only the various
features which are to be considered but also rule out any arbitrary
act. There is machinery as well as procedure for determining the
grant of refusal of a licence. The application for grant of a licence
is. to be determined on objective consideration as laid down in the
section. There ts :neither unfairness nor unreasonableness in sections
3 and 4 of the Act.
The validity of the Act was challenged on the principal ground that
the Act imposed unreasonable restrictions on the manufacturers in
their right to carry on trade and business in the manufacture of beedis
and cigars. The unreasonable restriction was said to be the imposi-
tion of vicarious liability on the manufacturers for acts and omissions
in case of independent contractors through whom they get beedis and
cigars and over whose employees they do not have any control and
with whom they do not come in contract. The provisions of section
2(g) (a) and 2(m) read with sections 2(e) and (f) of the Act are
said to create a totally artificial and fictional definition of employer
and thereby to cast vicarious liabilities upon a manufacturer of and
trader in beedis in respect of diverse matters which entail civil aod crimi
nal liabilities. Liabilities are imposed on manufacturer or trader in
beedis in respect of home workers whom it is said, they ·cannot con
trol. The home workers are in thousaods. It is impossible for · a
manufacturer to have aoy idea of the identity of the persons rolling
beedis or the premises where they work. Raw materials are deliver
ed to workers to do the work of rolling the beedis himself and not
having done by any other person. It is, therefore, said there is no
rational basis for iQlposing vicarious liability. Though liabilities and
obligations are great in relation to contract labour there ;, said to be
no corresponding creation of rights which normally exist in employer
in respect of his employees. The cumulative effect aod.impact of the
various provisions of the Act imposing liability on the manufacturer
is said to render it impossible for the maoufacturer or trader to carry
on his business. From a commercial pc!int of view, the restrictions
are said to be drastic and unreasonable.
The Act defines in section 2(e) contract labour meaoing aoy per-
H son engaged or employed in any premises by or through a contractor
with or without the knowledge of the employer in any manufacturing
process. Section 2(f) of the Act defines employee to mean a person
employed directly or through any agency whether for wages or not in
236 ·51JPB.l!ME COUllT llEl'Dllts [19741 3 S.C:R.
any establishment to do any work skilled and unskilled and includes A
. (i) any labonr who is given raw materials by an employer or a contrac-
tor for bemg made into beedi and cigar or bolh at home (herein
after referred to in this Act as 'home worker' and (ii) any person
not employed by an employer or a contractor but working with the
pennission of, or under agreement with, the employer or contractor.
Section ·2(g) of the Act defines "employer" to mean (a) in relation to
contract lat>our the principal employer, and ( o J in telation to other B
labour,. the person who has the ultimate control over the affairs of any
establishment or who has, by reason of his advancing money, supply-
ing goods or otherwise, a sub.stantial interest in the control of the
affairs of any establishment, and includes any other person to whom the
affairs of the establishment are entrusted, whether such other person is
called the managing agent, manager, superintendent or by a .. 1 other
name. Section 2(m) of the Act defines 'principal employer' to mean C
a person for whom or on whose behaH any contract labour is engaged
or employed in an establishment. section 2(h) of the Act defines
'establishment' to mean any place or premises including the precincts
thereof in which or in any part of which any manufactnring process
connected with the. making of beedi or cigar or both is being or is
ordinarily, carried cin and includes an industrial premise... Section
2(i) of the Act defines 'industrial premises' to mean any place or pre
mises in which any industry or manufacturing process connected with
the making of beedi or cigar or both is being or is ordinarily, carried
on with or without the aid of power. ·
These definitions indicate these features. First, there are workers
in industrial pren'tises ·and workers in establishment. Second, the Act
recognises home workers. Third, the Act recognises contract labour
by or through contractor. Fourth, .. any person who is given raw
materfals by an .employer or a contractor is an empl0y,e ... Ag•in. any
person thougll not employed by an employer or a· contractor but work-
ing with the permission or. under agreement with the employer or a
contractor is an employee .. Fifth, in relation to .:ontract labour the
principal employer is a person for whom and on whose beh'lf labour
is engaged or· e,mployed in an establishment. Sixth, the employer in
relation to other labour is a person who has ultim1te con(rol over the
affair~ of any establishment or who has by reason of advancing money,
5Uj>ply goods. or otherwise a substantial interest in the affairs Of ar,y
establishment.
The two· classes of ·employers are broadly defined as the employer
and the prindpal employer.' The first kind is the manufacturer who
di.r"<;tlV employs. labour. ~mob a· manufac~urer becomes. an employer
w1thm tho moanmg Of SectJon· ~(g)(b) '?f ~~e Act ;>y ongag1ng l1bour.
The ~econd class of employer 1s ·(he prmc1pal employer who through
a C<,Jutractcr as defined in section 2(a) of the Act engages labour
wh~h is J.;nown. •s contract lab:our. This hbour <s engaged by. or, on
!)<;half 9f !11~ ma.r,i;factµter who·becomesJho principal .employer • .ThC
third. cate~<iry of employer Js. a contractor. who· engages !"hour .for
exec.iti,rtg, work for and GI). his own behalf.· Such a· cont!actor. may
undertake work from a· manufacturer or a .trade mark holder but he
.E
ii
"' '
I
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MANGALORE BEED! WORKS V. UNION (Ray, C.l.) 237
becomes the principal employer in relation to contract labour on the
ground that the labour is engaged for and on his own behalf. The
fourth class of employer is where a contractor becomes what is known
as sub-contractor, of a contractor. A contractor in such a case would
ask the sub-contractor to engage labour for and on behalf ,,f the con
tractor. Jn such a case the contractor would be the principal employer
because the sub-Contractor is engaging contract labour for and on
behalf of the contractor who is the principal empluyer. The fifth
class of employer is where a person by reason of advancing money
or supplying goods or otherwise having a substantial interest in the
control of any establishment becomes the employor ·of labour. To
illustrate, a mortgagee in possession of an industrial premises, a hypo•
thecatce of goods manufactured ip industdal premises or in a.ny estab
lishment,· a financier in relation to a manufacturer or a contractor or
a sub-contractor may become employer by reason of such consideration
mentioned in the Act.
Iii cases where the manufacturer or trade mark holder himself
employs labour there is direct relationship of master and servant and
therefore liability is attracted by reason of that relationship. There
cannot be any question of unreasonableness in such a case. In the
second category the manufacturer of trade mark bolder engages con
tract labour through a contractor and he becomes the princ;pal emplo
yer. Though such labour may be engaged by a contractor with or
without the knowledge of the manufacturer or trade mark holder, this
contract labour is engaged for the principal employer who happens to
be the trade mark holder or the manufacturer. The liability arises
by reason of coptract labour engaged for or on behaH of the principal
employer. Jn tlie tHird category, the contractor becomes the principal
employer because the contractor engages labour for or on his own
behalf. Where the contractor engages labour for the manufacturer it
is not unreasonable restriction to impose liability on the rr.ar.ufacturer
fer the labour .engaged by the manufacturer through the contractor.
It is important to notice· that the Act fastens liability on the person
who himself engages labour or the person for whom and on whose
behalf Jabour is engaged or where a person has ultimate control over
the affairs of the establishment by reason of advancement of money
or of substantial interest in the control of the affairs of the establish
ment. ·
Therefore, the manufacturers or trade mark hoidcrs have liability
in respect o! workers who are directly employed by them or who are
employed by them through contractor>. Workers at the indu>trial
premises do not present any problem. The m 1aufacturer or trade
mark holder will observe all the provisions of the Act by reason of
employing .such labour in the industrial premises. When the rnamx
facturer engages labour through the contractor the labour is engaged
on behalf of the manufacturer, and the latter has therefore liability to
such contract labour. It is only when the contractor engages labour
for or on his own behalf and supplies the finisheJ product to the
mmufacturer that he will be the principal employer in relation to such
labour and the manufacturer will not be responsible for implementinJ
3-954SCin4
238 SUPREME COURT REPORTS [ 19741 3 S.C.R.
the provisions of the Act with regard to such labour employed by the
contractor. If the right of rejection rests with the manufacturer or
trade mark holder, in such a case the contractor who will prepare
b(ledis through the contract Jabour will find it difficult to establish
that he is the independent contractor. If it is a genuine sale tran
saction by the contractor to the manufacturer or trade mark holder
it will point in the direction of an independent contractor.
This Court in Dewan Mohideen Sahib v. United Bidi Workers'
Union Salem, [19641 7 S.C.R. 646 said that the so called inde
pendent contractor in that case was supplied with tobac;:o and leaves
and was paid certain amounts for the wages of the workers employed
and for his own tr.ouble. The so called independent contractor was
merely an employee or an agent of the appellant in that case. The
so called independent contractor had no independence at all. The
proprietor could at his own choice supply raw niatcrial or refuse to
do so. . The contractor had no rigbt tg_ insist on supply of raw mate
rials to him. The work was distributed between a number of so called
i11dependent contractors, who were told to employ not more than 9
persons at one place to avoid regulations under the Factories Act.
This Court held that the relationship of master and servant between
the appellant and the employees employed by the indep,ndent
contractor was established in that case. If it is found that manu
facturers or trade mark holders are not responsible_ on the ground
that the person with whom they are dealing are really independent
contractors then such independent contractors will have tu be consideroo
as principal employers within the meaning of the A~t ..
The contention on behalf of the petitioners and the appellants is
that in common law a person cannot be made respqnsible fDr actions
oi an independent contractor and that he should not be penalised for
the contravention of any law by an independent contractor is to be
examined in view of the language employed in defining the expressions
cqntract labour, contract, establishment, employer and principal
employer. It was particularly said that when home workers were given
tobacco and leaves directly by the manufacturers the home workers
would not be under their control and the manufacturers should not
be made responsible for providing any amenities or .leave facilities for
those home workers.
This Court in Silver Jubilee Tailoring House & Ors. v. Chief
Inspector of Shops and Establishments & Anr. (Civil Appeal No.
1706 o( 1969 decided on 25th September, 1973) discussed the ques
tion as to whether employer employee relationship existed ·between
the tailoring house and the workers in that case. The definition of a
person employed in that case was a person wholly or principally
employed therein in connection with the business of the shop. The
workers were paid on piece rate basis. They attended the shops if
there was work. The rate of wages paid to the workers was not
uniform. The rate depended upon the skill of the worker and the
nature ~f the work.· .Th~ workers were given cloth for stitching. They1
were to,d how the slttchmg was to be done. If they did not stitch it
MANGALORE BEED! WORKS V. UNION (Ray, C.J.) 2 39
according to the instructions, the employer rejected the work. The
worker was asked to re-stitch. If the work was not done according
to the instruction no further work was given to a worker. A worker
did not have to make an application for leave if he did not come to
the shop on a day. If there was no work, the employee was free to
leave the shop. All the workers worked in the shop. Some worker<
could take cloth for stitching to their homes.
Mathew, J. speaking tor the Court referred to the dedsions of this
Court and English and American decisions and came t<) these conclu
sions. First, in recent years the control test as traditionally
formulated has not been treated as an exclusive test. Control is an
important factor. Second, the organisation test, viz., that the workers
attend the shop and work there is a relevant factor. If the employer
provides the equipment this is some indication that the contract is a
contract of service. If the other party provides the equipment this is
some evidence that he is an independent contractor. No sensible
inference can be drawn from the factor of equipment where
it is customary for servants to provide for their own
equipment. Little weight can today be put upon the provisions of
-tools of minor character as opposed to plant and equipment on a large
scale. Third, if the employer has a right to reject the end product if it
does not conform to the instructions of the employer and direct the
worker to re-stitch it, the element of control and supervision as formu
lated in the decisions of this Court is also present. Fourth, a person
can be a servant of more than one employer. A servant need not be
under the exclusive control of one master. He can be employed
under more than one employer. Fifth, that the \mrkers are not oblig
ed to work for the whole day in the shop is not very material. In the ..
ultimate analysis it would depend on the facts and circumstances of
each case in determining the relatio~ship of master and servant.
The present legislation is intended to achieve welfare benefits and
amenities for the labour. That is why the manufacturer or trade marks
holder becomes the principal employer though he engages cont~act
labour through the contractor. He cannot escape liability imposed on
him by the statute by stating that he has engaged the Jabour through
a contractor to do the work and therefore he is not responsible for the
labour. The contractor in such a case employs the Jabour only for
and on behalf of the principal employer. The contractor being an
agent of the principal employer for manufacturing beedis is amenable
to the control of principal employer. That is why the statute says that
even if the contract engages labour without the knowledge of the ~m
ployer the principal employer is answerable for such labour because
the labour is engaged for or on his behalf. The act and the Rules
thereunder prescribe maintenance of Jog books and registers, Where
the manufacturer or the trade mark holder engages labour directly,
the manufacturer maintains registers and Jog books. Where the manu
facturer engages contract labour through a contractor the manufac
turer will require the contract or to maintain such log ·books of the
contract labour and through such books and registers Will keep control
over not only the contractors but also the labour.
240 SUPREM]l COURT REPORTS [ 19741 3 S.C.R.
The principal employer is the real master of the business. He
has real control of the business. He is held liable because he
exercises supervision and control over the labour employed for and
on his behalf by contractor. The benefits of the welfare measure
reach the workmen only by direct responsibility of the principal emplo
yer. The basis of the welfare measure is in the interest of the workers
with regard to their health,. safety and wages including benefits of leave
am! family life. The Bombay High Court and the Kerala High Court
struck down the provisions contained in sections 2(g) (a) and 2(m)
of the Act in regard to the principal employer being liable for contract
labour as an unreasonable restriction o-:i. the manufacurer's right to
carry on business. This view proceeds on the basis that the principal
employer is liable for acts of the independent contractor. The Act
does not define an independent contractor, nor mention the indepen
dent contractor. The Act speaks of the principal employer in relation
to contract labour and employer in relation to other labour. When
a contractor engages labour for or on behalf of another person that
other person becomes the principal employer. The Attorney General
rightly said that if it were established on the facts of any particul.ar
case that a porson engaged labour for himself he would be the principal
employer of contract labour. · In such an instance there is no question
of agency on behalf of another person.
In cases where an industrial manufacturer finds it convenient to
give work on contract rather than do it employing his own man he
cannot have the advantages of employing the labour without corres
ponding obligations. If the contractors could be made responsible
for the working conditions of labour or their wages or their leave or
their other benefits than no question would arise. It is not uncommon
for labourers to work for a contractor on terms which are designed to
satisfy the law that they are not servants but independent contractors.
In the present case, it is not material to find out as to who can be
called an independent contractor. It can be said that independent
contractors are those who employ labour for and on behalf of them
selves in so far as the present Act is concerned. The only scope for
inquiry is whether a person has employed labour for and on his own
behalf. If the answer be in the affirmative then such a contractor
would be a principal employer within the meaning of section 2(g) (a).
ft appears that the principal employer or the employer, as the case
may be, is liable on the ground that the labour is employed for or on
behalf of the principal employer or the employer. In relation to con
tract labour the principal employer is the person for whom or on whose
behalf any contract labour is engaged in any establishment. An em
ployer in relation to other labour is the person who has the ultimate
control over the affairs of any establishment or has a substantial inter
est in the control of the affairs of any establishment as defined in sec
tion 2(g) (b) of the act. There is no vicarious liability in the case
of the principal employer or in the case of employer The Act does
not define an independeni contractor. The Act does not prevent an
independent contractor from being the principal employer in relation
to contract labour. It will ,bo a question o( fact in each case as to
MANGALORE BEED! WORKS v. UNION (Ray, C./.) 241
who is the person for whom or on whose behalf contract labour is
engaged. If such a contractor who is referred to as an independent
contractor employs labour for himself the liability will attach to him
as the principal employer and not to the manufacturer or trade mark
holder. There is no restriction on the right of the manufacturer or
the trade mark holder to carry on business. They are liable under
the Act for contract labour employed for or on behalf of them.
For the foregoing reasons the provisions of the Act in particular con
tained in sections 2(g) (a), 2(g) (b) and 2(m) are constitutionally
valid and do not impose any unreasonable restriction on the manufac
turer or trade mark holder.
On behalf of the petitioners and the appellants, it is said that sec
tion 26 of the Act gives substantive rights with regard to leave and sec
tion 27 of the Act is the procedural part in computing wages. The
contention advanced was that section 26 of the Act speaks of emplo
yees in an establishment and, therefore, these sections do not apply to
home workers. The contentions are that sections 26 and 27 of the Act
cast an unreasonable burden and impose obligations which are not prac
tically capable of fulfilment and are thus violative of Articles 19 (I)
(f) and (g) of the Constitution. In any event sections 26 and 27 of
the Act are said to bo unenforceable in regard to home work·ors and are,
therefore, violative of Articles 19(1) (f) and (g) so far as the same are
applicable to home workers. These two sections deal with leave and
wages during leave period. Broadly stated, section 26 allows leave at
the rate of one day for every 20 days of work performed by an adult om
ployee during the previous calender year. In the case of a young person
1eave is at the rate ot one day for very 15 days of work during the pre
vious calender year. There are provisions as to calculation of leave
which are not material in the present case.
Under section 27 of the Act an employee shall be paid at the rate
equal to the daily everage of his full time earning for the days on which
he had worked during the month immediately preceding his leave ex
clusive of any overtime earnings and bonus but inclusive of d~arness and
other allowances. There are two explanations. The first explanation
states that the expression "total full time earning" includes cash equiva
lent to the advantage accruing through the concessional sale to employeei
of foodgrains and other articles, as the employee is for the time being
entitled to, but does not include bonus. The second explanation states
that for the purpose of determining the wages payable to a home worker
during leave period or for the purpose of payment of maternity benefit
to a woman home worker "day" shall mean any period during \Yhich
such home worker was employed, during a period of twenty four hours
commencing at midnight, for making beedi or cigar or both.
The word "establishment" is defined in section 2(h) of the Act to
mean any place or premises including the the precincts in which or in
any part of which any manufacturing process connected with the mak
ing of beedis or cigars or both is carried on and it includes an industrial
premises. Section 2(i) of the Act defines "industrial premises" to
1mean any place or premises not being a private dwelling house where
242 SUPREME COURT REPORTS [ 19741 3 S.C.R.
the industry or manufacturing process of making beedis or cigar is car
ried on. An Employee is defined in section 2(f) of the Act to mean
any person employed directly or through any angency in any establish
ment and include any labour who is given raw materials by an emplo
yer or a contractor at home referred to as the home worker and person
employed by an em.iloyer or a contractor but working at the premises
with the employer or contractor. Therefore, the words 'employed in
an establishment' in section 26 of the Act are refe.rable to borne wor
kers as well. The second explanation to section 27 of the Act also
speaks of determination of wages payable to borne worker during leave
period.
It was said that the words "total full time earnings" occurring in
section 27 of the Act were inapplicable to home workers for these
reasons.
First a home worker with the assistance of his family members could
collect large earnings in a month preceding the month in which he
would take leave. This was said to be an unreasonable restriction on
an employer inasmuch as a home worker would not work hard or per
haps at all for a considerable period of time and would work only in the
month preceding which he would take leave. It is not possible for a
home worker to increase his earnings because the employer will have
control over raw materials supplied to home worker as also on the daily
turnover. An employer is in a position to prevent malpractices or
abuse of taking more materials to make a higher income. It is also
reasonable to hold that an employer will not allow an employee on in
creasing the income.
It was secondly said that section 27 of the Act did not prescribe the
minimum number of days an employee should work before he was
entitled to annual leave wages. Reference was made to section 79 (I)
of the Factories Act 1948 which provides for 240 days of work as mini
mum for entitlement of annual leave. The provisions in section 26 of
the Act is that for every 20 days one day's leave is allowed.· If any
worker does not work hard one will not be entitled to leave as conte
plated in the Act. The basis of calculating one day's leave for every
20 days of work is also adopted in the case of Government servants.
(See Central Civil Service Leave Rules, 1972 Rules 26 and 2(m).
Instead of being unreasonable it can be said to be an impetus to a ser
vant to put in the maximum of work in order to obtain the maximum
amount of leave. The entitlement to leave under section 27 of the Act
is based on the number of days of actual work. It is, therefore, not an
unreasonable restriction on the employer.
Thirdly it is said that the payment of leave wages ·at the rate equal to
the daily average of his total full time earnings in the case of home
workers is unreasonable. Reference is made to section 22 of the Act
which speaks of notice of periods of work in industrial premises. ~ec
tion 22 of the Act is not applicable to home workers. In the case of
home workers it is said that they are free to do work at any time and for
any length of time in a day even for 24 hours a day. It is, therefore said
. that it will be difficult to calculate the total full time earnings of home
workers.
MANGALORE BEEDI WORKS V. UNION (Ray, C.J.) 243
The works in section 27 of the Act are "total full time earnings".
One meaning of the words in the case of home workers wiII be daily
average hours of work done by home worker during the last month be·
fore leave provided such average does not exceed the daily period of
work as prescribed in a notice under section 22 of the Act. Such a
construction would give not only full meaning to the words "full time
earnings" but would also place home workers and workers in industrial
premises in the same position with regard to their leave wages. It wiII
not cast unreasonable burden on the employer in the form of leave wage>
disproportionate to the amount of work done by the home w<lrkers.
Another meaning is that the total full time earnings would be the
actual total earnings as far as the workers in industrial premises as well
as home workers are concerned. With· regard to the second meaning
the words "full time" wiII not have any restriction as to hours of work.
The result may be that a home worker may have lqnger hours of work
and larger income compared with the worker in the industrial premises,
but such longer hours of work can be controlled by an employer both
with regard to giving raw materials and allowing longer hours of work.
As a matter of fact it is found that home workers can turn out 700 to
1000 pieces a day. That is the view expressed in the Report of the
Royal Commission on labour in India 1931 as also the Labour Investi
gation Committee Report 1944 and the Report of the Court of Enquiry
appointed by the Government of Madras, 194 7. The minimum wages
prescribed by various states for these home workers are between Rs. 2 to
4.30 for rolling 1000 pieces. Therefore, the Financial burden on
account of leave wages will not be higher to constitute any unrea>onable
restriction.
The Bombay High Court in the present appeals said that the provi
sions of sections 26 and 27 of the Act constitute unreasonable restriction
not only with regard to home workers but also with regard to employees
in industrial establishment. The reason given is that if employees in
industrial premises do not choose to work for all days for the full hours
notified it will be equally impossible to determine what his full time
earnings will be and what his daily average of the full time earnings for
the days on which he worked during the preceding month will be. The
Mysore High Court in the present appeal correctly said that the home
workers will get wages for the leave period corresponding to the number
of beedis manufactured by him for a particular employer. The hours
of work will in that case be immaterial, because if he worked for less
number of hours he would obtain lesser payment. There will thus be
no difficulty in computing wages payable for the annual leave period.
The Jwme worker will get leave wages corresponding to his actual earn·
ing just as the worker in the industrial premises will get leave wages cor
responding to his full time earnings.
The Andhra Pradesh High Court in the present appeal said that
home workers carry on their rolling work at homes which are neither
establishments nor industrial premises. The word ''establishment" as
defined in section 2(h) of the Act ,relates to home workers as well. It
244 SUPREME COURT REPORTS I 1974 I 3 s.C.ll.
is only industrial premises as defined in section 2(i) of the Act which
excludes private dwelling houses.
The home workers are not required to work for a specified number
of hours a day. The fact that sections 17 to 23 of the Act can have no
application to home workers but only to persons employed in industrial
premises does not tender sections 26 and 27 of the Act inapplicable to
home workers. The express language of section• 26 and 27 of the Act
is relateable to home workers. They work in establishments. The
daily average of total full time earnings for the days worked during the
month immediately preceding the leave is applicable to home workers.
l t is because payment to home workers is made at piece rate, viz., for
the number of beed'is rolled. The Madras High Court sai<\ that sections
26 and 27 of the Act have imposed unreasonable restrictions on manu
facturers in regard to employees rn industrial premises. The Madra.
High Court held that for working 11 days a worker would be entitled to
one day as annual leave with wages. The Act does not say so. The
Act provides that any fraction of leave for half a day or more will be
treated as one day's iull leave. Therefore, if on a calculation of entire
leave at the rate of one day for every 20 days of work, there is any frac
tion of more than one day's leave so calculated or earned it would be
treated as one day. It is only where there is fraction of leave earned
that for such 11 days work one day's leave is to be given. It is not
same as providing one day's leave for working only 11 days in all cases.
The entitlement under the Act to one day's leave for every 20 days show;
that the period of 20 days is a minimum period prescribed for earning
one day's leave.
The structure of sections 26 and 27 of the Act is two-fold. First, so
far as workers employed in industrial premises are concerned they are
entitled to annual leave with wages provided they work for at least 20
days a year, for full hours work specified in the notice. Tl1erefore,
sections 26 and 27 of the Act will not apply to workers in industrial pre
mises who have not worked for full working hours according to the
notice for 20 days a year. Second, sections 26 and 27 of the Act will
apply to home workers who work at least 20 days a year and the day
within the expression 20 days will mean any period of day because there
is no notified hours of work.
In view of the fact that the two sections are applicable both to
workers in industrial premises and home workers the expression "'total
fu11 time earnings" occurs in section 27 of the Act. Section 11· deals
with working hours. Section 22 speaks of notice of periods of work.
Sections I 7 and 22 refer to industrial premises and are therefore not
applicable· to home workers. The total full time earning; for workers
in industrial premises will attract the specified periods of work conten1-
plated in section 22 of the Act. With regard to a home worker the
wages during leave period will be calculated with reference to the daily
average of his total full time earnings for the days on which he had
worked during the preceeding month. In the case of home workers it
will be the average of 30 days earnings. To illustrate, if the worker has
earned different sums on different days during the month the sums will
be added for the purpose of arriving at an average. The computation
MAlloALORE BEED! WORKS V. UNION (Ray, C.J.) 245
in the case of home workers will be first with reference to the total earn
ing during the month and full time earning' is the average thereof. The
second explanation to section 27 of the Act shows that for the purpose
of determining the wages payable to home worker during leave period
day sball mean any period during which such home worker, was employ
ed during any period of 24 hours. Therefore, so far as the home
worker is concerned day shall mean a.ny period.
The manner in which leave wages for workers in industrial premises
and home workers are to be calculated may be illustrated with reference
to the beedis and Cigar workers (Conditions of Employment) Mysore
Rules, 1969. Section 44(2) of the Act provides that the State Govern
ment m~y make rules inter alia for the records and re~ister they shall
maintain in establishments in compliance with the provISions of the Act
and the rulos thereunder. Establishment means both industrial pre
miaes .and any private house where the home workers carry on their
work, Rule 33 of the Mysore Rules framed under the Act speaks of
maintenani:e of records and registers in Form No. XIIJ. Form No.
XIII has 8 columns as the muster roll of employees in industrial pre
mises. Rule 33 (2) of the Mysore Rules speaks of records for home
workers in Form No. XIV. There are four columns showing the date,
whether work was done, number of beedis manufactured and the wages
received. At tl!e foot of Form XIV it shows the total number of days
worked in the ·month. Therefore, in the case of home workers wages
are calculated on the basis of these records, namely, the number of
days worked and second the amount of wages received. In the case of
home worker hours of work are not necessary. In the 'case of employee
industrial premises columns 8 and 9 show)nter alia the group, relay,
shift number and period work. With regard to home workers payment
is made at the rate of 1000 pieces of beedis. Leave with wages in the
case of home workers is on that basis of payment. The log book is a
form of guarantee and security for both the employer and the worker in
regard to quality of work and relative payment.
Reference was made to four earlier decisions of this Court for the
F · purp6se of showing that sections 26 and 27 are inapplicable to home
workers. These decisions are Shri Chintaman Rao & Anr. v. The
State of Madhya Pradesh, [19581 · S.C.R. 1340; Shri Birdhichand
Sharma v. First Civil Judge, Nagpur & Ors., [1961] 3 S.C.R. 161;
Shankar Balaji Waje v. State of Maharashtra, [1962] Suwl. 1 S.C.R.
249 and M/s.·Bhikuse Yamasa Kshatriya (P) Ltd. v. Union of India
& Am. U.964] 1 S.C.R. 860. These four cases were decided with
reference to the Factories Act. Sections 79 and 80 of the Factories
Act were considered there. These two sections are in similar language
to section 26 and 27 of the Act. The only difference is that unlike sec
tion 79 of the Factories Act, in section 26 of the Act there is no require
ment of working for 240 days a calendar year for entitlement to annual
!~ave and further thafin section 26 of the Act the words used are
"employee" in place of the word 'worker' and the word "establishment"
in place of the word "factory" in the Factories Act.
In Chintaman Rao (supra) case this Court held that the three
ingredients and concepts of employment are, first there must be an
employer, second, there must be an employee and the third, there must
246 SUPREME COURT REPORTS [ 1974 J 3 S.C.R.
be a contract of employment, In Chintaman Rao case (supra) certain A
independent contractors· known· as Sattedars supplied beedis to the
Manager of a beedi factory. The Sattedars manufactured the beedis in
their own factories or they entrusted t)ie work to third parties. The
Inspector of Factories found in the beedUactory certain sattedars who
came to deliver beedis manufactured by them. The owner of the fac-
tory was prosecuted for violation of sections 62 and 63 of the Factories
Act for failure to maintain the register of adult workers. It was held B
that the Sattedars and their "coolies (sic) were not workers within the
definition of section 2(1) of the Factories Act. The ratio was that the
Sattedars were not under the control of the factory management and
could manufacture beedis wherever they pleased. Further the 'coolies'
(sic) were not employed by the management through the Sattedars.
'Jn Birdhichand Sharma case (supra) the appellant employed C
workmen in factory. The workmen were not at liberty to work at their
houses. Payment was made for piece rates according to the amount of
work done. The workmen applied for leave for 15 days. The appel
lants did not pay their wages. The appellant contended that the work-
men were not workmen within the meaning of the Factories Act. It
was held that the workmen could not be said to be independent C!Jnlrac-
tors but were workmen within the meaning of section 2(1) of the Facto- D
ries Act. A distinction was sought to be drawn between workmen and
independent contractors. It was held·that the workmen could come and
go when they liked, they were piece rate workers within the meaning of
the Factories Act. If the worker did not reach factory before midday
he would be given no work. He was ti:> work at the factory. He
could not work elsewhere. He would be removed if he was absent for
8 days. His attendance was noted. If his work did not come up to E
the standard the pieces prepared would be rejected. The leave provid-
ed under section 79 of the Factories Act was held to be a matter of right
when a worker had put in a minimum number. of working days.
In Shankar Ba/aji Waje case ·csupra) it was held that the labourers
who used to roll beedis in the factory were not workers within the mean-
ing of the Factories Act. Birdhichand Sharma case (supra) was dis
tinguished on the facts. The minority view was that the workers in F
Shanker Balaji Waje case (supra) were of the same type as Birdhichand
Sharma case (supra). In Shankar Ba/aji Waje case (supra) the majo-
rity view was that there was contracts of service. The worker
' was not bound to attend the factory for any fixed hours. He
could be absent from the work any day he liked and for ten days
without informing the appellant. He had to take permission if he was
to be absent for more than 10 days. The worker was not bound to roll G
beedis ot the factory. He could do so at home with the permission of
the appellant. There was no actual supervision. Beedis not up to the
standard could be rejected. Workers were paid at fixed rates.
In Bhikuse Yamase case (supra) this Court had to consider
whether a notification under section 85 of the Factories Act giving the
beedi rollers benefits provided to workers in the Fectories Act was valid. H
Beedi rollers were refused benefits by the owners of beedi manufacturing
establishments. Therefore, the State Government issued notification
under section 85 of the Factories Act Section 85 of the Factories Act
MANGALORB BEED! WORKS V. UNION (Ray, C./.) 247
prO\ "ko Jiat the State Governm, .it may declare that all or any of the
provisc•>ns of the Act shall apply to any place where a manufacturing
process is carried on notwithstanding that the number of persons
employed therein is Jess than the number specified in the definition of
factory or where the persons working therein are not omployed by the
owner but are working with the permission of, or under agreement with,
such owner. The State Government designated certain places to be
deemed factory and t!te persons working there to be deemed workers.
This Court said that extension of the benefits of the Factories Act to
·premises and workers not falling strictly within the purview of the
Factories Act is intended to serve the same purpose. On this reasoning
the provisions for the benefit of deemed workers were held to be reason
able within the meaning of Article 19(1) (g) of the Constitution.
These four decisions were relied on liy counsel for the petitioners
and the appellants fo show that home workers would not be entitled to
leave on the ground that sections 26 and 27 of the Act were unworkable
In regard to home workers and constituted unreasonable restrictions.
The imposition of liability to afford to home workers benefits like annual
leave with wages cannot be said to be unreasonable restriction on the
right of the owner to carry on his business. In the Act, the word
"employee" includes a home worker .. The word "establishment"
applies to a private house. The second explanation to section 27 of
the Act indicates that a home worker is dealt with by the section. Sec
tions 26 and 27 of the Act are to be read together. Jn Birdhichand
Sharma case (supra) this Court held that if a worker had put in a num
ber of working days he would be entitled to leave. This Court did not
go into a question as to what the meaning of the word "day of work"
would be to entitle a worker annual leave under section 79 of the Fac
tories Act in Birdhichand Sharma case (supra).
Jn the present case the Act contemplates that ho ·ce workers are at
liberty to work at any time and for any number of h"urs a day. The
Act cannot be said to be not applicable to home worlcers. The Act has
made a distinction between the two types of workers and has made the
Act applicable to both the types of workers. Even with regard to
workers in industrial premises where period of work is notified it is not
obligatory on the part of the employer to allow an employee to work
in the industrial premises for the whole of the notified period of work ..
The employee can be asked to work for the whole of the notified period
of work which will not exceed 9 hours a day or 48 hours a week as
provided in section 17 of the Act. In Shankar Ba/aji Waje case
(Supra) the majority view was that the expression "total fnll time earn
ings" mean earnings in a day by working full time on that day and
full time was to be in accordance with the period given in the notice
displayed in the factory for the particular day. On that ground the
workers in Shankar Ba/aji Waje case (supra) were held not be
entitled to wages for the leave period because such wages could not be
calculated when t!1e terms of work were such that they could come and
go when they Jiked and no period of work was mentioned with respect
to workers., The majority view in Shanker Balaji Waje case (Supra)
will not apply to sections 26 and 27 of the Act because the home
workers are entitled to ·wages during the leave period and such wages
do not in the case of home workers depend upon the consideration
248 SUPREME COURT REPORTS [ 1974 J 3 S.C.R,
whether a particular home worker woks for a whole of the notified
period of work. The basis of calculation of wages in the case of home
workers is the daily average of his total full time earnings for the days
on which he haq worked during the month immediately preceding his
leave. If a home workers does full time work by rolling out 1000 piecei
he will get corresponding amount of wages. Both the factory workers
in industrial premises and home workers in establishments are ·similarly
placed by proper control over or regulation of .supply of raw materials
to home workers. Just as the total fu11 time earnings of the worker in
an industrial premises are calculated with ~eference to hours of work
each day, similarly the full time earnings of the home workers are
calculated by the earnings of each day which are kept under control by
supply of measured raw materials to produce the requisite number of
beedis which a worker can produce a day within his hours of work in
the establishment. So far as home workers are concerned, the payment
is made at piece rate and it is not material in their case about specifi"d
hoers of work because they will get lesser payment if they will not work
for the same number of hours as worker in industrial premises. The
provisions of sections 26 and 27 are applicable to home workers
and workers in industrial premises are also capable of being made
applicable without any reasonable restrictions on employers.
It has been contended that section 31 of the Act which provides
one month's notice in lieu of notice of dismissal was an unreasonable
restriction. The reason advanced was that the Act has not dfined the
word "wages" and therefore it is not possible to calculate wages. Section
27 of tl:e Act prescribed the rate for calculating wages during the period
of leave. Section 39 (I) of the Industrial Disputes Act applies to
matters in respect of every industrial premises. Section 2(rr) of the
Industrial Disputes Act defines wages. The defination of wages in the
Industrial disputes Act applies to workers in industrial premises con
templated by the Act. Home workers are not included in industrial
preuises because they work in private dwelling house which are
establishments. The defination of wages in the Industrial Disputes Act
will apply to workers who are paid on monthly basis. Section 28 ( 1)
of the Act empowers the State Government to direct that the provisions
of tlie Payment of Wage_s Act, 1936 shall apply to employees in
establishments to which the Act applies. Section 2(6) of the payment
of wages Act defines "wages" tq include inter alia any remuneration to
which the person employed is entitled in respect of any leave period.
Some aid may be had from the definition of wages in the Payment of
Wages Act. viz. wages include leave wages. Therefore, the word
"wages" in section 31 of the Act will mean wages which are calculated
under section 27 of the Act . This can be calculated both in the cases
of workers in industtial premises and home workerSin establishments.
Therefore, the proivsions contained in section 31 of the Act cannot be
•.aid to be unreasonable restrictions.
The Petitioners and the appellants next contended that Rule 37
of the Maharasthra Rules and Rule 29 of the Mysore Rules framed
under section 44 of the Act imposed unreasonable restrictons on the
·beedi an~ cigar manufacturers. Rule 37 of the Maharashtra Rules
\
MANGALORE BEEDI WORKS V. UNION (Ray, C.J.) 249
provides that no employer or contractor shall ordinarily reject as sub
standard or chhat or otherwise more than 5 percent of the beedis or
cigars of both received from the worker including a home worker. Rule
37(2) of the Maharashatra Rules further provides that where any beedi
or cigar ls rejected as sub-standard or chhat or otherwise on any ground
other than the ground of wilful negligence of the worker, the worker
shall be paid wages for the pieces so rejected at one half of the rates
at which wages are payable to him for the beedis or cigars or both which
have not been so rejected. ·
Rule 29 of the Mysore Rules provides that no employer or contractor
shaR ordinarily reject an sub-standard or chhat or otherwise more than
2 per cent of the beedis or cigars or both received from the worker in
cluding a home worker. It is also provided there that the employer or
contractor may effect such rejection upto 5 per cent for reasons to be
recorded and communicated in writing to the worker.
Rule 29 of the Kerala Rules is identical to Rule 29 of the Mysore
Rules except that instead of 2 per cent it provides for 2.5 per cent as
a limit for rejection.
The Kerala High Court held that Kerala rule 29 fixes arbitrary per
centage and is not in the interest of the general public. The inpos1tion
of 5 per cent by the proviso to Rule 29 was said by the Kerala High
Court to be arbitrary. It was said that the percentage of rejection might
be higher than 5 per cent but the fixed limit of 5 per cent would have
this bad consequence. It is that quality of beedis would go dewn if
the workers were assured that more than 5 per cent would not be
rejected.
The Mysore High Court rejected the contention that Mysore Rule
29 imposes an unreasonable restriction. The reason given by that High
Court was as follows. The argument that sub-standard beedis or cigar;
in excess of 5 per cent cannot be rejected by the employer is unsound.
Ordinarily 2 per cent rejection is permitted. Rejection upto 5 per cent
is permissible only after recording reasons therefore. But if the employer
finds that the quantity of sub-standard beedis is about 5 per cent, the
matter is to be referred to the Inspector. Therefore, Rule 29 does not
compel the employer to accept sub-standard becdis when the rejection
is above 5 per cent.
The Bombay High Court upheld Rule" 37 of the Maharashtra Rules
which allows rejection of more than 5 .per cent. The 5 per cent reje:tion
is said by the Bombay High Court to he an outer limit. It does not
mean according to the Bombay High Court that the rejection mu1t b'
5 per cent. It is said that the contractors by reason of their experieRce
will find 5 per cent rejection to be reasonable. The experience suggests
that the outer limit of 5 per cent is fairly reasonable. It is difticult to
imagine that no limit should be fixed. The Bombay High Courrfurther
found that even for sub-standard beedis there is a market though at a
lesser rate. The Bombay High Court further found that pilfering of
tobacco was an accepted vice of the industry. Inspi\e of .that melollv
rejection in the industry hardly exceeded 3 per cent. The Bombay High
Court found 5 per cent rejection to be reasonable.
250 SUPRE~1 E C't1 '. REPORTS [ 19741 3 S.C.R.
The maximum limit of 5 per cent for the rejection of beedis is
therefore, based on experience in tl1c industry and secondly the employe;
ca!' reject m?re than 5 per cent by raising a dispute before the appro
pnate authonty.
On behalf of the petitioners and the appellants it was said that the
word "sub-standard" by itself would offet no guidance for rejection and
confer arbitrary power. Section 39(1) of the Act provides that the pro
visions of the Industrial Disputes Act shall apply to matters arising in
respect of every industrial premises and section 39(2) (~) 'of the Act
provides that notwithstanding any thing contained in sub-section (1) a
dispute between an employer and employee relating to the payment of
wages for beedi or cigar or both rejected by an employer shall be settled
by such authority and in such manner as the State Government may by
Rules specify in that behalf. Section 44(2) (r) of the Act provides for
making of rules with regard to the manner in which sorting or rejection
of beedi or cigar or both and disposal of rejected beedi or cigar or both
shall be carried out. The Mysore Rule 27 provides that any dispute
between an employer and employee in relation to rejection by the em
ployer of beedi or cigar or both make by an empfoyee may be referred in
writing by the employer or the employee or employees to the Inspector
for the area who shall after making such enquiry as he may consider
necessary and after giving the parties an opportunity to represent their
respective cases, decide the dispute and record the proceedings in form
X. For01 X relates to record of decision of Order. Various particu-'
Jars, inter alia, are substance of the dispute, substance of the evidence
taken and findings and statement of the reasons therefor. There is also
a rihgt of appeal from the decision of the Inspector to the Chief
lnspector:
It therefore apears that the Rules about rejection and fixing maximum
limit of 5 per cent are reasonable and fair. First, experience in the
industry as recorded in the Report of Minimum Wages Committee
supports such limit of 5 per cent as normal and regular. Second, inspite
of 5 per cent maximum limit it is permissible to the employer to reject
more than 5 per cent. For that a dispute is raised before the appro
priate authorities set up under the Rules. The State Government under
Sections 44(2) (r) and (s) of the Act is empowered to make Rules in
respect of the manner in which sorting or rejection of beedi or cigar or
both and disposal of rejected beedi or cigar or both shall be carried ollt
and the fixation of maximum limit of rejection of beedi or cigar or both
manufactured by an employee. Section 39(2) of the Act provides that
a dispute between an employer and employee relatin~ inter alia to
rejection by the employer of beedi or cigar or bo)h made by an employee
and the payment of wages for beedi or cigar rejected· by the employer
shall be ·settled by such authority and in such manner as the State Gover
ment may by Rules specify in that behalf. Rule 27 of the Mysore
Rules as well as Rule 27 of the Kerafa Rules provide that a disoute
hetweon an employer and employee or employees in relation to rejection
by the employer of beedi or cigar or the payment of wages for the becdi
or cigar rejected by the employer may be referred in writing by the
employer or· employee to the Iaspector for the ·area. The Inspector
after hearing the parties shall decide the issue. The aggrieved party has
the right of Apeal to the Chief I~pector.
MANGAWRE BEED! WORJ:S v. UNION (Ray, CJ,) 251
Under Rule 29 of the Mysore Rules rejection of more than 2 per
cent and upto 5 per cent is required to be for reasons in writing. Rule
37 of the Maharashtra Rules provides for rejection upto 5 per cent
without any obligation to give reasons. It was said by the petitioners
that the Mysore and Kerala Rules fixed the limit for rejection but the
Maharashtra Rule did not do so. Both the Rules fixed 5 per cent as
the maximum limit for rejection. The Mysore and the Kerala Rules
have nothing corresponding to Maharashtra Rule 37(2) requiring pay
ment at half the rates for beedis rejected as sub-standard, if. the same
was not due to the wilful negligence of the employee. It was, ther<"lore,
said that either up to 5 per cent rejection under Maharashtra Rllle 37
or rejection of more than 5 per cent the employer was under an abli
gation to make payment at half of the rate as rejected beedis if such
rejection was not due to the willuI negligence of the employee.
It has, ther·ofore, to be ascertained as to whether the Rules prohibit
employer from rejecting more than 5 per cent even ;r they· are {ound
to be sub-standard l!_nci seconclly whether the requirement to pay wages
at one half of the rate for the rejected beedis is a reasonable restriction.
The Rules provide tor rejection upto 5 per cent. The Rules
further used the word 'ordinarily' in regard to such rejection.
In case of rejection of more than 5 per cent Rule 27 of the Mysore
Rules and Rule 3 7 of the Maharashtra Rules provide for raising of a
dispute in regard to such rejection. The dispute contemplated is in
relation to rejection of beedis and the payment of wages for the rejected
beedis. The word "rejection" and "rejected" indicate that the dispute
is raised because of the rejection of beedis. The contention advanced
on behalf of the Petitioner that before a dispute is raised on rejection
is possible is erroneous. The dispute arises because of rejection.
Therefore, Rules 27 and 29 of the Mysore Rules and Rule 27 of the
Kerala Rules do not impose any unreasonable restricton on the right of
rejection.
Maharashtra Rule 27 also permits rejection ·of more than 5 per cent
and raising of disputes. The contention on behalf of the petitioners
that the Maharashtra Rule which requires payment at one .half of the
rate for the rejected beedis on any ground other than the ground of
wilful negligence of the worker is an unreasonable restriction is not
correct. The Bombay High Court correctly held that the experience in
the industry is that there is a market for sub-standard beedis. It is also
reasonable to hold that home workers will be interested in seeing that the
beedis are not sub-standard because in the process home workers would
be earning less. The Maharashtra Rule is intended to eliminate exploi
tation of illiterate workers who are mostly women. The Rules with
regard to rejection are, therefore, reasonable. It is also open to the
employers to raise dispute for rejection above 5 ·per cent,
The Petitioners and the appellants challenged section 37(3) of the
Act as unworkable. That sub-section provides that the provisions of
the Maternity Benefit. Act, 1961 shall' apply to every establishment
as if such establishment were an establishment to which the said 1961
Act had been applied by notification unde.r section 2(i) of 'he said
1961 Act. The proviso to section 3 7 ( 3) of the Act states thal Mater
nity Benefit Act in its application to a home worker shall apply subject
·.~.
252 SUPREME COURT REPORTS [ 1974 J 3 S.C.R.
to certain modifications. The Madras High Court upheld the conten
tion and said that since a worker in a beedi industry is not required to
w.ork regularly for any prescribed perio:I of hours in a day or even day
after day for any specified period, from the very nature of the case, pro-
visions of the said l % l Act are unworkable with regard to such home
workers. It may.be stated that the reasonableness of section 37(3) of
the Act was not challenged. An argument which was submitted was
!hat it was difficult to locate home workers. That argument was not
pressed in this Court. The provisions of the said 1961 Act in sections
-4 &nd 5 thereof deal with prohibition of employment of, or work by,
women, prohibited· during certain peri":I and right of payment of mater-
nity benefit Section 4 of the 1961 .Act does not present any difficulty
because it speaks of prohibition of work by a women in any establish
ment during .six months immediately following the day of her delivery.
Further, section 4 provjdes that on a request being made by a pregnant
woman she will not be required to do work of an arduous nature or
work which involves long hours of standing and that period is one
month immediately precedi~ the period of six weeks before the date of
her expected delivery. Section 5(2) of the said 1961 Act provides
that no women shall be en.titled to maternity benefit unless she has
actually worked in any establishment f6r a period of not less than 160
days, in the twelve months immediately preceding the date of her
expected deJivery. There is no difficulty with regard to working of
these sections in regard to maternity benefits to women employed in an
establishment.
For these reasons, we hold that Parliament had legislative compe- 4
.tence in making this Act and the provisions of the Act are valid and
do not offend any provisions of the Constitution. E
The Writ Petitions Nos·. 127-132 of 1972 are dismissed. The
Judgments of the Madras High Court, Bombay High Court and the
Andhra Pradesh High Court are set aside, and Civil Appeals Nos.
2516-23, 2560-69, 2661-64 of 1972, 66-69, 72-75, 1307, 854-56 •
. 857-59, 1203 and 1204 of 1973, 307-311 of 1972 and 173 of 1973
are dismissed. The State of Maharashtra and the Union of India F
appeals against the judgements of the Bombay High Court and the
Andhra Pradesh High Court being Civil Appeals Nos. 1864-73/ l 9 71
and 1972-86/1971 respectively are accepted. The appeals from the
Judgement of the Gujarat High Court and Mysore High Courts being
Civil Appeals Nos. 585/1971 and 1553, 1614-18, 1769/1971, 1131-
33 and 1440 of 1972 respectively are dismissed. The parties will pay
and bear their own costs. G
ALAGIRISW AMI, J .-I am substantially in agreement with the judg
ment delivered by my Lord, the Chief Justice, but I think it is neces
sery to add a few words to clarify certain matters in view of the com
plications that are likely to arise .otherwise. The Act is the result of
a compromise between the original intcQtions of the Government and
the modifications they had to make in the proposed measure as a result
of eoo<:asions intended to bring the home workers within the scope
Ii the Act. The original intention wa~ not to permit beedi rolling in
private homes which will involve thousands of labourers in thousands
I
MANGALORE BEEl:'I WORKS v. UNION (Alagiriswpmi, /.) 253
A of far-flung homes and the difficulty of applying the provisions of the
measure to them. The result is an Act which is likely to give rise to
many difficulties in its actual working. It is obvious on a reading of
the measure that its purpose is to rope in every possible person who
could be brought in as an employer. But the resuft of the definitions
in the Act is that every body would be a principal employer, e!l'ployer
and contractor and every labour will be contract labour.
Take the definition of the word "contractor". In so far as it says
that -it means "a person who, in relation to a manufactt.tring process,
undertakes to produce a given result by executing the work" it is not
objectionable and refers to a contractor ordinarily understood. But
when the words "through contract labour" are added it leads to com-
plications. "Contract labour" is defined as "any person engaged or
employed in any premises by or through a contractor". Therefore, all
labour employed by a contractor is contract labour. If any manufac- ·
turer employs any person through a contractor, the labour would be
contract labour .. Then again "contractor" also~eans "a person who
engages labour for any manufacturing process in a private dwelling
house". In such a case even a principal employer who engages labour
for any manufacturing· process would be a contractor. The further de
finition of the word "contractor" includes a sub-contractor, agent,
munshi, thekedar or sattedar. These are obviously included to cover a
class of persons dealt With by this Court in certain decisions including
Chintaman Rao's Case (1958 SCR 1340). An "employer" is defined
to .be, in relation to contract labour, the principal employer. I have
already pointed out that contract labour would include labour employed
even by the manufacturer himself direct. "Principal employer" is de
fined as "a Jl!'rson for whom or on whose behalf any contract labour
is engaged or employed in art establishment". Therefore, when con
tract labour is employed for a person he is principal employer. When
contractlabour is engaged or employed on behalf of a person he is also
a principal employer. What distinction could be made between the two
is a little difficult to understand. However, in the second part of de
finition of "employer" in relation to labour other than the contract lab
our in clause 2(g) (li)-though in view of what I have said earlier it is
difficult to see what that other labour could be-there can be no objec
tion to the person who has the ultimate control over the affairs of any
establishment being considered the employer, as also any person to
whom the affairs of the establishment are entrusted, whether such other
person is called 'the managing agent, manager, superintendent, or by any
other name. But to call a person who has, by reason of his advancing
money, supplying goods or otherwise, a substantial interest in the con-
trol of the affairs of any establishment, also an employer is very diffi
cult to justify. It is apparently intended to cover cases where a person
runs business benami i.e. in another's name. There can be no objec
tion to such a provision. But merely because a person lends or ad-
vances money or supplies goods he cannot be called an employer. He
may have a substantial interest in the control of-the affairs of the manu
facturing establishment in the sense that the security for the money ad
mnced depends upon the manufacturing establishment being run pro
perly or even in the sense that a person supplying goods might also be
4-l954Sup .C.L /74
254 SUPREME COURT REPORTS ( 19741 3 S.C.R.
interested in the control-of the affairs because he may be supplying good;
on credit. I think the words "or who has, by reason of his advancing
money, supplying goods or otherwise, a substantial il)terest in the
control or the affairs of any establishment" should be struck down.
The interpretation placed upon the expression "employer" by me
learned Attorney General does not really flow from the various defini
tions in the Act. I think it is not without significance that the learned
Attorney General put forward this interpretation because it is only on
that basis that the Act could be workable at all. While I realise that
courts should give effect to the intentions of the legislature, it can be
done only if that is possible without doing violence to th.e actual langu
age of the statute. The various definitions plainly seek to rope in every
body who has anything to do with the manufacture of beedies and while
trying to give effect to the penal provisions in the statute considerable·
difficulties will arise. There will on the one hand be the actual occu
pier of the industrial premises. There will be on the other hand a per
son who might have advanced money to him and supplied goods to
him and therefore may be substantially interested in its control. The
actual occupier himself might be a contractor and in that case he as
well as the person on whose behalf beedies are manufactured would b~
liable. Who, in that case, would be actually liable? I do not agree
with the view taken by the Bombay High Court that the Act exhibits
an intention to retain the system of contractors. It only takes notice
of the existence of the system of contractors and it appears to me that
by making the principal employer responsible in every case it is actual
ly trying to force the principal ·employer to undertake the work of manu
facture himself rather than give it to contractors because in any case he
would be ultimately liable financially and otherwise to everyone of the
workmen employed. Quite possibly if an independent contractor is
one of the type envisaged by the Madras High Court in its judgment in
Abdul Aziz Sahib & Sons v. Union of India (1973 2 MLJ 126) that is,
of a person buying the materials from the person whom it calls the trade
mark holder and then selling the beedies to him, he could be called
an independent contractor. But he is actually a manufacturer himself
in that case. He may be selling the beedies manufactured by him not
to one person but to many persons. The conditions in the beedi indu'
try being that the actual person who ultimately sells the beedies to the
public emp1oys various n1eans by which he does not take any responsi
bility for the welfare of the workers employed in the industry, the Act
proceeds on the basis rhar he must be n1ade responsible. I find it diffi
cult to accept the contention of the learned Attorney General that tho
criterion adopted by the Madras High Court is both wide as well as
re5trictive. It can h.: said to be \vide or restricted, as one choose to
call it, only if one cavisa~~s a situation like the one in Dewall Mohi
tken's cave (1964 7 SCR 646). But then if the so called contractor
is really a benami for the manufacturer there is no difficulty in holding
the manufacturer rr~ponsible.
The main cor.tenlions put forward on behalf of the various appel
lants are re~arding the provisions of ss. 26. 27, 29, 31 and 37 of the
Act and Rule 37 of the Maharashtra Rules and the corresponding rules
MANGALORE BEED! WORKS v. UNION (A/agirisw(lmi, J.) 255
made by the various other States. The very convincing reasons and
the criticism made by the various appellants were not met by the argu-·
meats advanced by the learned Attorney General. It is now well es
tablished from the Chintama11 Rao"s case (supra), Shankar Balaji's
case (1962 Supp. I SCR 249) and Bhikuse's case (1964 1 SCR 860)
that in this industry even people working in factories belonging to manu
facturers come as they like, go as they like, work on some days even
for one hour a day, and there are no fixed hours of work. This sort
of situation exists mainly due to the fact that the payment is made to
the worker on a piece rate, and the work is also carried on as a part
tinie occupation. What applies to them applies with greater force to
the home workers. Therefore when section 26 provides that every em
ployee in an establishment (which will include a dwelling house) shall
be allowed in a calendar year leave with wages at the rate of one day
for every twenty days of work performed by him during the previous
calendar year, it leads to real difficulty. There may not be much point
in the criticism that whereas the Factories Act provides for annual
leave only for person who had worked for 240 days in a year this Act
provides for one day's leave for every 20 days during which they have
worked. It may be possible for the contractor to know on how many
days the home worker has worked from the log book maintained by
him. But what is the wage which has to be paid to him during the
period of leave ? That term is not defined in the Act and it is not
permissible to refer to other Acts in order to understand the meaning
of that term. Even if we take it to be what it means in popular ufage
it is not possible to say what arc the wages in the case of a home wor
ker. A home worker might work for one hour on one day, eight hours
on another day and not at all for a number of days. What would be
the wages payable to him ? I am not canvassing the reasonableness of
this provision but of the difficulty in giving effect to the provision. The
same criticism applies to various other provisions contained in that
section. · Section 27 provides that for the leave allowed to an em
plovee under section 26 he shall be paid at the rate equal to the
daily average of liis total full-time earnings for the days on which
he had worked during the month immediately preceding his leave
exclusive of any overtime earnings and bonus but inclusive. of dear
ness and other aUowances. The term "Full-time earnings" has been
interpreted in Shankar Balaii"s anti Bhikuse"s cases. If it is not appli
cable to an emolovee of the tv,e of Pandurang in Shunkar Balaji's
ca" surelv it cannot apply to a home worker. This difficulty is not
got over by Explanation fl which describes a "day" as any period
durin~ which the home worker was employed during a period of
twenty-four hours. That does not help in calculating the full-time
earnings. Again. what meaning arc \VC to give to the term '·fuil
timc earnings· when there is no perio/J of work at all and there ore
no fixed hours of working ·in the case of a home worker ? J am not
satisfied with the learned Attorn~y General's interpretation of section
23 that h is not permissible after this Act came into. force for anv
worker of the type of Pandurarig in Shankar Balaji's case to work
under the conditions described iri that case. If a person should not
be employed in an industrial premises except in accordance with
the notice of work displayed in the premises under section 22, it
256 SUPREME COURT REP OR TS [ 1974 l 3 S.C.ll.
does not mean that he cannot work for less than the period mention
ed in th~ notice of work. -bnli if he is employed for a longe~ tilill'
than that mentioned in the notice of work would the occupier of
the industrial premises make himself liable to-·be proceeded against.
Jn anv case even if that interpretation is correct that cannot apply
tO a home worker.
The difficulty of applying the provisions of the Maternity Benefits
Act is again apparent. The very. purpose of allowrng . the home
workers to work in their homes bemg that the work $l! rolling beed1es
is light work, which men and women can do in their homes during
their spare hours, the provision of the Maternity Benefits ·Act r""
garding women not being allowed to do at.duous labour for a cer
tain period before deliverv arld after de_livery is not apparent. And
how can the provision be applied to women who cannot be said to
be, so to say, employed continuous~y for a certain period before the
confinement.
Under section 31 no employer shall dispense with the services
of an employee who has be.en employed for a period of six mo)lths
or more, except for a reasonable cause, and without giving such em
ployees at least one month's notice or wages in lieu of such notice.
Is it enoueh that the emplo.yee has been employed for a period of
six months if he has been working for one or two days every month
during those six months, and in any case how are his wages in lieu
of notice to be determined ? And who would be the "employer
competent to dispense with the services of the employee"? If a
contractor dispenses :with the services of an employee in contraven
tion of section 31 and is convicted utiler section 33 for the first time,
would the principal employer be liable to imprisonment if there
is a second prosecution? These are some of the problems which
are likely to arise in actual working of the Act.
I must make it clear that my oojectiott is not to any of the pro
visions on the ground of their -Im-reasonableness or constitutionality.
The long abstracts which the learned Attorney General read from
the Report of the Royal Commission on Labour, the Rege Com
mittee Report, and the Reports of Dr. B. V. N. Naidu and Mr. M. A.
Natarajan depict the miserable conklitions in which the workers int
the industry work. Nobody can dispute the need !or setting right
those evils. But good il!(enti<;ms should not result in a legislation
which would become ineffective a.nd lead to a lot of fruitless litiga"
tion over the years. I think it Js necessary to utter a word of caution
lest the fact that we upholkl the vafidity of the Act as such should be
interpteted by various courts §.nd tribunals as sanctioning one inter
pretation or the other of the various provisions. That would be
opening up the pandora's box of litigation. I would therefore hold
in a2rcement with the maiority of the High Courts that sections
26, 27. 31 and 37(3) do not apply to home workers.
And finallv as re£ards Rule 37 of the Maharashtra Rules, it was
accepted by the appellants as reasonable if it is interpreted as mean-
MANGALORE BEED! WORKS v. UNION (A/agiriswami, J.) 257
in2 that ordinarily chhat up tQ five per cent could be rejected, but
hiRher thaa that is. rejected it woo1tl be subject to a decision by the
Inspector. It was said that_ to make the rejection of chhat in excess
of five per cent. to depend u~ori the decision by the Inspector would
make all those beedies us~less becatlse they have got .to be heated
immediately so that the beedies may not be spoilt because of the
moisture. I think that interpretation is correct ·and the other States
mav amend . the RUies so as to bring it in line with the Mabarashtra
Rule.
I have tried to interpret the various provisions of the Act not in
order to consider the;ir- constitutionality or the reasonableneS6 of
the restrictions as reflecting on the constitutionality, but of thefr in
terpr~tation in so far as they'ar~ likely to lead to difficulties in actual
application of the provisio_ns of the Act. I think it would be good
in the interest of all concerned if the Act is amended as early as
possible to remove all the lacunae and the ,difficulties pointed out
above. These difficulties have arisen oecause of an attempt blindly
10 apply the provisions, w)lich would be quite workable if they are
applied to conditions wh•~e the Factories Act would \je applicable,
where the Jabour is regular in its attendance every day as well as
over a period, to conditions ~f work which are vastly tlifferent as:
well as to people who work at home without, a conscious attempi to
mould them to suit those conditions. The sooner that is done the
better for all concerned.
P.H.P. Appeals dismissed.