Judgment :- 1. The petitioners are manufacturers of beedi, and raw materials required for the beedi industry. These petitions along with a number of other petitions that were beard together question the validity of the Beedi and Cigar Workers (Conditions of Employment) Act, 1966 (hereinafter referred to as the Act). The actual prayers in these petitions and the others that were heard together varied-It may however be stated that a general attack has been levelled against the Act and particular provisions thereof have been singled out for special attack. In O. P. No. 3307 of 1968 the sections of the Act that are challenged are S.2 (d). (e), (f), (g), (i), (m); S.3, 4, 7, 21, 26, 27, 33, 34, 44 (2) (m), (r), (s), (t), (u) and (w) of the Act and the rules in Chap.5 of the Rules. In O. P. No. 1338 of 1969 the sections challenged are 1 (3), 2, 3, 4, 7, 8, 21, 26, 27, 33, 36 and 44 and the rules framed under the above Act. There is an important additional prayer in O. P. No. 1338 of 1969 that the Act has been passed by the Parliament without legislative competence. 2. At the time of the arguments the grounds urged before me were the following. (1) S.1 (3) of the Act has conferred arbitrary powers on the State Government. This is the contention raised by counsel for the petitioner in O. P. 1338 of 1969. (2) Counsel for the petitioner in O. P. 1338 of 1969 also raised the contention that the Parliament has no legislative competence to pass the Act. (3) The petitioners in both the cases contended that S.2 (g) (a) and 2 (m) have to be struck down. 3. The validity of S.3, 4, 21,26 and 27 were also challenged. The rule making S.44 (2) was not spared either. 4. The ground of the attack was that this Act as a whole and the particular provisions that have been referred to above have imposed unreasonable restrictions on the business or trade carried on by the petitioners. The restriction cannot, it is said, be upheld under clause (6) of Art.19 of the Constitution of India. Art.14 was also referred to, but the arguments centred round the violation of the guarantee under Art.19 (1) (g) of the Constitution 5. To understand these contentions, a few facts have to be stated. 6. The restriction cannot, it is said, be upheld under clause (6) of Art.19 of the Constitution of India. Art.14 was also referred to, but the arguments centred round the violation of the guarantee under Art.19 (1) (g) of the Constitution 5. To understand these contentions, a few facts have to be stated. 6. The beedi industry is of a peculiar nature. Though there are certain premises which may be termed industrial premises which are registered under the Factories Act where the work of manufacturing of 'beedi' is carried on, a large percentage of the work in connection with the manufacturing process of this article is not carried on in factories registered under the Factories Act nor at specified places of business; but according to the convenience of those engaged in the manufacturing process in their own houses during leisure hours and as it suited them or at other places which are found convenient to them. Two bigger manufacturers merely supplied the material and engaged contractors, who, by and large, it appears, were truly independent contractors. There are two methods employed in so engaging contractors. Some as in the case of the petitioner in O P. No. 3307 of 1968 sold their raw material to the contractor and when the contractor produced the finished article purchased that article from the contractor. Very often this is merely a book adjustment, but the formality of a sale and repurchase were gone through. The majority however engaged independent contractors and entrusted them with the raw material and asked them to produce the finished products. The contractors so engaged very seldom did the work of manufacturing beedis themselves. Very few of them had industrial premises of their own and very few of them engaged labour in the sense of supervising and controlling their work. Almost invariably they entrusted the work to others who were most often home workers, and occasionally the work was entrusted to workers other than home workers. These workers, whether they were home workers or other workers, had do fixed hours of work. Their manner of doing the work was never controlled or supervised by the contractor. The agreement between the contractor and the labour employed was merely that the finished products must be produced by using the raw material given to them and the finished product must be of standard quality. They were at liberty to work as they pleased. Their manner of doing the work was never controlled or supervised by the contractor. The agreement between the contractor and the labour employed was merely that the finished products must be produced by using the raw material given to them and the finished product must be of standard quality. They were at liberty to work as they pleased. At home very often many, if not all, the members of the family took part in the manufacturing process. This manufacturing process in many States in India is therefore in the nature of a cottage industry which, from the very nature of things required an intermediary. There are of course a few very prosperous beedi manufacturers who controlled the business in different areas. But the way in which they carried out the manufacture is as indicated above. To make the picture complete I must also refer to one other method which is really in the nature of a camouflage to screen the true nature of the relationship between the manufacturer and his employees. That was by resort to engaging a manager or some other person who has been termed as a contractor, by the manufacturer. Really he is not an independent contractor. He is so called for the purpose of making it appear that the labour is employed by him. This is to avoid the liabilities that may accrue to the real employer, who is the manufacturer, towards wages and other amenities that are to be given to workers. This method of engaging labour, or, perhaps, it will be better to use the expression exploiting labour, has been frowned upon by the State, and legislation has been brought in to avoid the evils of such a system. 7. I may add one more word about the Act before I proceed to deal with the specific contentions relating to the validity of the various provisions of the Act challenged in these two petitions. The legislative history of legislation on the subject intended to give relief to the beedi workers shows that legislation was on piece meal basis. 7. I may add one more word about the Act before I proceed to deal with the specific contentions relating to the validity of the various provisions of the Act challenged in these two petitions. The legislative history of legislation on the subject intended to give relief to the beedi workers shows that legislation was on piece meal basis. When restrictions were introduced and wages were fixed under the Minimum Wages Act for the workers and further amenities were granted to them by legislation in one State or in one area, not only the manufacturers but the industry itself migrated from that State or the area to other places where such restrictions and such laws were not in existence. There is also no uniformity in regard to the legislation on the subject. Confronted with this position and with the plight of the labour engaged in this industry or business, the Parliament intervened and deemed it fit to pass a law that will be applicable to the whole of India, and the result is the Act. 8. In the preamble to the Act all that is stated is that the Act is 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. But the objects and reasons of the Act, which may be looked into atleast for the purpose of finding out what was the mischief that was sought to be avoided by the provisions in the Act, refer to some of the matters that I have mentioned above. 9. Now coming to the specific contentions raised I may deal with the point raised by counsel for the petitioner in O.P. No. 1338 of 1969 that the Parliament has no power to pass the Act. The power is stated in item 24 in List III of the Seventh Schedule to the Constitution. Item 24 is in these terms: "24. 9. Now coming to the specific contentions raised I may deal with the point raised by counsel for the petitioner in O.P. No. 1338 of 1969 that the Parliament has no power to pass the Act. The power is stated in item 24 in List III of the Seventh Schedule to the Constitution. Item 24 is in these terms: "24. Welfare of labour including conditions of work, provident funds, employers' liability, workmen's compensation, invalidity and old age pensions and maternity benefits.' According to counsel, the Act does not in pith and substance relate to the welfare of the labour but is really a restriction imposed on the industry and therefore falling under item 24 in List II of the Seventh Schedule to the Constitution which deals with "industries subject to the provisions of entries 7 and 52 of List P. Entries 7 and 52 in List I of the Seventh Schedule deal with "Industries declared by Parliament by law to be necessary for the purpose of defence or for the prosecution of war", and, "Industries, the control of which by the Union is declared by Parliament by law to be expedient in the public interest." It is clear That subject to the entries 7 and 52 in List I 'Industries' fall under the exclusive jurisdiction of the State Legislature. So if an enactment in pith and substance is a statute relating to industry the State Legislature alone will have competence to pass such a law. But, on the other hand, if the Act in pith and substance deals with the welfare of the labour, the Parliament will have power to pass the law under item 24 in List III of the Seventh Schedule to the Constitution. The Parliament will have the power to pass a law which in pith and substance or substantially provides for the welfare of the labour even if that law impinges on the beedi industry as such. I need only refer to a decision in Chaturbhai v. Union of India, reported in AIR. 1960 S C. 424 for this purpose. On a reading of the Act as a whole there can be little doubt that it is substantially, if not exclusively, concerned with the welfare of the labour engaged in the manufacturing process of beedi. I need only refer to a decision in Chaturbhai v. Union of India, reported in AIR. 1960 S C. 424 for this purpose. On a reading of the Act as a whole there can be little doubt that it is substantially, if not exclusively, concerned with the welfare of the labour engaged in the manufacturing process of beedi. If restrictions have been imposed on the industry they are purely incidental to achieving the object of granting amenities and providing for the welfare of the labour. The contention that there is no legislative competence is therefore rejected. 10. The next contention is based on the ground that the power granted by sub-section (2) of S.1 of the Act is far too wide and therefore arbitrary. It is urged that some States may bring the Act into force on such date as they appoint and then apply it only to some area, and such arbitrary power conferred by a statute is had for excessive delegation. This contention too I am unable to accept. It is certainly for the State Government to decide in what manner this enactment must be brought into force. They are the best judges of the situation so far as the labour in the State pertaining to this industry is concerned. The power has been conferred not on a minor minion of the Gover-ment but on the State Government itself. There are similar provisions in various enactments and I know of none which had been struck down merely on the ground that no guidelines have been provided to the State Government to decide when an enactment should be brought into force and in which area. I negative this contention also. 11. The definitions that have been challenged are those in clauses (g) and (m) of S.2 of the Act. [ shall extract S.2 (g) and 2 (m). I negative this contention also. 11. The definitions that have been challenged are those in clauses (g) and (m) of S.2 of the Act. [ shall extract S.2 (g) and 2 (m). 112 (g) "employer" means, (a) in relation to contract labour, the principal employer, and (b) in relation to other labour, the person who has the ultimate control over the affairs of any establishment or who has, by reason of his advancing money, supplying goods or otherwise, a substantial 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 any other name;" "2 (m) "principal employer" means a person for whom.or on whose behalf any contract labour is engaged or employed in ah establishment;" 12. The Andhra Pradesh High Court as well as the Maharashtra High Court, in Writ Petition Nos. 2587, 2888, 3007,3009,3058,3156, 3254,3618, 3776, 3824,3825, 3826,4364, 4553,5013, and 5174 of 1468 and 1235 of 1969, and Special Civil Application Nos. 391, 392 and 393 of 1969, Nos. 409 to 411 of 1968 and Nos. 451, 453, 513 and 514 of 1969, respectively, had occasion to consider the question of the validity of the provision in S.2 (g) (a) and two different reasonings have been given by the courts to come to the conclusion that the Act should not be applied to a principal employer as defined in the Act. The Maharashtra High Court came to the conclusion that a reading of S.2 (g) would make it abundantly clear that the provisions in the Act are made applicable to the principal employer even in cases where he employs a genuine independent contractor for the purpose of getting beedis manufactured on the materials supplied by him to the contractor for such manufacture. This, according to the Maharashtra High Court, imposed onerous obligations and responsibilities on the principal employer and enjoined on him duties which it was impossible or, at any rate, extremely impracticable, for him to perform. It was noticed that certain acts and omissions of the principal employer were liable to be visited with the serious consequences enumerated in S.33 of the Act. It was noticed that certain acts and omissions of the principal employer were liable to be visited with the serious consequences enumerated in S.33 of the Act. The restrictions imposed by the Act on the principal employer and the imposition of penalty for the contravention of the provisions of the statute by him or by his independent contractors were held by the Maharashtra High Court to be not 'reasonable restrictions' falling within Art.19(6) of the Constitution of India. The Maharashtra High Court therefore set aside S.2(g) (a) as well as 2(m) and omitted the words 'in relation to other labour' occurring in S.2(g) (b) of the Act. The Andhra Pradesh High Court however came to the conclusion on a reading of the statute that notwithstanding the provision in S.2(g) (a) the Act will not apply to a principal employer carrying on the business by employing real and genuine independent contractors. The effect, of course, of these decisions is the same. The Act is not to apply to a manufacturer who engages independent contractors. 13. A reading of S.2 (g) makes it clear that two sets of employers are contemplated by that section. 'Contract labour' has been defined in S.2 (e) as meaning any person engaged or employed in any premises by or through a contractor, with or without the knowledge of the employer, in any manufacturing process. This means that whenever persons are engaged and employed in any premises by or through a contractor, the employer will be the principal employer, and S.2 (m) defines 'principal employer' as a person for whom or on whose behalf any contract labour is engaged or employed in an establishment. S.2(g) (b) however applies only in relation to other labour. It means that the person who has the ultimate control over the affairs of any establishment or who has by reason of his advancing money, supplying goods or otherwise, a substantial 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 any other name. This is a very wide definition and, when taken along with the definition of the term'establishment' in S.2 (h), will comprehend all contractors who engage labour and, what is further, will of course take in manufacturers who resort to the method of employing managing agents, managers, superintendents, by whatever name called, in an attempt to shirk or to avoid their responsibilities as employees. It is difficult, with great respect, to read the section as it has been read by the Andhra Pradesh High Court as applying only to such manufacturers who employ labour by resorting to the device of trying to interpose an intermediary between the labour and themselves and as not applicable to the labour of independent contractors. If the section will therefore take in a principal employer who has no supervision or control, no contract, nor even knowledge of the persons who are really doing the work, then the question arises whether such a provision is in the nature of an unreasonable restriction in carrying on the business or trade. 14. It may be necessary to do away with the contract system; and the practice of engaging labour through a contractor for work inside a factory premises for carrying out the work of the factory, has been ruled by Tribunals to be unsustainable, and such decisions have been upheld by the Supreme Court. But the question is whether in all cases and in all circumstances there is something Inherently wrong in the method of engaging independent contractors. If restrictions are necessary those should be imposed in such a manner as not to impose onerous burdens on the person engaging such contractors. As I read the Act, I am not able to understand the provisions of the Act as doing away with the contract system. Perhaps it is unwise to resort to such a step as far as the beedi industry is concerned where, as I indicated, the method adopted is the contract system by and large. This is recognised by the Act. A contract is defined under the Act. So also the contract labour to which I referred to already. In these circumstances, the contractor may engage whom he likes. The workers are entrusted with the work and they are working in their own houses. The impracticability, if not the impossibility, of ensuring that the provisions of the Act are complied with is obvious. So also the contract labour to which I referred to already. In these circumstances, the contractor may engage whom he likes. The workers are entrusted with the work and they are working in their own houses. The impracticability, if not the impossibility, of ensuring that the provisions of the Act are complied with is obvious. The effect of the provision would therefore be to prevent people from engaging contractors. This, in the nature of the trade and in the circumstances, imposes unreasonable restrictions on the carrying on of the trade in the manner in which it has been carried on for a long time. This system as such is not sought to be abolished either. The provisions in S- 2 (g) (a) and 2 (m) of the Act cannot therefore stand and I strike them down. In view of the striking down of S.2 (g) (a) the words "in relation to other labour" occurring in S.2 (g) (b) can have no place and these also have to be deleted. This I direct. 15. S.3 and 4 of the Act, which may be termed licensing provisions, may next be considered. S.3 indicates that no employer shall use or allow to be used any place or premises as an industrial premises unless he holds a valid licence issued under this Act, and S.4 contains the procedure for applying for licence and the matters that are to be considered for granting the licence. 16. At the outset, it may be mentioned that the application for licence need be made only for industrial premises. Industrial premises mean any place or premises (not being a private dwelling house), including the precincts thereof, in which or in any part of 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. This is contained in S.2 (i) of the Act. In order that there may be effectual check that the provisions of the statute are being complied with, it is necessary to know in advance in which place the business is carried on. To achieve this object, statutes have after, if not invariably resorted to the practice of insisting on licences and insisting that the work will be carried on in accordance with the terms of the licence issued. To achieve this object, statutes have after, if not invariably resorted to the practice of insisting on licences and insisting that the work will be carried on in accordance with the terms of the licence issued. A licensing provision as such cannot therefore be said to be bad, and I see no reason why this section should be set aside. But counsel for the petitioner contended that the provisions in S.4, particularly clauses (a),(b) and (e) in sub-section (3) of S.4 as well as S.4(4) (c), are bad. I shall extract these provisions in S.4 (3) (a), (b), (e) and S.4 (4) (c). "4(3). The competent authority shall, in deciding whether to grant or refuse a licence, have regard to the following matters: (a) the suitability of the place or premises which is proposed to be used for the manufacture of beedi or cigar or both; (b) the previous experience of the applicant; (e) welfare of the labour in the locality, the interest of the public generally and such other matters as may be prescribed. 4 (c). The competent authority shall, in deciding whether to renew a licence or to refuse a renewal thereof, have regard to the matters specified in sub-section (3)." 17. 1 do not think these provisions impose unreasonable restrictions on carrying on any trade when it is borne in mind that these provisions are only meant as guiding principles for the grant of a licence and are not meant merely for refusing licences. Further, the provision in sub-section (8) of S.4 enjoins that, when an application for a licence is refused, the competent authority shall give reasons in writing for such refusal. Further, there is a provision in S.5 for appeal, if any person is aggrieved, to the State Government. These provisions in sub-section (8) of S.4 and S.5 are, I consider, sufficient safeguards. The provisions in S.3 and 4 therefore cannot be said to be bad. 18. Before leaving this aspect, I must also refer to the argument that the provision in sub-section (7) of S.4 empowering the State Government to issue in writing to a competent authority such directions of a general character as that Government may consider necessary in respect of any matter relating to the grant or renewal of licences under this section is unreasonable. The argument is that by virtue of these provisions the Government can give any direction as it likes to the competent authority completely fettering his discretion and thus preventing him from considering the aspect in the light of the provisions of the Act. I do not think that sub-section (7) of S.4 enables the State Government to give any such direction. Any direction issued under sub-section (7) of S.4 must certainly be in consonance with the provisions of the statute. One cannot expect the State Government to give directions in an arbitrary manner which has nothing to do with the purpose of the Act and which is meant to negative or neutralise or make ineffective the provisions of the Act. If any such directions are given those directions will certainly be open to challenge. There is no reason for holding that the section is bad. I therefore reject the contention that S.3 and 4 of the Act are not valid. 19. S.8 to 27 provide for matters in relation to working conditions such as cleanliness, ventilation, overcrowding, drinking water, latrines and urinals, washing facilities, creeches, first aid. canteens, working hours, wages for overtime work, interval for rest, spread over, weekly holidays, notice of periods of work, hours of work to correspond with notice under S.22, prohibition of employment of children, prohibition of employment of women or young persons during certain hours, annual leave with wages and wages during leave period. These provisions are not uncommon. Actually they find a place in the Factories Act, and the amenities that are afforded by these sections are those that have to be insisted upon with a view to provide good working conditions for labour. In the light of the striking down of S.2(g) (a) of the Act the responsibility for carrying out these provisions will not be that of the manufacturer who has no idea where the work is being done and who is being employed. In the light of the above, by and large, these provisions are incapable of challenge on the ground that they impose unreasonable restrictions on the carrying on of any business or trade. 20. The only provisions in this group of S.8 to 27 that have to be noticed particularly are those in S.21 (3), 26 and 27. The Andhra Pradesh High Court held that these sections will not apply to home workers. 20. The only provisions in this group of S.8 to 27 that have to be noticed particularly are those in S.21 (3), 26 and 27. The Andhra Pradesh High Court held that these sections will not apply to home workers. The Maharashtra High Court has declared that these sections should not be applied to borne workers. The learned Government Pleader who appeared in the case has submitted that on a fair reading of the Act S.3 to 27 are not applicable to home workers. There are no sections in the Act, he pointed out, fixing hours of work for bonne workers. So full time wages cannot be postulated. It follows, he submitted, that S.27 cannot apply and therefore S.26 cannot also apply-If these sections cannot apply, S.21(3) cannot also apply. I therefore make it clear that S 21(3) and Ss- 26 and 27 will not apply to home workers. 21. S.31 and 33 were also challenged. But it is conceded by counsel for the petitioners that if S.2(g) (a) is struck down, there are no grounds to challenge the validity of these sections. 22. Reference was made then to clauses (r), (s), (t), (u) of sub-s. (2) of S.44 of the Act. These clauses in S.44 (2) have to be utilised for carrying on the purposes of the Act. If they are used for any other purposes, rules framed under the Act can be challenged. The attack on the section cannot be sustained. I reject this contention. 23. Reference was then made to the provisions in R.27,28 and 29 in Chap.5 of the Kerala Beedi & Cigar Workers (Conditions of Employment) Rules,1968. I shall extract these rules. "27. Disputes relating to issue of raw materials by the employer: (a) Any dispute between an employer and an employee or employees in relation to:... I reject this contention. 23. Reference was then made to the provisions in R.27,28 and 29 in Chap.5 of the Kerala Beedi & Cigar Workers (Conditions of Employment) Rules,1968. I shall extract these rules. "27. Disputes relating to issue of raw materials by the employer: (a) Any dispute between an employer and an employee or employees in relation to:... (a) the issue by the employer of raw materials to the employee; (b) the rejection by the employer of beedi or cigar or both made by an employee; or (c) the payment of wages for the beedi or cigar or both rejected by the employer may be referred in writing by the employer or employee or employees to the Inspector having jurisdiction over the area who shall after giving the parties an opportunity to represent their respective cases decide the dispute and record the proceedings in Form X. (2) Any party to the dispute aggrieved by the decision thereon under sub rule (I) may prefer an appeal within a period of thirty days from the date of the decision to the Deputy Labour Commissioner having jurisdiction over the area: Provided that the Deputy Labour Commissioner may admit an appeal within a period of fifteen days after the said period if the appellant satisfies such authority that be had sufficient cause for not preferring the appeal within that period. 28' Supervision of distribution of raw materials: No employer shall if he is required so to do by Inspector by an an order in writing, distribute, except under the supervision of the Inspector making the order or the supervision of another Inspector, raw materials to such employee or employees and during such period as may be specified in the order. 29. Rejection as Chhat No employer or contractor shall ordinarily reject as sub standard or chhat or otherwise more than 2.5 per cent of the beedis or cigars or both received from a worker including a home-worker; Provided that the employer or contractor may effect such rejection up to 5 percent for reasons to be recorded and communicated in writing to the worker." 24. It is contended that the provision of referring the disputes referred in R.27 to the Inspector who is having jurisdiction over the area provided by R.27 and the provision in R.28 that no employer shall, if he is required so to do by an Inspector by an order in writing, distribute, except under the supervision of the Inspector making the order or the supervision of another Inspector, raw materials to such employee or employees and during such period as may be specified in the order, are unreasonable restrictions. I am unable to accept this contention. The decision of the Maharashtra High Court clearly indicates that one of the longstanding complaints of the labour was that there has been unreasonable and unfair rejection of the finished products and therefore it is necessary that provisions should be made for preventing this evil. It is in this light that R.27 and 28 have been framed. I see no reason why R.27 and 28 should be held as imposing any unreasonable restriction. But the imposition of 5 percent by the proviso to R.29 on the maximum limit of rejection seems to me to impose an arbitrary percentage. There may be cases where finished product is sub standard and is not usable and it is quite conceivable that the percentage of chhat is far above 5 per cent. The employer certainly has the right then to reject the beedi, and it can never be made to depend on an arbitrary percentage of 5 or any other figure. There must be some other method devised for preventing the rejection of beedis which are not sub standard beedis. A rule such as that contained in R.29 will have only one result. The quality of beedis will go down as the workers are assured that more than 5 per cent would not be rejected. It is not in the interest of the general public or the industry and certainly therefore not a provision for the welfare of the labour-If the industry is affected it will affect the labour as well. This provision has been upheld by the Maharashtra High Court and also by the Andhra Pradesh High Court. The question that was raised before the Maharashtra High Court was on the basis that the provision in the corresponding rules was violative of Art.14 of the Constitution. This contention was rejected. 25. This provision has been upheld by the Maharashtra High Court and also by the Andhra Pradesh High Court. The question that was raised before the Maharashtra High Court was on the basis that the provision in the corresponding rules was violative of Art.14 of the Constitution. This contention was rejected. 25. For the reasons that I have stated I consider R.29 is very arbitrary in nature and is imposing very unreasonable restrictions in carrying on business. I therefore strike down R.29 of the rules.