Seeking Legal Insights: Can We Deny Section 17-B Benefits Based on Contractor Status?

Interim Relief and Section 17-B Compliance

In one of our ongoing matters at the Gujarat High Court, challenging the award of the Labor Court regarding the reinstatement of a contract laborer, the court has granted interim relief subject to compliance with Section 17-B of the Industrial Dispute Act, 1947. In the order granting interim relief, the Honorable Court mentioned that "Considering the nature of the dispute decided by the labor court and having regard to the stand taken by the petitioner (i.e., the company) that the respondent no. 1 (i.e., Contract Labor) was the contractor's worker, the court finds that the petitioner has made out a case for the grant of interim relief. Hence, relief is granted subject to compliance with Section 17-B of the Industrial Dispute Act, 1947."

Provisions of Section 17-B

The provisions of Section 17-B are very clear and entitle a workman to benefits if the following five conditions are satisfied:

1. There should be an order of reinstatement.
2. The employer should prefer proceedings against the order in the High Court or Supreme Court.
3. The workman should be employed in any establishment during the pendency of the proceedings.
4. The workman should file an affidavit before such court to that effect.
5. Such court should be satisfied that the workman had neither been employed nor had been receiving adequate remuneration during such period.

The only relief available to the employer is to prove that the said workman is gainfully employed and has been receiving adequate remuneration, and in that case, the workman will not be entitled to benefits under Section 17-B.

Judgment of the High Court of Jharkhand

In this context, there is a judgment of the High Court of Jharkhand in LPA No. 267 of 2012 wherein the court mentioned that "Refusing relief under Section 17-B is an exception, as it would be in the rarest of the rare cases. The case may be only those where an award is challenged on the basic issue of jurisdictional error or error apparent on the face of the award. One instance of jurisdictional error can be about the absence of the relationship of workman and the employer between the parties. If the writ petitioner challenging the award before the High Court genuinely, bona fide, seriously, and gravely raises the question of the absence of this relationship and the High Court is satisfied prima facie in full measure with reference to such contention of the writ petitioner, which has to be duly supported by material on record, and the High Court comes to a prima facie conclusion that indeed very serious and grave doubts do exist with respect to the question of such a relationship between the parties, it can refuse to pass an order under Section 17-B of the Act."

I was trying to establish the correlation between our case and the above judgment to refuse benefits under Section 17-B of the Act, as in our case also the High Court has prima facie agreed with the stand taken by us that the respondent no. 1 is the contractor's worker. I request legal opinion and views with other such judgments, if any, refusing benefits under Section 17-B on such grounds.

I am of the opinion that the Honorable Gujarat High Court has given such a judgment in light of the proviso of Section 17B. Relief is granted if the workmen have been employed and have received adequate remuneration during the pendency of proceedings. This is an established provision and will not be affected by the judgment of the Honorable Jharkhand High Court. See this [Indian Labour Laws & Shram Suvidha Simplified](http://www.shramsamadhan.com/)

Dear Rajendra, I hope you will bear with me for my preference to answer your open thread rather than your private message to me, given its public importance.

As you are aware, any industrial dispute relating to non-employment can be prolonged indefinitely by the employer if they choose not to rehire an unwanted employee by utilizing various layers of legal rights to appeal. In order to counteract this tendency, Section 17-B was introduced into the Industrial Disputes Act, 1947 by the amending Act of 1984. The right established under this section is a separate and independent right available to a worker during the proceedings before a High Court or the Supreme Court, initiated by the employer against the reinstatement award in favor of the worker, subject to the prerequisites mentioned in your post. It can be argued that once these requirements are met, the worker becomes entitled to the wages as stipulated by Section 17-B, and no court order is necessary to grant him such wages, as the statute itself confers the right. This section's significance and implications, aimed at ensuring equitable dispensation of social justice to the conflicting partners in production, cannot be overstated.

I understand your reliance on the judgment (unreported?) of the honorable High Court of Jharkhand to reject outright the statutory concession granted to workers who have lost their livelihood due to employer actions. The determination of whether a worker is a regular employee of the Principal Employer or a Contract Labor engaged through a Contractor is indeed a factual question, and whether a Principal Employer is liable for the termination of employment of a contract laborer is a legal question. The prevalence of "Umbrella Contracts" nowadays further complicates the resolution of these questions. Therefore, in my view, the entire matter should be decided on its merits in the disposal of the Writ filed under Article 226, rather than in an interim application for the payment of wages under Section 17-B pending litigation. This may explain the rationale behind the observations of the honorable High Court of Gujarat as mentioned above while granting relief under Section 17-B.

Without prejudice to my aforementioned stance, I will now mention some cases where the benefit of Section 17-B was rarely denied to workers as you requested. A Division Bench of the Karnataka High Court ruled in Vysya Bank Ltd v. General Secretary, All India Vysya Bank Employees' Union [1996(1)LLJ.420] that the Tribunal's reinstatement order was solely based on compassionate grounds, which is not permissible under the provisions of Section 11-A of the ID Act, 1947. Therefore, prima facie, there was enough evidence on record to disregard the effects of Section 17-B and refuse relief under it by the Writ Court when the matter is brought before it.

Thank you for your time and attention.

Sincerely, [Your Name]

Dear Umakantahn Sir,

Many thanks for your valued inputs and sharing other cases denying benefits under section 17B.

Kind Regards,
Rajendra Zala