- (1.)These two appeals by special leave raise a common question and will be decided together. The appellants are proprietors of two bidi concerns. A reference was made by the Government of Madras of dispute between the appellants and their workmen with respect to three matters. In the present appeals however we are concerned with only one matter, namely, whether reduction of annas two in the wages of workers employed under the agents of the appellants was justified and to what relief the workers were entitled.
(2.)The contention of the appellants before the tribunal was that the workers in question were not their workmen and therefore there being no relation of employers and employees between them and the workmen, the reference itself was incompetent and there could be no industrial dispute between them and the workmen concerned, their case being that the workmen concerned were the workmen of independent contractors. It was found by the tribunal on the basis of evidence led before it by both parties that the modus operandi with respect to manufacture of bidis in the appellants' concerns was that contractors took leaves and tobacco from the appellants and employed workmen for manufacturing bidis. After bidis were manufactured, the contractors took them back from the workmen and delivered them to the appellants. The workmen took the leaves home and cut them there; however the process of actual rolling by filling the leaves with tobacco took place in what were called contractors factories. The contractors kept no attendance register for the workmen. There was also no condition that they should come and go at fixed hours. Nor were the workmen bound to come for work every day; sometimes the workmen informed the contractors if they wanted to be absent and sometime they did not. The contractors however said that they could take no action if the workmen absented themselves even without leave. The payment was made to the workmen at piece rates. After the bidis were delivered to the appellants payment was made therefor. The system was that the appellants fixed the price of tobacco and leaves supplied to the contractors who took them to the place where work of rolling was done and gave them to the workmen. Next day, the manufactured bidis were taken by the contractors to the appellants who paid a certain price for the manufactured bidis after deducting therefrom the cost of the tobacco and the leaves already fixed. The balance was paid to the contractors who in their turn paid to the workmen, who rolled bidis, their wages. Whatever remained after paying the workmen would be the contractors' commission for the work done. It may also be mentioned that there were written agreement on the same pattern between the appellants and the contractors in that behalf, though no such agreement has been printed in the paper books.
(3.)On these facts the appellants wanted to make out a case as if there was a sale of leaves and tobacco by the appellants to contractors and after the bidis were rolled there was a resale of the bidis to the appellants by the contractors. The tribunal however held that it was clear that there was no sale either of the raw materials or of the finished products, for, according to the agreement, if bidis were not rolled, raw materials had to be returned to the appellants and the contractors were forbidden from selling the raw materials to any one else. Further after the bidis were manufactured they could only be delivered to the appellants who supplied raw materials and not to any one else. Further price of raw materials fixed by the appellants as well as the price of the finished products always remained the same and never fluctuated according to market rates. The tribunal therefore concluded that there was no sale of raw materials followed by resale of the finished products and this system was evolved in order to avoid regulations under the Factories Act. The tribunal also found that the contractors generally got only annas two per thousand bidis for their trouble. The tribunal also referred to a clause in the agreement that the appellants would have no concern with the workers who rolled bidis for whom only the contractors would be responsible. But it was of the view that these provisions were deliberately put into the agreement by the appellants to escape such statutory duties and obligations as may lie on them under the Factories Act or under the Madras Shops and Establishments Act. Finally on a review of the entire evidence, the tribunal found that this system of manufacture of bidis through the so-called contractors was a mere camouflage devised by the appellants. The tribunal also found that the contractors were indigent persons and served no particular duties and discharged no special functions. Raw materials were supplied by the appellants to be manufactured into finished product by the workmen and the contractors had no other function except to take the raw materials to the workmen and gather the manufactured material. It therefore held that the so-called contractors were not independent contractors and were mere employees or were functioning as branch managers of various factories, their remuneration being dependent upon the work turned out. It therefore came to the conclusion that the bidi workers were the employees of the appellants and not of the so-called contractors who were themselves nothing more than employees or branch managers of the appellants. It finally held that reduction in the wages by two annas per thousand bidis was not justified and the workmen were entitled to the old rates. It, therefore, ordered the reduction in wages to be restored.