State Lacks Authority to Refer HAL Labor Disputes: Allahabad High Court Rules Canteen Workers Not HAL Employees

In a key ruling, the Allahabad High Court dismissed the claim by Hindustan Aeronautics Karmchari Sabha (HAKS) that 57 canteen workers at Hindustan Aeronautics Ltd. (HAL) should be considered regular employees of HAL, rather than contract labor. The Court held that the State Government had no jurisdiction to refer labor disputes involving HAL to the Industrial Tribunal, as HAL is a Central Public Sector Enterprise (CPSE) under the exclusive authority of the Central Government.

This dispute began in 2000 when HAL ended its subsidized canteen service and transitioned to a market-rate service, resulting in the termination of 57 contract canteen workers. The workers alleged that HAL, rather than the canteen contractor, was their true employer and demanded regularization. They argued that HAL’s contract with the canteen operator was merely a “sham” created to avoid labor obligations. The State Government referred the matter to the Industrial Tribunal, which ruled that the workers should be treated as HAL employees, though it denied their request for back wages. Both HAL and HAKS challenged this award, leading to the Allahabad High Court’s review.

The Court examined multiple legal questions, including the authority to refer labor disputes involving HAL, the nature of the canteen contract, and the workers’ entitlement to back wages.

Justice Subhash Vidyarthi ruled that only the Central Government is the “appropriate government” for disputes involving HAL. As HAL is a CPSE with the Central Government holding 71.64% of its shares, the Court noted that, per Section 2(a) of the Industrial Disputes Act, only the Central Government has the authority to refer labor disputes concerning HAL.

"HAL, as a central government-owned entity, falls within the exclusive jurisdiction of the Central Government for industrial dispute references," Justice Vidyarthi clarified.

The Court held that the State Industrial Tribunal lacked jurisdiction in this case, even though the Central Government had delegated certain powers to the State Government in a 1998 notification. The Court reasoned that such delegation does not override the statutory requirement that the Central Government directly oversee labor issues for centrally controlled enterprises like HAL.

HAKS claimed that the contract between HAL and the canteen operator was a “sham” used to disguise the workers as contract labor. The Court disagreed, finding no evidence of HAL’s direct control over hiring, supervision, or employment conditions of the canteen workers. The Court emphasized that a contract can only be declared sham if there is proof of employer-level control and supervision by HAL over the workers, which was not substantiated.

"A genuine contractual relationship exists between HAL and the canteen contractor, devoid of the requisite elements to label it as sham," the Court observed.

Addressing the claim for back wages, the Court upheld the Tribunal’s decision to deny them, noting that the workers failed to provide evidence of unemployment during the period in question. The Court emphasized that such claims require a demonstration of economic hardship directly resulting from the employer’s actions.

The Allahabad High Court quashed the Tribunal’s finding that the canteen workers were employees of HAL, concluding that HAL’s contract with the canteen operator was valid. The Court dismissed the workers’ claims for regularization and clarified that HAL did not bear the responsibility to employ or compensate them as permanent employees.

This judgment affirms that labor disputes involving Central Public Sector Enterprises fall within the Central Government’s jurisdiction, limiting state intervention. It also reinforces standards for distinguishing between contract labor and permanent employment in the context of corporate and public sector partnerships.

Date of Decision: November 4, 2024
Hindustan Aeronautics Ltd. Through Its General Manager  vs Hindustan Aeronautics Karmchari Sabha Through Its G.S. and Others