Steel Authority of India Ltd. vs. National Union Water Front Workers

 Facts of the case:

The appellants, a central government company is engaged in the sale and manufacture of various types of iron and steel materials. Contractors were entrusted with the work of handling the goods in their stockyards. On July 15, 1989, the Government of West Bengal issued a notification prohibiting the employment of contract labour in four specific stockyards in Calcutta under Section 10(1) of the CLRA Act. This notification was kept in abeyance initially for six months and thereafter, extended that period from time to time but stopped extending after August 31, 1994. The first respondent, a labour union filed a writ petition in the High Court of India, seeking to absorb the working of contract labour in their regular establishment and asking for the prohibition notification in abeyance to be abrogated. The High court accepted the writ and held for the labour union. This judgement was challenged by the appellants based on a recent judgement of the Supreme court (passed while the case was pending) that held that in cases of Central government companies, the appropriate government is the central government. This appeal was dismissed by the High Court and the case was finally appealed to the Supreme Court.


Key issues:

The key issues of this case are:

·       Whether the prohibition notification issued under Section 10(1) of the CLRA Act by the government is valid and applies to all Central government companies

·       The correct interpretation of the expression “appropriate government” in Section 2 of CLRA Act

·       If automatic absorption of contract labour follows on the issuance of a valid notification prohibiting the contract labour.


Decision of the Court:

The Supreme Court held that the contract workers would have no right to automatic absorption after abolition. They would only have the right to preference in employment to fill in the vacancies of permanent employees. It further clarified who an appropriate government is in Section 10. Finally, it clarified the scope of intervention of government or a tribunal in the relationship between an employer and employee.  The court thus accepted the appeal.


Final Ratio:

The honorable court clarified the definition of ‘appropriate government’ in clause (a) of section 2 of the Industrial Disputes Act, to be lucid and clear. It said that the meaning was to be interpreted as it is commonly understood. It also delineated the words ‘authority’ and ‘state’ as given in article 12 since being an instrumentality of the central government does not mean that it is also under the authority of the central government. Therefore, it would be incorrect to say that for any establishment of central government, the appropriate government would be the central government. It also held that according to Sub section (1) of section 10 empowers the appropriate government to prohibit a notification in the official Gazette after consultation. There are also various necessities that need to be kept in mind before issuing the notification. The court observed that the notification of central government in question did not avert to any of the essentials except the requirement of consultation. Furthermore, the court also deliberated on the automatic absorption of contract labor working in an establishment after issuance of a prohibition notification. It held that there was no ground for the absorption of contract labour in issuing a notification and that it is not for the High court or the Supreme court to read in an unspecified remedy in Section 10. Various clarifications were also given in terms of the Industrial Disputes Act by the court.


Personal Observations:

This case marks an important distinction to the jurisprudence of labour laws, making it extremely important. It discussed various important segments of the Industrial Dispute Act and cleared ambiguities with respect to various terms in Labour laws. Most importantly, it discussed the question of automatic absorption of labour after suspension. Hence, it becomes a very important case while discussing labour laws in India.

Varuni Agarwal, 
2nd Year, OP Jindal Global University

[1] Steel Authority of India Ltd. vs. National Union Water Front Workers, (2001) 7 SCC 1.

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