Factories can engage contract worker in canteen as held by Hon’ble Supreme Court

The Hon’ble Supreme Court of India, on 10^th August, 2023 in its significant ruling, has upheld the judgement of the Division Bench of Karnataka High Court and allowed the Factories in Karnataka to engage contract workers in their canteens by complying with the Contract Labour (Regulation and Abolition) Act, 1970.

Here is a gist of the judgement:

• Under Section 10(1) and (2) of the Contract Labour (Regulation and Abolition) Act, 1970 the state government may prohibit, by notification in the Official Gazette, employment of contract labour in any process, operation or other work in any establishment.
• In exercise of the power conferred under the said provision in 1997, Government of Karnataka by a notification No.KAE-6LWA:97 dated 11.04.1997 prohibited employment of contract labour in industrial canteens.
• The impact of the notification was that the management were to provide and maintain the canteen at the factory directly and the contract labourer working in canteen would become permanent employees of the principal employer.
• Managements of factories aggrieved by the above notification challenged the validity of the notification by filing writ petition before the Hon’ble High Court of Karnataka. All the writ petitions were referred to Division Bench. The Division Bench dismissed all the writ petitions. Some of the managements filed special leave petition before the Supreme Court. Supreme Court dismissed the special leave petition.
• Various employers’ association and other organizations in Karnataka including KEA, CII, BCCI, FKCCI met the then Chief Minister Sri S.M.Krishna and appealed to him to withdraw the notification dated 11.04.1997 which prohibited the engagement of contract workers in factory canteen since it is impacting investment in Karnataka.
• Considering the request made by the employers, government of Karnataka, vide notification dated 1^st August, 2001 has revoked the earlier notification dated 11^th April, 1997 and allowed the factories to engage contract workers in their canteen.
• The Trade Unions challenged the action of the government by filing writ petition before the Hon’ble High Court. The Learned Single Judge by his order dated 13th April, 2005 allowed the writ petition and quashed the rescinding notification dated 1st August, 2001.
• The employers challenged the decision of the Learned Single Judge by filing an appeal before the Division Bench of the Hon’ble High Court.
• The Division Bench by order dated 24^th March, 2011 upheld the action of the Government of Karnataka in rescinding the notification dated 11^th April, 1997 by issuing a notification dated 1^stAugust, 2001, and managements of factories were permitted to engage contract workers in the canteen.
• Aggrieved Trade Unions have filed special leave petition before the Supreme Court. The Supreme Court, after hearing the parties, dismissed the Civil Appeal on 10th August, 2023.

Hence, it is clear from the above judgement of the Hon’ble Supreme Court that the employers in factories who are required to provide canteen can now operate their canteens with contract staff or outsource the work entirely.