Dharangadhara Chemical Works Ltd v State of Saurashtra (1956)

This is the foundation stone of the law on who is a "workman". Every later case in this Unit — on contract labour, on professionals, on managerial staff — begins from the test laid down here.

Three propositions come out of it, and an examiner may set any one of them.

First, the essential condition of being a workman is employment: there must subsist between the parties the relationship of employer and employee, or master and servant.

Second, the prima facie test of that relationship is the employer's right not merely to direct what work is to be done but to control the manner in which it is done — with the vital qualification that the nature and extent of the control required varies from business to business and is incapable of precise definition, so that the correct approach is to ask whether, having regard to the nature of the work, there was due control and supervision.

Third, the distinction between a workman and an independent contractor turns on personal service: the workman agrees himself to work, the independent contractor agrees to get others to work.

Alongside these runs a procedural holding of equal examination value: whether the relationship exists is a pure question of fact, and a Tribunal's finding on it cannot be disturbed under Art. 226 unless it is unsupported by evidence.

The appellants were lessees of the Salt Works at Kuda in the Rann of Cutch from the erstwhile State of Dharangadhara, and held a licence for the manufacture of salt on the land. Part of the salt was used by the appellants in their Chemical Works at Dharangadhara and the rest was sold to outsiders. The appellants employed a Salt Superintendent in charge of the Works, maintained a railway line and sidings, arrangements for the storage of drinking water, and a grocery shop near the Works where the labourers could buy their requirements on credit.

The salt was manufactured not from sea water but from rain water which, soaking down through the surface, became impregnated with saline matter. The operations were seasonal, commencing about October at the close of the monsoon and ending in June, when the workers returned to their villages for agricultural work. The area was parcelled into plots called pattas, each allotted to an agaria, generally the same patta to the same agaria year after year; an extensive patta was allotted to two agarias working in partnership. On allotment the appellants paid Rs. 400 for each patta to meet the initial expenses.

The agarias levelled the land, enclosed it and sank wells. The density of the water in the wells was examined by the Salt Superintendent; the brine was brought up and collected in condensers until it acquired a certain density, and then flowed into the pattas to crystallise. The pans had to be prepared to certain standards and were tested by the Salt Superintendent; when crystals began to form they were tested again, and only when they were of a particular quality was collection allowed to begin. The salt was loaded into railway wagons, transported to the depots, tested again, and paid for at the rate of Rs. 0-5-6 per maund. Rejected salt belonged to the appellants, and the agarias could neither remove nor sell the salt they had made. Accounts were made up at the end of the season, advances and grocery-shop dues being set off, and the balance paid over.

Against that stood the features on which the employer relied. The agarias worked themselves with their families, were free to engage extra labour whom they themselves paid and with whom the appellants had nothing to do; no hours of work were prescribed; no muster roll was maintained; the appellants did not control how many hours a day or days a month the agarias worked; there were no rules as to leave or holidays; and the agarias were free to go out of the Works as they liked provided they made satisfactory arrangements for the manufacture of salt.

Disputes having arisen about 1950 as to the conditions on which the agarias should be engaged, the Government of Saurashtra referred them for adjudication by its letter of reference dated 5 November 1951. The appellants contested the reference on the ground that the agarias were independent contractors, not workmen, so that the State was not competent to refer their disputes under s. 10.

The question was tried as a preliminary issue, and by its order dated 30 August 1952 the Industrial Tribunal held the agarias to be workmen and the reference intra vires. The appellants appealed to the Labour Appellate Tribunal and, failing to obtain a stay, moved the High Court of Saurashtra under Arts. 226 and 227 to quash the reference as without jurisdiction. A stay having been obtained in the writ proceedings, the Labour Appellate Tribunal dismissed the appeal on 27 September 1953, leaving the question to the High Court. By its judgment dated 8 January 1954 the High Court agreed with the Tribunal that the agarias were workmen within s. 2(s) and dismissed the writ petition, granting a certificate under Art. 133(1)(c).

Section 2(s) then defined "workman" to mean any person employed (including an apprentice) in any industry to do any skilled or unskilled manual or clerical work for hire or reward, and to include, for the purposes of any proceedings under the Act in relation to an industrial dispute, a workman discharged during that dispute, but not to include any person employed in the naval, military or air service of the Government.

The Court fixed on the word employed. The essential condition is that the person should be employed to do the work in that industry — "that there should be, in other words, an employment of his by the employer and that there should be the relationship between the employer and him as between employer and employee or master and servant." Unless a person is thus employed there can be no question of his being a workman within the definition.

The Court then surveyed the English authorities. The test uniformly applied is "the existence of a right of control in respect of the manner in which the work is to be done", and the distinction between a contract for services and a contract of service was put in the words of Hilbery J. in Collins v Hertfordshire County Council: "In the one case the master can order or require what is to be done while in the other case he can not only order or require what is to be done" but also how it shall be done.

That test, however, is "not accepted as universally correct". The Court set out the observations of Denning L.J. in Stevenson, Jordan and Harrison Ltd v Macdonald and Evans, noting Somervell L.J.'s point in Cassidy v Ministry of Health that there are many contracts of service where the master cannot control the manner of the work, as in the case of the captain of a ship, and the suggested reformulation: "One perhaps cannot get much beyond this: 'Was the contract a contract of service within the meaning which an ordinary man would give under the words'?" Denning L.J. added the integration idea: "One feature which seems to run through the instances is that, under a contract of service, a man is employed as part of the business, and his work is done as an integral part of the business", whereas under a contract for services the work, "although done for the business, is not integrated into it but is only accessory to it."

The Court also noticed Lord Thankerton's recapitulation in Short v J. & W. Henderson Ltd of the four indicia of a contract of service — the master's power of selection of his servant, the payment of wages or other remuneration, the master's right to control the method of doing the work, and the master's right of suspension or dismissal — together with his Lordship's warning that modern industrial conditions might require those indicia to be restated. Pending such restatement the Court adopted the statement in Halsbury that the relation of master and servant "imports the existence of power in the employer not only to direct what work the servant is to do, but also the manner in which the work is to be done", and took it "as the prima facie test".

The principle was then stated in the passage that is the heart of the case: the prima facie test is "the existence of the right in the master to supervise and control the work done by the servant not only in the matter of directing what work the servant is to do but also the manner in which he shall do his work", or, in Lord Uthwatt's words in Mersey Docks and Harbour Board v Coggins & Griffith (Liverpool) Ltd, "The proper test is whether or not the hirer had authority to control the manner of execution of the act in question".

Immediately the Court added the flexibility that makes the test workable: "The nature or extent of control which is requisite to establish the relationship of employer and employee must necessarily vary from business to business and is by its very nature incapable of precise definition." Hence "The correct method of approach, therefore, would be to consider whether having regard to the nature of the work there was due control and supervision by the employer", and, with Fletcher Moulton L.J. in Simmons v Heath Laundry Company, "It is a question of fact to be decided by all the circumstances of the case."

The respondents contended that the relationship was a pure question of fact which the Tribunal had jurisdiction to decide, so that neither the High Court under Arts. 226 and 227 nor the Supreme Court on appeal should interfere; they relied on Mahajan J.'s observations in Ebrahim Aboobakar v Custodian General of Evacuee Property that a writ cannot be granted to quash the decision of an inferior court within its jurisdiction on the ground that the decision is wrong, since "a court has jurisdiction to decide rightly as well as wrongly."

The Court found "considerable force" in that contention and held that the question whether the relationship is one of employer and employee or master and servant is a pure question of fact. The passage from Batt's Law of Master and Servant calling it a mixed question of fact and law was rejected as resting on a passing observation of McCardie J. in Performing Right Society Ltd v Mitchell and Booker (Palais de Danse) and as contrary to the weight of authority. The decision of a Tribunal on a question of fact within its jurisdiction is therefore not liable to be questioned under Art. 226 "unless at the least it is shown to be fully unsupported by evidence".

The appellants accordingly put their case on that footing: even accepting every fact found, the only possible conclusion was that the agarias were independent contractors, so that the finding was without evidence. The Court therefore examined the evidence.

The Salt Superintendent, the appellants' own witness, deposed that the panholders were allotted work by oral agreement, that the Company had no control over their hours or days of work, no control over how many labourers they engaged or what wages they paid, and that "The company's supervision over the work of the panholders is limited to the proper quality as per requirements of the Company and as per standard determined by the Government in matter of salt." He asserted that the panholders were contractors and not workmen. But clause 6 of the agreement, to which he referred, bound the agarias thus: "We bind ourselves to work as per advice and instructions of the officers appointed by them in connection with the drawing of brine or with the process of salt production in the pattas", with forfeiture of the patta, the brine and the wells, and of any claim for half-processed salt or for expense or labour, on default, negligence, slackness or misbehaviour.

Against that was the evidence of Shiva Daya, an agaria, that the company supervised the making of enclosures and the sinking of wells, measured the density of the brine, tested the brine in the condenser before it was allowed to flow into the pattas, inspected and passed the bottom of the patta before water was let in, inspected the pans when salt began to form, and supervised the draining away of saturated water, the fresh brine then being let in on the company's officer's instruction.

On this material the Industrial Tribunal concluded that the supervision and control exercised by the appellants "extended to all stages of the manufacture from beginning to end". The Supreme Court held that far from there being no evidence to support that conclusion, there were materials on the record on which the Tribunal could reach it.

Piece-work. The appellants urged that as the agarias worked no fixed hours or days and were paid not by the day but for the quantity of salt produced and passed, the very basis of the relationship of employer and employee was lacking. The Court answered that there is abundant authority in England that a person can be a workman though paid by the job, citing Crompton J. in Sadler v Henlock: "The test here is, whether the defendant retained the power of controlling the work. No distinction can be drawn from the circumstances of the man being employed at so much a day or by the job." Halsbury was to the same effect, that where a person is a worker and not a contractor it makes no difference that his work is piece-work.

Engaging and paying their own labour. The second argument was that the agarias engaged and paid other persons over whom the appellants had no control. The Court held that this proceeded on a misapprehension of the true legal position, and stated the governing distinction: "The broad distinction between a workman and an independent contractor lies in this that while the former agrees himself to work, the latter agrees to get other persons to work." A person who agrees himself to work, and does work, does not cease to be a workman merely because he gets others to work along with him and controls and pays them. "What determines whether a person is a workman or an independent contractor is whether he has agreed to work personally or not." Halsbury was quoted: "The workman must have 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."

Applying that, the agarias were professional labourers who personally worked along with the members of their families in the production of salt, and were therefore workmen; their freedom to engage and pay others to assist them did not affect that status.

The Court frankly acknowledged that "considerable difficulties" might arise from holding the agarias to be workmen: rules as to hours of work and the like might not conveniently apply to them, and the manner and method of their work might not be capable of regulation by directions of the Tribunal. But such difficulties "are no deterrent against holding the agarias to be workmen within the meaning of the definition if they fulfil its requirements". They went to the relief the Tribunal might grant, not to status, and were to be borne in mind when the Tribunal came to adjudicate the disputes referred to it.

The agarias were workmen within the meaning of s. 2(s) of the Industrial Disputes Act 1947; the reference under s. 10 was accordingly competent; the finding of the Industrial Tribunal was justified on the materials on record and there was no ground for interfering with it. The appeal was dismissed with costs.

The essential condition of a person being a workman is that he is employed, that is, that the relationship of employer and employee or master and servant subsists. The prima facie test of that relationship is the employer's right to supervise and control the work, directing not merely what work is to be done but the manner of doing it; but the nature and extent of the control required varies from business to business and cannot be precisely defined, so that the correct approach is to ask whether, having regard to the nature of the work, there was due control and supervision. Payment by the job rather than by the day does not make a man an independent contractor. The broad distinction is that the workman agrees himself to work while the independent contractor agrees to get others to work; a man who has agreed to work personally remains a workman although he takes assistance from others whom he controls and pays. Whether the relationship exists is a pure question of fact, and a Tribunal's finding on it is not open to challenge under Art. 226 unless unsupported by evidence.