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1976 DIGILAW 132 (GUJ)

SURAT JARI VEPARI MANDAL v. STATE

1976-09-28

B.K.MEHTA, S.OBUL REDDY

body1976
S. OBUL REDDI, J. ( 1 ) THIS Special Civil Application is filed by Shri Surat Jari Vepari Mandal and two jari merchants of Surat challenging two notifications issued by the State of Gujarat on dated August 6 1970 and the other dated December 16 1975 fixing the minimum rates of wages under the former notification and revising the minimum rates of wages under the latter notification in respect of the employment in jari industry in the State of Gujarat. ( 2 ) THE first petitioner is an Association consisting of persons engaged in the business of manufacture and sale of jari goods. Petition rs Nos. 2 and 3 are merchants engaged in the trade and business of manufacture and sale of jari goods. The main case of the petitioners is that Akhadedars are not employees as defined in sec. 2 (i) of the Minimum Wages Act 1948 (hereinafter referred to as the Act) and therefore they are Rot entitled to the benefit of the minimum rates of wages fixed under the two notifications. According to the petitioners the Akhadedars in respect of whom the minimum rate of wages is fixed are job contractors engaged in the process of jari winding which they do on their own machines. The work is entrusted to them on labour contract basis and either they execute the work by employing members of their families or in addition by employing their own labour by paying them fixed labour charges. ( 3 ) TO appreciate the questions raised by the petitioners that Akhadedars are not employees within the meaning of sec. 2 (i) of the Act it is necessary to know what the term Akhadedar means and the nature and character of the work turned out by an Akhadedar. Akhadedars are skilled artisans who make jari out of gold silver and copper. The material gold silver or copper is given to them by merchants engaged in jari industry for making jari. Jari industry is a very ancient industry and Akhadedars are the craftsmen or artisans who by several processes ultimately produce jari out of gold silver or copper. It is a cottage industry confined to Surat. It is an hereditary occupation of the Akhadedars and that is the only class of artisans that can make jari. Jari industry is a very ancient industry and Akhadedars are the craftsmen or artisans who by several processes ultimately produce jari out of gold silver or copper. It is a cottage industry confined to Surat. It is an hereditary occupation of the Akhadedars and that is the only class of artisans that can make jari. The main processes of manufacturing jari consists of (i) preparation of silver bar; (ii) drawing of silver wirecoarse medium find and superfine; (iii) gilding; (iv) slattening the wire (lametta); (v) dyeing of raw silk; (vi) winding of lametta on silk art silk or cotton thread; (vii) winding of silver thread on bobbins: (viii) reeling: ann (ix) packing. These are highly specialised processes which can be only done by skilled artisans who have come to be known by the name Akhadedars. Nearly 30 0 artisans are directly or indirectly engaged in the manufacture of jari. In the report of the Advisory Committee appointed by the Government of Gujarat for fixing minimum wages in the employment in jari industry it is stated that the persons engaged in the jari manufacture now could be classified as (1) Merchants; (2) merchant- manufacturers; (3) Akhadedars; and (4) employees or workmen who carry out the work at the unit where they are engaged at their homes including adult males females adolescents and children. The merchant generally is one who has no machinery of his own and gets the required processes carried out by Akhadedar by supplying the requisite raw material. The Akhadedar owns the machinery to process the raw material into various stages. After carrying out the processes he returns the finished product jari to the merchant who gave him the raw material at the rate fixed according to the weight of the raw material. There are also merchant- manufacturers who get the various processes done at their units on their machinery and also get certain other processes done outside their premises through Akhadedars by supplying the requisite raw material ar unfinished product and receive back the finished product. Akhadedars are ultimately the persons who either by themselves and with the aid of the members of their families or with the aid of labour employed by them process the raw material through several stages and ultimately deliver the finished product Jari to the merchants. The process involved in the manufacture of jari is not done by any single Akhadedar. Akhadedars are ultimately the persons who either by themselves and with the aid of the members of their families or with the aid of labour employed by them process the raw material through several stages and ultimately deliver the finished product Jari to the merchants. The process involved in the manufacture of jari is not done by any single Akhadedar. There are three categories of Akhadedars viz. Pawthawalas Tanias and Vintwawalas. The work to be executed by each of the three classes of Akhadedars is different. The merchant gives the raw material to Pawthawala for the preparation of bar and the initial processing of the bar. Then he takes back the semi-processed material from Pawthawala and hands over that material to Tania. Similarly he takes back the material to the extent processed by the Tania and then hands that over to Vintwawalas for final processing of jari. It thus transpires that the preparation of bar is done by one class of Akhadedars wire drawing-coarse medium fine and superfine is done by another class of Akhadedars gilding and flattening the wire (lametta) is done by another class of Akhadedars. Dyeing and colouring of yarn winding of Lametta on silk art silk or cotton yarn winding of jari thread on bobbins is also done by the last class of Akhadedars. Thus the merchant steps in at every stage of processing of raw material. In this petition we are only concerned with the rates of wages fixed for Tanias and Vintwawalas. No rates have been fixed by the impugned notifications for the Pawthawalas. ( 4 ) THE Government for the purpose of fixing minimum wages for the employment in this industry constituted the first Advisory Committee under sec. 5 (1) (a) of the Act on June 20 1966 and that Committee submitted its report on August 16 1967 The stand taken by the petitioners Association before the Committee was that Akhadedars are not employees but the Committee on the evidence collected by it recommended to the Government fixation of minimum rates of wages for the Akhadedars and the Government fixed minimum wages for workers employed by the Akhadedars but not for them. The Government again appointed a second Advisory Committee on May 16 1968 for the same purpose of fixing minimum rates of wages for Akhadedars. The Government again appointed a second Advisory Committee on May 16 1968 for the same purpose of fixing minimum rates of wages for Akhadedars. It would appear that the Petitioners Association did not partake in the proceedings before the Committee but they however submitted a written representation to the Government of India contending that Akhadedars are in the nature of contractors and not employees. The Akhadedars participated in the inquiry conducted by the second Advisory Committee and the Committee submitted its report recommending minimum rates of wages for the Akhadedars so as to enable them to make payments to the employees engaged by them. The rates were so fixed as to ensure each Akhadedar a monthly income of Rs. 250. 00. ( 5 ) THE Government issued the notification after considering the report of the Committee and also the Advisory Board on August 6 1970 fixing minimum rates of wages for the Akhadedars. That notification was challenged by the petitioners in Special Civil Application No. 1140 of 1970 questioning the jurisdiction of the State Government to fix minimum rates of wages for the Akhadedars. During the pendency of the writ petition a third Advisory Committee was appointed by the Government for fixing the rates of wages of Akhadedars fixed under the notification dated August 6 1970 A representative of the petitioners was also on this third Committee appointed for the purpose of revision of the rates of wages. On the basis of the report of the third Committee the wages were revised under the impugned notification dated December 16 1975 ( 6 ) THE main contention of Mr. I. M. Nanavati is that the contract between the Akhadedars in question and the merchants is one for service and not a contract of service and therefore an Akhadedar is not an employee within the meaning of sec. 2 (i ). According to him the Akhadedar executes the work on his own account. He is not under the control or supervision of the merchant. Akhadedar employs his own workmen and they work under the control and supervision of the Akhadedar. The merchant entrusts the processing work and remunerates him on contract basis. It is also pointed out from the Report of the Advisory Committee that each Akhadedar owns machinery costing about Rs. 7 500 and the total value of the machinery owned by all Akhadedars in Surat District is estimated at Rs. The merchant entrusts the processing work and remunerates him on contract basis. It is also pointed out from the Report of the Advisory Committee that each Akhadedar owns machinery costing about Rs. 7 500 and the total value of the machinery owned by all Akhadedars in Surat District is estimated at Rs. 2 crores. It is therefore contended by him that persons who own such costly and sophisticated machinery and who employ others to work under them and who are not under the control management or supervision of the merchant cannot be brought within the ambit of the definition of employee merely for the reason that an Akhadedar is an out-worker to whom raw material is given by the merchant. ( 7 ) IN support of his contention Mr. Nanavati relied upon certain decisions to which we shall refer presently. Mr. J. R. Nanavati learned Assistant Government Pleader contended that the decisions on which reliance has been placed by the learned counsel for the petitioners have no bearing on the facts of the case in view of the definition of employee which includes an out-worker. ( 8 ) SO the only question to be determined is whether an Akhadedar is an employee within the meaning of sec. 2 (i) sec. 2 (i) reads 2 In this Act unless there is anything repugnant in the subject or context - xxx xxx xxx xxx (I) employee means any person who is employed for hire or reward to do any work skilled or unskilled manual or clerical in a scheduled employment in respect of which minimum rates of wages have been fixed: and includes an out worker to whom any articles or materials are given out by another person to be made up cleaned washed altered ornamented finished repaired adapted or otherwise processed for sale for the purposes of the trade or business of that other person where the process is to be carried out either in the home of the out-worker or in some other premises not being premises under the control and management of that other person and also includes an employee declared to be an employee by the appropriate Government: but does not include any member of the Armed Forces of the Union. An Akhadedar to come within the definition of employee must satisfy the essential requirements specified in the definition. That he is an outworker is not in dispute. An Akhadedar to come within the definition of employee must satisfy the essential requirements specified in the definition. That he is an outworker is not in dispute. That articles or materials are given to him by the merchant class is also not in dispute. That he processes the article or material given to him is beyond dispute. The question then is whether he processes the materials for sale for the purposes of the trade or business of the other person or for his own. According to Mr. Nanavati the processing work done by an Akhadedar is done on his own account and therefore he is not an employee and the relationship of an employer and employee does not exist between the merchant and the Akhadedar. ( 9 ) STRONG reliance was placed by the learned counsel on the decision of the Supreme Court in SILVER JUBILEE TAILORING HOUSE V. CHIEF INSPECTOR OF SHOPS AND ESTABLISHMENTS A. I. R. 1974 S C. 37. In that case the meaning of the expression person employed came to be construed. Person employed as defined in sec 2 (14) of the Andhra Pradesh (Telengana Area) Shops and Establishments Act 1951 means in the case of a shop a person wholly or principally employed therein in connection with the business of the shop The tailors in that case were paid on piecerate basis. They generally attended the shops of the proprietor every day if there was work. The rate of wages paid to them was not uniform and depended upon the skill of the worker and the nature of the work. When cloth was given for stitching to a worker after it had been cut the worker was told how he should stitch it and if he did not stitch it according to the instruction the employer rejected the work and he generally asked the worker to restitch the same. When the work was not done by a worker according to the instructions generally no further work was to be entrusted to him. There was no obligation on the part of the worker to go for work to the shop on any days nor to make any application for leave. He was not obliged to inform the employer that he will not attend the shop for work. Almost all the workers worked in the shop. There was no obligation on the part of the worker to go for work to the shop on any days nor to make any application for leave. He was not obliged to inform the employer that he will not attend the shop for work. Almost all the workers worked in the shop. Some were allowed to take cloth for stitching to their homes on certain days with the permission of the proprietor of the shop. The machines installed in the shop belonged to the proprietor of the shop and the premises in which the work was carried on also belonged to him. The question which arose for decision in that case was whether the relationship of employer and employee existed between the parties as to attract the provisions of the Shops and Establishments Act. ( 10 ) THE Supreme Court held that the fact that the workers worked on the machines supplied by the proprietor of the shop was an important consideration in determining the nature of the relationship. If the employer provided the equipment that is some indication that the contract was a contract of service but if the other party provided the equipment this is some evidence that he is an independent contractor. It is on the ground that the machinery equipment is owned by the Akhadedar that the learned counsel for the petitioners contended that it goes to indicate that the contract is acontract for service and not a contract of service. The other circumstance that the employer had the right to reject the end product if it did not conform to the instructions given by him and to direct the worker to re-stitch the cloth was also taken into consideration for holding that the relationship of master and servant had existed. In that case Mathew J. not only considered the earlier decisions of the Supreme Court but also the English and American decisions. ( 11 ) IT may be noted that for several centuries the Akhadedars have been working on their own machinery and it is customary for them to provide their own equipment. The equipment or the machinery of the type which the Akhadedars have is useful only for the purpose of manufacturing jari. ( 11 ) IT may be noted that for several centuries the Akhadedars have been working on their own machinery and it is customary for them to provide their own equipment. The equipment or the machinery of the type which the Akhadedars have is useful only for the purpose of manufacturing jari. Ordinarily in the case of other industries a workman expects the employer to provide all the necessary machinery and tools but having regard to the peculiar nature and character of the jari industry the equipment came to be provided only by the Akhadedars though some merchants have installed the machinery and employed Akhadedars to work under them. Therefore from the mere fact that the machinery belongs to the Akhadedars it cannot be concluded that the Akhadedar is an independent contractor ( 12 ) THE Supreme Court in DHRANGADHRA CHEMICAL WORKS LTD. V. STATE OF SAURASHTRA A. I. R. 1957 S. C. 264 had occasion to consider the distinction between a workman and a contractor. The broad distinction as observed by Bhagwati J. is that the workman agrees himself to work while the independent contractor agrees to get other persons to work. It was also pointed out by him that a person who agreed himself to work and so worked did not cease to be such by reason merely of the fact that he got other persons to work along with him and that those persons were controlled and paid by him. The determining factor as held by the Supreme Court in that case whether a person is a workman or an independent contractor is whether he had agreed to work personally or not. If he had agreed to work personally then he is a workman and the fact that he took assistance from other persons would not affect his status as a workman. The Akhadedar works personally on his machine. He not only renders personal service to process the raw material into jari but undertakes to get the work done. Simply because he has the assistance of the members of his family and sometimes the assistance of others who work under him it cannot be said that the relationship of employee and employer does not exist between him and the merchant and that he ceases to be an employee. Simply because he has the assistance of the members of his family and sometimes the assistance of others who work under him it cannot be said that the relationship of employee and employer does not exist between him and the merchant and that he ceases to be an employee. The essential requirement to make him an employee is that he must have consented to work himself thus giving his personal services. As summarized in Halsburys Laws of England. volume 14 pages 651-652. THE workman must haw consented to give his personal services and not merely to get the work done but if he is bound under his contract to work personally he is not excluded from the definition simply because he has assistance from others who work under him. The question before the Supreme Court in the Saurashtra case was whether Agarias are independent contractors or workmen. The Agarias worked in the Salt Works at Kuda in the Ram of Kutch. Each Agaria was given a plot of land for purpose of manufacturing salt. At the time of allotment of the plot the appellant Dhrangadhra Chemical Works Limited paid an advance. The Agarias prepared pans according to the standards and after salt crystals begin to form in the pans they are tested for quality by the authorities Thereafter they are allowed to collect salt. Then the crystals are collected they are loaded into the railway wagons and transported to the depots where salt is stored. There again salt is tested Salt which is rejected is taken by the Dhrangadhra Chemical Works Limited. Account is made up at the end of the season when the advances which have been paid to the Agarias from time to time as also the amounts due from the Agarias to the grocery shop were taken into account and on a final settlement of the accounts the amount due by the Dhrangadhra Chemical Works Limited to the Agarias was ascertained and such balance was paid to the Agarias. The Agarias worked themelves with their families on the plots allotted to then and they engaged extra labour. They made payments to the labourers on their account and not on account of the Dhrangadhra Chemical Works Limited Disputes arose between the Agarias and Dhrangadhra Chemical Works Limited as to the conditions under which the Agarias should be engaged in the manufacture of salt. They made payments to the labourers on their account and not on account of the Dhrangadhra Chemical Works Limited Disputes arose between the Agarias and Dhrangadhra Chemical Works Limited as to the conditions under which the Agarias should be engaged in the manufacture of salt. The Government of Saurashtra referred the dispute for adjudication to the Industrial Tribunal Rajkot. The Dhrangadhra Chemical Works Limited contested the proceedings on the ground inter alia that the status of the Agarias was that of independent contractors and not of workmen and that the State was not competent to refer their disputes for adjudication under sec. 10 of the Industrial Disputes Act. Ultimately when the matter came to the Supreme Court on appeal preferred by Dhrangadhra Chemical Works Limited the Supreme Court held that the Agarias were professional labourers and the fact that they were free to engage others to assist them and also paid them would not make any difference so as to affect their status as workmen. The ratio of this decision is that where the professionals undertake to execute the work themselves and work themselves even if it be with the assistance of labour none-the-less they would be workmen and not independent contractors. The mere fact that Akhadedars engage labour to assist them in the process of jari manufacture and that the Akhadedar pays them and controls them will not militate against the contract being one of service. ( 13 ) SUBBA Rao J. as he then was in CHINTAMAN RAO V. STATE OF MADHYA PRADESH A. I. R. 1958 S. C. 388 stated that distinction between a contractor and a worker. But that distinction was drawn by the learned Judge on the basis of the definition of worker in sec. 2 (1) of the Factories Act which runs thus : worker means a person employed directly or through any agency whether for wages or not in any manufacturing process or in cleaning any part of the machinery or premises used for manufacturing process or in any other kind of work incidental to or connected with the manufacturing process or the subject of the manufacturing process. Therefore the distinction drawn between an independent contractor and a worker on the basis of the definition in that Act can have no bearing on the definition of employee which is of wider amplitude. An out-worker is not included in the definition ofworker in. sec. Therefore the distinction drawn between an independent contractor and a worker on the basis of the definition in that Act can have no bearing on the definition of employee which is of wider amplitude. An out-worker is not included in the definition ofworker in. sec. 2 (1) of the Factories Act. The employee here works for the purpose of the trade or business of the merchant at a place not being under the control or management of the merchant. It is well-settled that no general proposition can be laid down that under no circumstances an independent contractor can be considered to be a worker within the meaning of its definition in the Act. (See A. I. R. 1958 S. C. 388 ). We have therefore to go by the definition given in the Act bearing in mind the guidelines or the tests laid down by the Supreme Court to the extent they are applicable to the language employed in the definition. ( 14 ) RAY C. J. in M. G. BEEDI WORKS V. UNION OF INDIA A. I. R. 1974 S. C. 1832 after a review of the earlier cases of his Court observed: in the ultimate analysis it would depend on the facts and circumstances of each case in determining the relationship of master and servant. ( 15 ) THE Madhya Pradesh High Court in NAROTTAMDAS V. P. B. GOWARIKAR A. I. R. 1961 M. P. 182 dealing with the case of an out-worker preparing bidis from the raw material supplied to him observed :. . . . . . IF an out-worker prepares goads at his own residence and then supplies them to the employers he has for the purposes of the Minimum Wages Act to be treated as an employee. It is significant that the employers Association dissociated itself with the work of the second Committee. It has been found as a question of fact that the Akhadedars generally executed the work with the help of their own family labour and engaged some outside labour as well. It is an admitted fact that the Akhadedar does not own the raw materials and has no proprietary rights in the finished work. The position of an Akhadedar is very peculiar He is a worker. It is an admitted fact that the Akhadedar does not own the raw materials and has no proprietary rights in the finished work. The position of an Akhadedar is very peculiar He is a worker. At the same time he employs outside labour The question that Akhadedars are not employees was never raised by the petitioners before the first Advisory Committee which gave an unanimous report recommending minimum rates of wages for all the employees including Akhadedars. No effort was made to place any evidence before the second Advisory Committee by the petitioners. A representative of the employers was on the first Advisory Committee which gave an unanimous report. It is to be borne in mind that the Akhadedars have no right or interest in the product jari manufactured by them by various processes. What they receive by way of labour charges is simply the remuneration for the labour depending upon the weight of the material supplied to them. They are employed for hire to do the skilled work in the scheduled employment that is jari industry. The term employee is of wide amplitude to take in Akhadedars. Akhadedar satisfies the essential requirements of the definition. He is an outeworker. Raw material is supplied to him by the other person. The processing of the raw materials is not for the purposes of his trade or business but for the purposes of the trade or business of the petitioners. The essential requirement is that what is processed or manufactured by him should be for sale for the purposes of the trade or business of the person who supplies the materials to him. There is nothing in the definition to indicate that if the processing of the material or article supplied to the Akhadedar is done on his own machinery that he will not be an employee. It is immaterial whether he processes the raw material on his own machinery or on the machinery supplied by the merchants. What is required is that he should process the material for sale for the purpose of the trade or business of the petitioners as an out-worker. The Akhadedar does not do any trade or transact any business in jari. The sale is made by the other person who gives the materials to the Akhadedar. The question of control or supervision is not relevant. The Akhadedar does not do any trade or transact any business in jari. The sale is made by the other person who gives the materials to the Akhadedar. The question of control or supervision is not relevant. All that is necessary is that the processing should be carried out in the house of the out-worker or in some other premises which is not under the control and management of the merchant. The three Committees which have elaborately considered the material gathered by them opined that Akhadedars are not independent contractors. On the material placed before us we hold that employer and employee relationship exists between the petitioners and the Akhadedars. We therefore hold that Akhadedars come within the sweep and ambit of the definition of employee in sec. 2 (i ). ( 16 ) IN the result the petition fails and is accordingly dismissed. Rule discharged with costs. Petition dismissed. .