This case of Harishankar Sharma and other v. Artificial Limbs Manufacturing
Corporation and others
 is based on an argument based on the Factories Act,
The case first saw its light in the Allahabad High Court and the decision of
the Allahabad High Court has been appealed against in the Supreme Court.
The Factories Act, 1948 is a statute that has been enacted for the purpose of
consolidating and amending the law which regulates labour in factories. The Act
has been enacted with the primary intention of protecting workers in factories
against occupational and industrial hazards as well as promoting the health and
safety of workers. The Act seeks to encompass within its purview any
establishment with ten or more persons carrying on a manufacturing process with
the aid of power, and if the manufacturing process is conducted without the aid
of power, then the establishment needs to employ at least 20 persons, as can be
understood from the definition of factory, provided in Section 2(m) of the
Factories Act, 1948.
In Section 46 of the Factories Act, 1948, the statute provides the State
Government with the power of making rules for mandatorily requiring that "in any
specified factory wherein more than two hundred and fifty workers are ordinarily
employed, a canteen or canteens shall be provided and maintained by the occupier
for the use of the workers."
Now, it is imperative to observe that the Section 46 does not by itself makes it
mandatory for a factory with more than 250 workers to establish a canteen, but
puts the prerogative upon the State Government to require a factory to do so, if
it thinks fit.
As per Section 46(2), the rules enacted by the State Government may also lay
- the date by which such canteen shall be provided;
- the standards in respect of construction, accommodation, furniture and
other equipment of the canteen;
- the foodstuffs to be served therein and the charges which may be made therefor;
- the constitution of a managing committee for the canteen and
representation of the workers in the management of the canteen;
(dd) the items of expenditure in the running of the canteen which are not to be
taken in account in fixing the cost of foodstuffs and which shall be borne by
- the delegation to the Chief Inspector, subject to such conditions as may
be prescribed, of the power to make rules under clause (c).
Section 2(l) of Factories Act, 1948 defines "worker". According to the
provision, "worker" means a person employed, directly or by or through any
agency (including a contractor) with or without the knowledge of the principal
employer, whether for remuneration or not, in any manufacturing process, or in
cleaning any part of the machinery or premises used for a manufacturing process,
or in any other kind of work incidental to, or connected with, the manufacturing
process, or the subject of the manufacturing process but does not include any
member of the armed forces of the Union.
Facts of the Case
In this case, Respondent no. 1, which is Artificial Limbs Manufacturing
Corporation is an undertaking by the Indian Government, set up with the aim to
promote, encourage and develop artificial limbs as well as boost the
availability, use, supply and distribution of those at a reasonable cost in
India to people in need and in particular defence personnel who had lost their
limbs. The aforementioned respondent had set up a factory employing more than
700 workers in order to pursue the above mentioned objective and had for the
employees set up a canteen.
The canteen was run by contractors with whom the
respondent no.1, that is, the Artificial Limbs Manufacturing Corporation used to
enter into contracts. At the time of the case the canteen was run by the
contractor Aditya Shukla, who is respondent no. 2 in this case. Now, the
appellants in this case claimed that they were employed by several of the
contractors, both past and in the present and had been working in the canteen
for a long time. The appellants raised a claim that they were workers of
respondent no. 1 while their contract with respondent no. 2 was on-going.
The State Government referred the dispute to the Labour Court which held by an
order dated 10th May 1996, that the appellants were not the employees of
respondent no.1 and the High Court dismissed the appeal filed by the workers
against the decision of the Labour Court. However the appellants argued in the
Supreme Court that the State Government had specified the Artificial Limbs
Manufacturing Corporation factory under the provisions of Section 46(1) of the
Factories Act by notification and therefore the respondent no. 1 was statutorily
bound to establish and maintain a canteen.
Apart from the argument that the
canteen was part of the respondent no. 1's establishment, the appellants also
contended that several terms in the contract between the contractor and the
respondent no. 1 showed that the appellants were under the direct supervision
and control of the respondent no. 1 and further considering that the appellants
were employed in the canteen of respondent no. 1 inspite of there being several
changes in the contractors, showed that the appellants were in fact the workers
of respondent no. 1, rather than respondent no.2.
On the other hand, the respondent No.1 contended that it exercised no control
over the appointment, continuation or dismissal from service of the appellants.
The respondent no. 1 also alleged that the appellants had never challenged the
contract between it and the contractor as being a sham document intended to hide
the fact that the appellants were in fact employees under the respondent no.1.
In this case, the following precedents have been cited:
- Whether the Artificial Limbs Manufacturing Corporation is statutorily
bound to provide canteens under Section 46 of Factories Act, 1948?
- Whether the canteen workers are the employees of the respondent no. 1
- Whether a canteen set up in a factory to meet the statutory obligation
under Section 46 of Factories Act, 1948 entail that the employees of the
canteen become the employees of the establishment?
- Parimal Chandra Raha and others v. Life Insurance Corporation of India
and Others 
In this case it was held by the Supreme Court that since the Corporation had a
dominating effect on the contract and could continue or terminate the contract
and also to modify and dictate the new terms of the contract with the employees
of the canteen, the workers of the canteen would be employees under the
corporation subject to certain conditions.
- Indian Petrochemicals Corporation Ltd. vs. Shramik Sena and Others 
In this case, the that the workmen of a statutory canteen would be the workmen
of the establishment only for the purpose of the Factories Act and not for all
other purposes unless it was otherwise proved that the establishment exercised
complete administrative control over the employees serving in the canteen. Thus
what was to be seen in the relationship between the establishment and the
canteen employees, was that whether there existed a master-servant relationship.
- Barat Fritz Werner Ltd. V. State of Karnataka 
In this case, the Supreme Court held that running a canteen is an incidental
activity of a factory, which is necessary for running it.
- R.K. Panda v. Steel Authority of India Ltd 
The Supreme Court held that a clause in the contract which is benevolently
inserted to protect the contract labourers to continue to earn their livelihood
cannot by itself give rise to a right to regularisation in the employment of the
As to issue 1, that is, whether Artificial Limbs Manufacturing Corporation
statutorily bound to provide canteens under Section 46 of Factories Act, 1948,
the Supreme Court held that it was already decided by the High Court that it did
not apply to the respondent no. 1 company and that the issue required no further
To adjudge issue 2, as mentioned in the previous sections, the Court found that
although the respondent No.1 had agreed to provide the contractor with the basic
infrastructure, the actual running of the canteen was the responsibility of the
contractor alone and the contractor had the sole authority to employ, dismiss
employees and thereby held that the canteen workers were not employees of the
respondent no. 1.
On issue 3 that is whether the employees of a canteen established under the
statutory obligation of Section 46 of Factories Act, 1948 become employees of
the factory despite being employed by a contractor, the Court held that there
was nothing mentioned in the statute that provides for the manner in which a
factory must set up a canteen and employees of contractors who were in no way
supervised by the establishment, would not become the employees of respondent
Critical Analysis of the Judgement
Going through the judgement, it seems that the ratio-decidendi has been very
aptly decided and the reasoning behind the judgement seems to be very accurate
in its application. The judgement delivered by Justices S. Rajendra Babu and
Ruma Pal have certain very important junctures.
Firstly, in deciding whether the contract between the contractor who is
respondent no. 2 and the respondent no. 1 which is the Artificial Limbs
Manufacturing Corporation provides for an employer-employee relationship between
the respondent no.1 and the appellant, the Court found that the respondent no. 1
only supplied the basic infrastructure to run the canteen to the contractor
whilst the contractor had to provide for its upkeep and maintenance and further
indemnify the respondent no.1 for any loss or damage caused to those items,
thereby allowing the contractor to run the canteen as per his own discretion.
Considering that the respondent no.1 only obliged the contractor to provide the
employees all facilities as provided in various labour laws did not mean the
respondent no. 1 was usurping the role of running the canteen but only meant
that the corporation ensured compliance with statutory rules.
Clause 43 of the agreement which gave the contractor the discretion to employ
the workers already working in the canteen (like the appellants) also made it
clear that the contractor could not take action against the canteen workers.
Therefore the respondent No. 1 had no say as to who should be employed by the
contractor, nor did it provide for the method of recruitment to be followed by
There was no obligation on the contractor to employ the persons who had served
under earlier contractors. The master-servant relation being absent herein, it
was rightly pointed out by the Court that workmen of a statutory canteen could
only be the workmen of the establishment for the sole purpose of the Factories
Act and not for all other purposes unless it was otherwise proved that the
establishment exercised complete administrative control over the employees
serving in the canteen, using the principle of law as laid down in the case of
Barat Fritz Werner Ltd. V. State of Karnataka
The Supreme Court also rightly held that even if there is a mandatory clause in
the contract whereby a contractor had to hire old employees in a canteen, it
could not be said that they were employees of the factory because such a clause
in the contract is actually inserted in the contract in a benevolent fashion to
protect the continuance of the source of livelihood of the contract labourers
who had been working for long in the factory.
- 2002 LLR 88 (SC)
- 1997 (76) FLR 838 (All HC)
- 1995 Supp (2) SCC 611
- (1999) 6 SCC 439
- 2001 (4) SCC 498
- (1994) 5 SCC 304
- 2001 (4) SCC 498