If the contract is a sham or not genuine the workmen of contractor can claim to be employees of Principal Employer - Karnataka High Court
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Key
Questions considered by the Hon’ble Court:
(a) Whether an industrial dispute can be raised for
abolition of the contract labour system in view of the provisions of the Act?
(b) If so, who can raise such dispute?
(c) Whether the Industrial Tribunal or the appropriate
Government has the power to abolish the contract labour system? and
(d) In case the contract labour system is abolished, what is
the status of the erstwhile workmen of the contractors?
Conclusions
& Answers by the Hon’ble High Court:
(i) In view of the provisions of Section 10 of the Act, it
is only the appropriate Government which has the authority to abolish genuine
labour contract in accordance with the provisions of the said section. No court
including the industrial adjudicator has jurisdiction to do so.
ii) If the contract is a sham or not genuine, the workmen of
the so-called contractor can raise an industrial dispute for declaring that
they were always the employees of the principal employer and for claiming the
appropriate service conditions. When such dispute is raised, it is not a
dispute for abolition of the labour contract and hence the provisions of Section 10 of the Act
will not bar either the raising or the adjudication of the dispute. When such
dispute is raised, the industrial adjudicator has to decide whether the
contract is a sham or genuine. It is only if the adjudicator comes to the
conclusion that the contract is a sham, that he will have jurisdiction to
adjudicate the dispute. If, however, he comes to the conclusion that the
contract is genuine, he may refer the
workmen to the appropriate Government for abolition of the contract labour
under Section 10 of
the Act and keep the dispute pending. However, he can do so if the dispute is
espoused by the direct workmen of the principal employer. If the workmen of the
principal employer have not espoused the dispute, the adjudicator, after coming
to the conclusion that the contract is genuine, has to reject the reference,
the dispute being not an industrial dispute within the meaning of Section 2(k) of the ID
Act. He will not be competent to give any relief to the workmen of the
erstwhile contractor even if the labour contract is abolished by the
appropriate Government under Section 10 of the Act.
(iii) If the labour contract is genuine a composite
industrial dispute can still be raised for abolition of the contract labour and
their absorption. However, the dispute will have to be raised invariably by the
direct employees of the principal employer. The industrial adjudicator, after
receipt of the reference of such dispute will have first to direct the workmen
to approach the appropriate Government for abolition of the contract labour
under Section 10 of
the Act and keep the reference pending. If pursuant to such reference, the
contract labour is abolished by the appropriate Government, the industrial
adjudicator will have to give opportunity to the parties to place the necessary
material before him to decide whether the workmen of the erstwhile contractor
should be directed to be absorbed by the principal employer, how many of them
and on what terms. If, however, the contract labour is not abolished, the
industrial adjudicator has to reject the reference.
(iv) Even after the contract labour system is abolished, the
direct employees of the principal mployer
can raise an industrial dispute for absorption of the ex- contractor's workmen
and the adjudicator on the material placed before him can decide as to who and how
many of the workmen should be absorbed and on what terms.
Karnataka High Court
The Mysore Electrical Industries ...
vs
Engineering & General Workers ...
on 23 February, 2023
Bench: Hon’ble Justice Suraj
Govindaraj
WP No. 3788 of 2012
THIS WRIT PETITION IS FILED UNDER ARTICLES
226 AND 227 KARNATAKA OF THE
CONSTITUTION OF INDIA
PRAYING TO CALL FOR THE RECORDS ON THE FILE OF
THE INDUSTRIAL TRIBUNAL,
BANGALORE IN ID NO.5/2000, PERUSE THE SAME, ALLOW THE WRIT PETITION, QUASH THE
IMPUGNED AWARD DATED 3RD
DECEMBER 2011 PASSED IN ID NO.5/2000 VIDE ANNEXURE-A BY ISSUE OF A WRIT IN THE NATURE OF
CERTIORARI. CONSEQUENTLY,
DISMISS THE DISPUTE.
ORDER -2-
1. The petitioner-employer is before this Court seeking for
the following reliefs:
a) Call for the records on the file of the Industrial
Tribunal, Bangalore, in I.D.No.5/2000, peruse the same, allow the writ
petition, quash the impugned Award dated 3rd December 2011 passed in
I.D.No.5/2000 vide Annexure 'A' by issue of a writ in the nature of certiorari,
consequently, dismiss the dispute.
b) Or in the alternative pass such other order/s as this
Hon'ble Court deem fit to pass on the facts and in the circumstances of the
case, in the interest of justice and equity.
2. The employer is an undertaking of State of Karnataka
engaged in manufacture and sale of power breakers of various capacities. It has
its own service rules, Cadre and Recruitment Rules for appointment of regular
employees which is what is alleged to have been followed by the employer.
3. The services which are concerned with in the present
matter are those related to house-keeping, WP No. 3788 of 2012 gardening,
loading and unloading which is alleged to require only a few hours a day. It is
on that basis that the employer had entrusted those works to labour contractors
for lumpsum amount by entering into contract.
4. The contractors are alleged to have engaged their own men
to carry out the said work. The house-
keeping and gardening work was entrusted to
"Sri.Shankar Nursery (associated)", work of loading and unloading was
entrusted to "M/s Associated Detective & Security Services".
5. On 7.03.2000, Sri Shankar Nursery terminated the contract
relating to house keeping and gardening.
Similarly on 24.03.2000, M/s Associated Detective &
Security Services terminated the contract and thereafter withdrew their men.
6. In pursuance thereof, the employer entrusted the work to
"M/s Essential Services" vide contract dated 29.03.2000 which also
came to be withdrawn by the said contractor vide letter dated 29.11.2000. It
is alleged that thereafter the employer has not engaged any contract
workers.
7. The persons engaged by Sri Shankar and M/s Associated Detective
& Security Services had filed a petition on 31.03.1999 through the
respondent Union before the Deputy Labour Commissioner for a declaration that
the workers whose names are mentioned in Annexure-A thereto were always
employees of the employer and therefore they are entitled to get all the
benefits as applicable to the permanent workmen from the date of their joining
service. It was contended that the said workers were discharging their work
which were perennial in nature along with other permanent workmen and therefore
they are entitled to be declared as permanent workmen.
8. The employer opposed the said petition by contending that
the persons named in annexure to the petition were not discharging their jobs
as mentioned against their name, the employer does WP No. 3788 of 2012 not
even know them. The work entrusted to the contractors was house-keeping,
gardening, loading and unloading which required only few hours of work in a day
and therefore, the same cannot be said to be perennial in nature and therefore,
they were not entitled to be treated as permanent workmen.
9. The matter having been referred to conciliation, the
conciliation efforts failed and as such, the State Government in exercise of
powers conferred under Section
10(1)(d) of the Industrial Disputes Act, 1947 [for short 'ID Act'] referred the points of
dispute for adjudication to Industrial Tribunal, Bengaluru on 14.12.1999.
10. The points which were referred for adjudication are as
under:
i. Whether the management of Mysore Electrical Industries
Ltd., Tumkur Road, Bangalore, are justified in engaging contract workers as
packers, Electricians, Welders, Cook, Stores, Painters, House-Keeping, Driver,
Typist, Draftsman, Librarian etc., and getting done permanent and perennial
nature of work through them and whether the said contract system in sham?
ii. If not, to what relief the workers shown in Annexure 'A'
who are represented by Engineering and General Workers Union, No.2, Mill
Corner, Malleswaram, Bangalore-3 are entitled?
11. During the pendency of the said adjudication 19 of 66
workmen raised a conciliation proceeding contending that employer had refused
them work from February 2000, which was opposed by the employer contending that
they are not even employees of the company, hence, the question of refusing
them work would not arise. This issue was also referred to conciliation which
ended in a failure.
The State government vide order dated 7.03.2001 referred
this dispute for adjudication on the question.
"Whether the management of Mysore Electrical Industries
Limited, Tumkur Road, Bangalore was justified in refusing work to 19 contract
workers, if not what relief that the said workers entitled to?
12. The Labour Court, Bangalore took up the same as
Reference No.5/2001 and since the earlier dispute was pending before the
Industrial Tribunal, the same was referred to the Industrial Tribunal.
13. While the matter was pending, the Union filed an
interlocutory application on 14.12.2000 under Section 11 of the ID Act
seeking for a direction to the employer to restore the services of the workmen
listed in the annexure to the affidavit. The Industrial tribunal after hearing
the matter vide order dated 12.04.2001 directed the employer to restore the
services of the workmen listed in the annexure. Said order was challenged
before this Court in W.P.No.18358/2001 wherein an order of stay was declined.
W.A. No.3517/2001 having been filed, the Division Bench of this Court stayed
the operation of the order and subsequently disposed of the matter with a
direction to the tribunal to dispose of the proceedings before the Tribunal
expeditiously.
14. The Tribunal after considering the matter directed the
employer to restore the services of the workmen and it is aggrieved by the same
that the petitioner-employer is before this Court
15. Sri.H.N.Muralidhar, learned counsel for the
petitioner-employer would submit that, 15.1. There is no prohibition in terms
of Section 10(1) of
the Contract Labour Abolition Act ['CLRA' for short] prohibiting the employer
from engaging the services of contractors by engaging contract labour. In the
absence of such prohibition, the employer is entitled to enter into a contract
with a contractor which cannot be found fault with unless a notification is
issued under Subsection (1) of Section 10 of the CLRA, the Industrial
adjudicator would not get any right to adjudicate any dispute relating to
contract labour.
15.2. The precondition for the workman to raise a dispute
under the CLRA before the labour adjudicator is the issuance of a notification
under Section 10(1) of the CLRA Act.
15.3. In the present case there being no such notification,
the industrial Tribunal ought tohave considered this aspect which it has failed
to do.
15.4. In the other matter, where the workman had approached
the labour Court which was subsequently transferred to Industrial tribunal
alleging that the employer had refused work, the Tribunal had come to a
conclusion that there is no relationship between the employer and the workman,
therefore, the question of refusing work would not arise.
15.5. The Tribunal having come to such a conclusion in the
subsequent matter could not have directed the employer to reinstate the workmen
by way of the impugned order.
15.6. The Tribunal has not adjudicated and or given any
finding on the questions referred to it but has only directed implementation of
the earlier order passed by the tribunal on 12.4.2001 which could not have been
done. By way of the final order, the tribunal has only confirmed the interlocutory
order without adjudicating the issues in question. Therefore, the order of the
tribunal is required to be set-aside.
15.7. In support of his case, Sri.H.M.Muralidhar, learned
counsel relies upon the decision in Steel Authority of India Ltd. And others
(SAIL) -v- National Union Waterfront Workers and others1, more particularly
para 125 thereof which is reproduced hereunder for easy reference:
125.The upshot of the above discussion is outlined thus:
(1)(a) Before 28-1-1986, the determination of the question
whether the Central Government or the State Government is the appropriate
Government in relation to an establishment, will depend, in view of the
definition of the expression "appropriate Government" as stood in the
CLRA Act, on the answer to a further question, is the industry under
consideration carried on by or under the authority of the Central Government or
does it pertain to any specified controlled industry, or the establishment of
any railway, cantonment board, major port, mine or oilfield or the
establishment of banking or insurance company? If the answer is in the
affirmative, the Central Government will be the appropriate (2001)7 SCC 1
Government; otherwise in relation to any other establishment the Government of
the State in which the establishment was situated, would be the appropriate
Government;
(b) After the said date in view of the new definition of
that expression, the answer to the question referred to above, has to be found
in clause (a) of Section 2 of the Industrial Disputes Act; if (i) the Central
Government company/undertaking concerned or any undertaking concerned is
included therein eo nomine, or (ii) any industry is carried on (a) by or under
the authority of the Central Government, or
(b) by a railway company; or (c) by a specified controlled
industry, then the Central Government will be the appropriate Government;
otherwise in relation to any other establishment, the Government of the State
in which that other establishment is situated, will be the appropriate
Government.
(2)(a) A notification under Section 10(1) of the CLRA Act
prohibiting employment of contract labour in any process, operation or other
work in any establishment has to be issued by the appropriate Government:
(1) after consulting with the Central Advisory Board or the
State Advisory Board, as the case may be, and (2) having regard to
(i) conditions of work and benefits provided for the
contract labour in the establishment in question, and
(ii) other relevant factors including those mentioned in
sub-section (2) of Section
10;
(b) Inasmuch as the impugned notification issued by the
Central Government on 9-12-1976 does not satisfy the aforesaid requirements of
Section 10, it isquashed but we do so prospectively i.e. from the date of this
judgment and subject to the clarification that on the basis of this judgment no
order passed or no action taken giving effect to the said notification on or
before the date of this judgment, shall be called in question in any tribunal
or court including a High Court if it has otherwise attained finality and/or it
has been implemented.
(3) Neither Section 10 of the CLRA Act nor any other
provision in the Act, whether expressly or by necessary implication, provides
for automatic absorption of contract labour on issuing a notification by the
appropriate Government under sub-section (1) of Section 10, prohibiting
employment of contract labour, in any process, operation or other work in any
establishment. Consequently the principal employer cannot be required to order
absorption of the contract labour working in the establishment concerned.
(4) We overrule the judgment of this Court in Air India case
[(1997) 9 SCC 377 : 1997 SCC (L&S) 1344] prospectively and declare that any
direction issued by any industrial adjudicator/any court including the High
Court, for absorption of contract labour following the judgment in Air India
case [(1997) 9 SCC 377 : 1997 SCC (L&S) 1344] shall hold good and that the
same shall not be set aside, altered or modified on the basis of this judgment
in cases where such a direction has been given effect to and it has become final.
(5) On issuance of prohibition notification under Section
10(1) of the CLRA Act prohibiting employment of contract labour or otherwise,
in an industrial dispute brought before it by any contract labour in regard to
conditions of service, the industrial adjudicator will have to consider the
question whether the contractor has been interposed either on the ground of
having undertaken to produce any given result for the establishment or for
supply of contract labour for work of the establishment under a genuine
contract or is a mere ruse/camouflage to evade compliance with various
beneficial legislations so as to deprive the workers of the benefit thereunder.
If the contract is found to be not genuine but a mere camouflage, the so-called
contract labour will have to be treated as employees of the principal employer
who shall be directed to regularise the services of the contract labour in the
establishment concerned subject to the conditions as may be specified by it for
that purpose in the light of para 6 hereunder.
(6) If the contract is found to be genuine and prohibition
notification under Section 10(1) of the CLRA Act in respect of the
establishment concerned has been issued by the appropriate Government,
prohibiting employment of contract labour in any process, operation or other
work of any establishment and where in such process, operation or other work of
the establishment the principal employer intends to employ regular workmen, he
shall give preference to the erstwhile contract labour, if otherwise found
suitable and, if necessary, by relaxing the condition as to maximum age
appropriately, taking into consideration the age of the workers at the time of
their initial employment by the contractor and also relaxing the condition as
to academic qualifications other than technical qualifications.
16. Per contra, Sri.K.B.Narayana Swamy, learned counsel for
the Union would submit that,
16.1. The workmen had been engaged with the employer even
before the contractor came into the picture, the services of the workmen were
shifted by the employer unilaterally to the contractor with a sole purpose of
obviating compliance with the applicable labour laws, as also making payment of
lesser amounts that required to be made.
16.2. The arrangement between the employer and the
contractor is a sham transaction. It has come in evidence that there is no
agreement which has been entered into between the employer and the contractor
and no such agreement has been produced before the Tribunal.
16.3. The employer has not registered himself under Section
7 of CLRA, the contractor has not registered himself under Section 12 of the
CLRA, hence the question of a non-registered employer entering into a contract
for labour with a non-registered contractor would not arise. The same apart
from being a violation of the mandate of the CLRA would establish the
transaction to be a sham transaction between the employer and the contractor.
16.4. Many of the workmen being in the service of the
employer from as far back as 1995 and various other workmen having joined
subsequently, have been discharging various works like that of house-keeping,
painter, packer, cook, welder, typist, etc, on a continuous basis. The fact
that they have been rendering such work for several years would by itself
establish that the works being carried out by the workmen are perennial and
permanent in nature.
16.5. The workmen having earlier been engaged on the rolls
of the employer, it is only with an intention to violate the requirements of
the applicable labour law that the
methodology of contract labour has been resorted to.
16.6. The services rendered by the workmen being essential
for the running of the factory of the employer, the workmen of the Union are
required to be treated on par with the regular employees of the employer who
have also been engaged to render similar service, that is to say that not only
workman belonging to the respondent Union, but certain other workmen have been
engaged by the employer to render the very same service.
16.7. The workers remaining the same, nature of work being
the same, the employer resorted to unilaterally shift the workers who were
working with the employer to the rolls of the contractor and many different
contractors thereafter with an intention to pay less money than what is
required and therefore, the entire transaction is a sham transaction.
16.8. Learned counsel relies upon the decision of the
Hon'ble Apex court in Gujarat Electricity Board, Thermal Power Station, UKAI,
Gujarat2, more particularly paragraphs 10, 33, 53 to 59 which are extracted
hereunder for easy reference:
10. In view of the aforesaid contentions, the questions that
fall for consideration in this appeal, which are common to all the appeals are
as follows:
(a) Whether an industrial dispute can be raised for
abolition of the contract labour system in view of the provisions of the Act?
(b) If so, who can raise such dispute?
(c) Whether the Industrial Tribunal or the appropriate
Government has the power to abolish the contract labour system? and
(d) In case the contract labour system is abolished, what is
the status of the erstwhile workmen of the contractors?
33. These decisions in unambiguous terms lay down that after
the coming into operation of the Act, the authority to abolish the contract
labour is vested exclusively in the appropriate Government which has to take
its decision in the matter in accordance with the provisions of Section 10 of the Act.
This conclusion has been arrived at in these decisions on the interpretation
of Section 10 of
the Act. However, it has to be remembered that the authority to abolish
the contract labour under Section
10 of the Act comes into play only where there exists a genuine
contract. In other words, if there is no genuine contract and the so-called
contract is a sham or a camouflage to hide the reality, the said provisions are
inapplicable. When, in such circumstances, the workmen concerned raise an
industrial dispute for relief that they should be deemed to be the employees of
the principal employer, the court or the industrial adjudicator will have
jurisdiction to entertain the dispute and grant the necessary relief. In this
connection, we may refer to the following decisions of this Court which were
also relied upon by the counsel for the workmen.
53. Our conclusions and answers to the questions raised are,
therefore, as follows:
(i) In view of the provisions of Section 10 of the Act, it
is only the appropriate Government which has the authority to abolish genuine
labour contract in accordance with the provisions of the said section. No court
including the industrial adjudicator has jurisdiction to do so.
ii) If the contract is a sham or not genuine, the workmen of
the so-called contractor can raise an industrial dispute for declaring that
they were always the employees of the principal employer and for claiming the
appropriate service conditions. When such dispute is raised, it is not a
dispute for abolition of the labour contract and hence the provisions of Section 10 of the Act
will not bar either the raising or the adjudication of the dispute. When such
dispute is raised, the industrial adjudicator has to decide whether the
contract is a sham or genuine. It is only if the adjudicator comes to the
conclusion that the contract is a sham, that he will have jurisdiction to
adjudicate the dispute. If, however, he comes to the conclusion that the
contract is genuine, he may refer the
workmen to the appropriate Government for abolition of the contract labour
under Section 10 of
the Act and keep the dispute pending. However, he can do so if the dispute is
espoused by the direct workmen of the principal employer. If the workmen of the
principal employer have not espoused the dispute, the adjudicator, after coming
to the conclusion that the contract is genuine, has to reject the reference,
the dispute being not an industrial dispute within the meaning of Section 2(k) of the ID
Act. He will not be competent to give any relief to the workmen of the
erstwhile contractor even if the labour contract is abolished by the
appropriate Government under Section 10 of the Act.
(iii) If the labour contract is genuine a composite
industrial dispute can still be raised for abolition of the contract labour and
their absorption. However, the dispute will have to be raised invariably by the
direct employees of the principal employer. The industrial adjudicator, after
receipt of the reference of such dispute will have first to direct the workmen
to approach the appropriate Government for abolition of the contract labour
under Section 10 of
the Act and keep the reference pending. If pursuant to such reference, the
contract labour is abolished by the appropriate Government, the industrial
adjudicator will have to give opportunity to the parties to place the necessary
material before him to decide whether the workmen of the erstwhile contractor
should be directed to be absorbed by the principal employer, how many of them
and on what terms. If, however, the contract labour is not abolished, the
industrial adjudicator has to reject the reference.
(iv) Even after the contract labour system is abolished, the
direct employees of the principal mployer
can raise an industrial dispute for absorption of the ex- contractor's workmen
and the adjudicator on the material placed before him can decide as to who and how
many of the workmen should be absorbed and on what terms.
54. It is in the light of the above position of law which
emerges from the provisions of the Act and the judicial decisions on the
subject that we have to answer the contentions raised in different civil
appeals before us. As regards the present civil appeal, the facts of which have
already been referred to earlier, Shri Venugopal, the learned counsel for the
appellant- Board contended that none of the direct workmen of the Board had
espoused the cause of the contract labour and hence the Tribunal had no jurisdiction
to entertain the reference. He also submitted that any amount of consent by the
appellant-Board for such a reference will not confer jurisdiction on the
Tribunal to entertain the reference.
55. As has been pointed out earlier, the order of reference
of the dispute to the Tribunal was made by the State Government on the basis of
a joint application for reference under Section 10(2) of the ID
Act. The application was duly signed by the present appellant-Board, all the
seven contractors involved in the dispute and by the then Surat Labour Union
which had both direct as well as contract labourers, as its members. The
respondent-Union is the successor of the said Surat Labour Union. These facts
show two things, viz., that contrary to the submission made by the learned
counsel, the direct employees of the Board had espoused the cause of the
contract labourers, and the appellant-Board had also accepted the fact that the
dispute in question was raised and supported also by the said employees. No
objection was taken before the Tribunal or the High Court either to the order
of reference or to the adjudication of the dispute by the Tribunal that the
dispute was not espoused by the direct employees of the appellant-Board. This
would also show that the fact that the dispute was espoused by the direct employees of the Board was accepted by the
Board and never questioned till this date. Apart from the fact, therefore, that
the Board had signed the joint application for reference and therefore it
cannot in an appeal by special leave under Article 136 of the
Constitution for the first time raise the question which is a mixed question of
law and fact, we are of the view that even on facts as they stand, it will have
to be held that the dispute was in fact espoused by the direct employees of the
appellant-Board. We therefore reject the said contention.
56. It was next contended that the dispute raised by the
workmen was for abolition of the contract and such a dispute could not have
been entertained by the Tribunal in view of the provisions of Section 10 of the Act.
For this purpose, the learned counsel relied upon clause (1) of the order of
reference. We find nothing in the said clause which supports the contention of
the learned counsel. The clause reads as follows:
"Whether the workers whose services are engaged by the
contractors, but who are working in the Thermal Power Station of Gujarat
Electricity Board at Ukai, can legally claim to be the employees of the Gujarat
Electricity Board?"
It will be obvious from a reading of the said clause that
what in fact is referred for adjudication is the determination of the status of
the workmen, viz., whether though engaged by the contractors, they are legally
the workmen of the appellant-Board? In other words, implicit in the said clause
is the assertion of the workmen that they are in law the workmen of the
appellant-Board and not of the contractors, and they wanted the Tribunal to
decide their exact legal status. This is clear also from the statement of claim
filed by the workmen in support of their demand. In para 3 of the statement of
claim, it is averred that the Board has been employing Mukadam Supervisors
"who are draped in different paper arrangements and are now known as
contractors of the Thermal Power Station" and the Board and the so-called
contractors have joined hands for mass victimisation and termination of
services even without payment of due wages. Again, in para 5 of the statement
of claim, it is stated that the workmen are being paid wages by the Management
of the Board through Mukadam Supervisors now known as contractors of the Board.
The contractors come and go but the workmen are working throughout since the
inception of the Thermal Power Station. The control, direction and initiation
of these workmen are in the hands of the supervisors and technical staff of the
Thermal Power Station. It is also alleged in the said para that the so-called
contractors are not contractors as none of them have taken licence. It is also
averred there that it is abundantly clear that the workmen employed to perform
the permanent and perennial nature of duties are the employees of the Board. In
para 10 of the statement of claim, it is prayed that "the Tribunal should
hold and declare that the workers deployed in the Thermal Power Station under
the garb of contractor are the permanent employees of the Thermal Power Station
managed and controlled by the appellant-Board". In para 6 of the
application for interim relief which was filed on behalf of the workmen, it was
averred that the Board was through different agreements showing the workmen as
if they were working under some intermediaries and the said intermediaries are
"make-believe trappings" and are 'dubious' in nature and it was only
to deprive the workmen of the benefits which are available to the employees of
the Board that the said "make-believe trappings" were employed by the
Board. It is therefore not correct to say that the present reference was for
the abolition of the contract. The reference, on the other hand, was for a
declaration that the workmen were in fact and in law the employees of the
appellant-Board and that they should be given the service conditions as are
available to the direct employees of the Board.
57. It was then contended by the learned counsel that the
Industrial Tribunal has nowhere recorded a finding that the contract in
question was a sham, a camouflage, a make-believe or a subterfuge. On the
contrary, according to him, the Tribunal has held that the contract labour of
each of the contractors must be deemed to be the employees of the
appellant-Board, firstly because the Board and the contractors had not produced
valid proof of the registration certificate and the licences respectively,
relying on the decisions of the Madras and Karnataka High Courts, and secondly,
because of the nature of the work. He submitted that the decisions of the
Madras and Karnataka High Courts have been expressly overruled by this Court in
Dena Nath case [(1992) 1 SCC 695 : 1992 SCC (L&S) 349] . As regards the
nature of work, the exclusive jurisdiction to record a finding in that behalf
is of the appropriate Government under Section 10 of the Act and
the Tribunal is precluded from recording a finding in that behalf and
abolishing the contract on the basis of such finding. In fact, the Tribunal has
no jurisdiction to abolish the contract.
58. In the first instance, we find that the contention that
the Tribunal has held that the workmen in question are the employees of the
Board only because of the non-production of the valid proof of the certificate
and the licences in question, is not correct. The Tribunal has, on the basis of
the evidence on record, come to the conclusions, among others, that
(i) the work was being done on the premises of the Board
itself as the coal was being used for the purposes of the Board, viz.,
generation of electricity;
(ii) the workmen were broadly under the control of the
Board; (iii) there was overall supervision of the work by the officers of the
Board; (iv) the work was of a continuous nature; and (v) the work was an
integral part of the overall work to be executed for the purposes of the
generation of the electricity and that it had to be performed within specified
time-limits as part of the integrated process. The Tribunal has also in this
connection referred to a decision of this Court reported in Hussainbhai case
[(1978) 4 SCC 257 : 1978 SCC (L&S) 506] to support its conclusion that in
the aforesaid circumstances found by it, the workmen in question were the
employees of the Board. It is true that the Tribunal has not in so many words
recorded a finding that the contract was a sham or bogus or a camouflage to
conceal the real facts. It is also true that the Tribunal has referred to the decisions
of the Madras and Karnataka High Courts and on its finding that the Board and
the contractors had not produced valid proof of the registration certificate
and the licences for the relevant period has held that the workmen should be
deemed to be the employees of the Board. However, the decision of the Tribunal
has to be read as a whole. Thus read, the decision makes it clear that the
Tribunal has based its conclusion both on the ground that the workmen were in
fact engaged by the appellant-Board and not by the contractors who were merely
intermediaries set up by the Board and also on the ground that there was no
valid proof of the registration certificate and the licences in the possession
of the Board and the contractors respectively. It is not, therefore, correct to
say that the decision of the Tribunal is based only on the latter ground. We
are of the view that there is a factual finding recorded by the Tribunal that
the labour contracts in question were not genuine and the decision of the
Tribunal is based on this ground as well.
59. It is also not correct to say that to arrive at the
finding as to whether the labour contracts are genuine or not, the court or the
industrial adjudicator cannot investigate the factors mentioned in clauses (a)
to (d) of Section 10(2) of
the Act. The Explanation to
Section
10(2) makes the decision of the appropriate Government final only on
the question whether the process or operation or the work in question is of a
perennial nature or not, and that too when a dispute arises with regard to the
same. If no such question arises, the finding recorded by the Court or the
Tribunal in that behalf is not ineffective or invalid. Further, in all such
cases, the Tribunal is called upon to record a finding on the factors in
question not for abolishing the contract but to find out whether the contract
is a sham or otherwise. The contract may be genuine even where all the said
factors are present. What is prohibited by Section 10 is the
abolition of the contract except by the appropriate Government, after taking
into consideration the said factors, and not the recording of the finding on
the basis of the said factors, that the contract is a sham or bogus.
16.9. By relying on the above decision, he submits that the
abolition of contract labour by issuance of notification under Section 10 of
the CLRA comes into play when there exists a genuine contract. If there is no
genuine contract and the contract is a sham or camouflage to hide the reality,
the provision of Section
10 would not be applicable. In such circumstances, if the workmen
raise industrial dispute, they should deem to be employees of the principal
employer. He further submits that there is no need for issuance of any
notification under Section 10 for
the industrial adjudicator to get jurisdiction in a matter relating to CLRA.
16.10. Reliance is placed upon the decision in Oil and
Natural Gas Corporation Limited -v- Petroleum Coal Labour Union and Others3
more particularly paragraphs 27, 29 and 30, which are extracted hereunder for
easy reference:
Whether jurisdiction of the Tribunal to direct the
Corporation to regularise the services of the workmen concerned in the posts is
valid and legal?
27. The Central Government in exercise of its powers
under Section 10 of
the Act referred the existing industrial dispute between the workmen concerned
and the Corporation to the Tribunal which rightly adjudicated Point (i) of the
dispute (supra) on the basis of the facts, circumstances and evidence on record
and passed an award dated 26- 5-1999 directing the Corporation that the
services of the workmen concerned should be regularised with effect from the
date on which all of them completed 480 days, subsequent to their appointment
by the memorandum of appointment. The contention urged on behalf of the
Corporation that the Tribunal has no power to pass such an award compelling the
Corporation to regularise the services of the workmen concerned is wholly
untenable in law. Even if we consider the same, the said contention is contrary
to the legal principles laid down by this Court in Hari Nandan Prasad v.
WP No. 3788 of 2012 Food Corpn. of India [Hari Nandan
Prasad v. Food Corpn. of India, (2014) 7 SCC 190 : (2014) 2 SCC (L&S)
408] , wherein the decisions in U.P. Power Corpn. Ltd. v. Bijli
Mazdoor Sangh [U.P. Power Corpn. Ltd. v. Bijli Mazdoor Sangh, (2007) 5 SCC
755 : (2007) 2 SCC (L&S) 258] and Maharashtra SRTC v. Casteribe
Rajya Parivahan Karmchari Sanghatana [Maharashtra SRTC v. Casteribe
Rajya Parivahan Karmchari Sanghatana, (2009) 8 SCC 556 : (2009) 2 SCC (L&S)
513] and Umadevi (3) [State
of Karnataka v. Umadevi (3), (2006) 4 SCC 1 : 2006 SCC (L&S) 753]
were discussed in detail.
29. Further, it is very clear from the facts that all the
workmen concerned have got the qualifications required for their
regularisation, except one of them and have been employed by the Corporation
even prior to 1985 in the posts through various irregular means. The Tribunal
has got every power to adjudicate an industrial dispute and impose upon the
employer new obligations to strike a balance and secure industrial peace and
harmony between the employer and workmen and ultimately deliver social justice
which is the constitutional mandate as held by the Constitution Bench of this
Court in a catena of cases. This abovesaid legal principle has been laid down
succinctly by this Court in Bharat
Bank Ltd. v. Employees [1950 SCC 470 : AIR 1950 SC 188] , the relevant
paragraph of the said case is extracted hereunder: (AIR p. 209, para 61)
61. "We would now examine the process by which an
Industrial Tribunal comes to its decisions and I have no hesitation in holding
that the process employed is not judicial process at all. In settling the
disputes between the employers and the workmen, the function of the Tribunal is
not confined to administration of justice in accordance with law. It can confer
rights and privileges on either party which it considers reasonable and proper,
though they may not be within the terms of any existing agreement. It has not
merely to interpret or give effect to the contractual rights and obligations of
the parties. It can create new rights and obligations between them which it
considers essential for keeping industrial peace. An industrial dispute as has
been said on many occasions is nothing but a trial of strength between the
employers on the one hand and the workmen's organisation on the other and the
Industrial Tribunal has got to arrive at some equitable arrangement for
averting strikes and lock-outs which impede production of goods and the industrial
development of the country. The Tribunal is not bound by the rigid rules of
law. The process it employs is rather an extended form of the process of
collective bargaining and is more akin to administrative than to judicial
function. In describing the true position of an Industrial Tribunal in dealing
with labour disputes, this Court in Western India Automobile Assn. v.
Industrial Tribunal [(1949-50) 11 FCR 321] quoted with approval a
passage from Ludwig Teller's well-known work on the subject, where the learned
author observes that: (FCR p. 345) '... industrial arbitration may involve the
extension of an existing agreement or the making of a new one, or in general
the creation of new obligation or modification of old ones, while commercial
arbitration generally concerns itself with interpretation of existing
obligations and disputes relating to existing agreements.' The views expressed
in these observations were adopted in its entirety by this Court. Our
conclusion, therefore, is that an Industrial Tribunal formed under the Industrial Disputes Act is
not a judicial tribunal and its determination is not a judicial determination
in the proper sense of these expressions."
It has been further held by this Court in LIC v. D.J. Bahadur [(1981)
1 SCC 315 : 1981 SCC (L&S) 111] , as follows: (SCC p. 334, para 22)
22. "The
Industrial Disputes Act is a benign measure, which seeks to pre-empt
industrial tensions, provide the mechanics of dispute resolutions and set up
the necessary infrastructure, so that the energies of the partners in
production may not be dissipated in counterproductive battles and the assurance
of industrial justice may create a climate of goodwill."
30. Thus, the powers of an Industrial Tribunal/Labour Court
to adjudicate the industrial dispute on the points of dispute referred to it by
the appropriate government have been well established by the legal principles
laid down by this Court in a catena of cases referred to supra. Therefore, the
Tribunal has rightly passed an award directing the Corporation to regularise
the services of the workmen concerned.
16.11. Relying on the above, he submits that the Tribunal
had a jurisdiction to direct the employer to regularize the services of the
workman in order to strike a balance and secure industrial peace and harmony between
the employer and workmen and ultimately to deliver social justice which is a
constitutional mandate as held in catena of cases. By referring to sub-para 5 of paragraph 125 of
the decision in SAIL1 which is extracted hereinabove, he submits that the
contract when not genuine and uses as a mere ruse and camouflage to evade
compliance with beneficial legislation so as to deprive the workers of the
benefit, the contract labour will have to be treated as employees of the
principal employer who has to be directed to regularize the services of the
contract labour in the establishment which is what the tribunal has done by
directing the employer to provide work to the workmen if they report to work
and found medically fit which is what had been directed in the Interlocutory
order dated 12.04.2011. He, therefore, submits that the order passed by the
Tribunal is in accordance with law and does not require interference.
17. Sri.H.M.Muralidhar, learned counsel in rejoinder would submit
that, 17.1. The decision in Gujarat Electricity Board2 has been over ruled by
the decision in SAIL1 and in this regard he refers to paragraphs 102, 103, 104
and 105 thereof which are extracted hereinabove for easy reference. He submits
that merely on issuance of a notification under 10(1) of the CLRA, the workers
would not get automatically regularized, there cannot be an automatic
absorption. The grounds and factors as that exist would have to be appreciated
by the Industrial adjudicator to ascertain whether the workmen are entitled to
absorption or not. In this regard he also refers to sub-para 5 of para 125 of
judgment in SAIL1 and submits that the absorption post issuance of notification
under Section 10(1) of the CLRA is subject to sub-para 6 of para 125 of the
judgment in SAIL1 and the absorption could only occur by giving preference to
the contract labour if the principal employer intends to employ regular
workmen, if necessary by relaxing age criteria, as also the academic and other
technical qualification.
17.2. Thus, he submits that if contract labour is abolished
and the employer were not to engage any other persons in their place, the
erstwhile contract labour would not get any right to work. It is only a
preferential right that is vested in them which comes into play only when
employer were to engage other regular workmen, in that instead of party being
engaged, the employer would have to consider erstwhile contract labour. In the
present case, he again reiterates that there being no notification under
Section 10(1) of CLRA, the Industrial adjudicator would not get any
jurisdiction to decide the dispute. In the present case, he again reiterates
that there being no notification under Section 10(1) of the CLRA, the
Industrial adjudicator would not get any jurisdiction to decide the dispute.
18. Sri.K.B.Narayana Swamy in reply to the rejoinder would
submit that, 18.1. The decision in Gujarat Electricity Board2 has been
overruled to a limited extent as regards the automatic absorption post the
issuance of notification under Section 10(1) of the CLRA. By the decision in
SAIL1 in terms of which only a preferential right has been granted to the
workmen to seek for employment in the event of employer engaging anyone else.
The aspect of jurisdiction of the Industrial adjudicator to decide the matter
in the absence of a notification under Section 10(1) of the CLRA has not been
set-aside by the SAIL1.
Therefore, he submits that the said finding in Gujarat
Electricity Board's case2 as regards jurisdiction of the Industrial Adjudicator
stands undisturbed.
19. Heard Sri.H.M.Muralidhar, learned counsel for the
petitioner-employer and Sri.K.B.Narayana Swamy, learned counsel for the respondent-workmen.
Perused papers.
20. The points that arise for consideration are:
20.1. Whether a notification under Section 10(1) of CLRA is
a pre-requisite for the Industrial tribunal to have jurisdiction to decide the
matter relating to reinstatement, regularization or services of contract
labour?
Whether in the event
of the contract, arrangement of transaction between the employer and the
contractor being found to be sham, camouflage to make payment of lesser amounts
to the workman, then what is required to be paid. Could the workmen be directed
to be paid the same wages as that paid to other workmen?
20.3. Whether the works of house keeping, painter, driver,
typist, welder, cook, electrician, packer, loader, unloader, can be said to be
perennial work and not temporary work?
20.4. Whether the order passed by Industrial tribunal
suffers from any legal infirmity requiring interference at the hands of this
Court?
20.5. What order?
21. ANSWER TO POINT NO.1: Whether a notification under
Section 10(1) of CLRA is a pre-requisite for the Industrial tribunal to have
jurisdiction to decide the matter relating to reinstatement, regularization or
services of contract labour?
21.1. The contention of Sri.H.N.Muralidhar, learned counsel
for the employer is that unless a notification under Section 10(1) of CLRA is
issued, the Industrial tribunal would have no jurisdiction over a dispute
raised by the alleged contractor. Section 7 of the CLRA requires an employer to
register himself which reads as under:
7. Registration of certain establishments.- (1) Every
principal employer of an establishment to which this Act applies shall, within
such period as the appropriate Government may, by notification in the Official
Gazette, fix in this behalf with respect to establishments generally or with
respect to any class of them, make an application to the registering officer in
the prescribed manner for registration of the establishment:
Provided that the registering officer may entertain any such
application for registration after expiry of the period fixed in this behalf,
if the registering officer is satisfied that the applicant was prevented by
sufficient cause from making the application in time.
(2) If the application for registration is complete in all
respects, the registering officer shall register the establishment and issue to
the principal employer of the establishment a certificate of registration
containing such particulars as may be prescribed.
21.2. Section 12 of the CLRA requires a contractor to
register himself which reads as under:
12. Licensing of contractors.-
(1) With effect from such date as the appropriate Government
may, by notification in the Official Gazette, appoint, no contractor to whom
this Act applies, shall undertake or execute any work through contract labour
except under and in accordance with a licence issued in that behalf by the
licensing officer.
(2) Subject to the
provisions of this Act, a licence under sub-section (1) may contain such
conditions including, in particular, conditions as to hours of work, fixation
of wages and other essential amenities in respect of contract labour as the
appropriate Government may deem fit to impose in accordance with the rules, if
any, made under section 35 and
shall be issued on payment of such fees and on the deposit of such sum, if any,
as security for the due performance of the conditions as may be prescribed.
21.3. From the above it is clear that it is only the
employer who is registered under Section 7 can engage a
contractor registered under Section
12. As a corollary if an employer who is not registered
under Section 7, then
he cannot engage services of a contractor though registered under Section 12 of
CLRA and vice versa, that is to say a employer registered under Section 7 cannot engage
services of a contractor who is not registered under Section 12 of CLRA. It is
therefore, required that both the employer and the contractor are registered
under Section 7 and 12 respectively.
21.4. Section 10 of the CLRA reads as under:
10 Prohibition of employment of contract labour. - (1)
Notwithstanding anything contained in this Act, the appropriate Government may,
after consultation with the Central Board or, as the case may be, a State
Board, prohibit, by notification in the Official Gazette, employment of
contract labour in any process, operation or other work in any establishment.
(2) Before issuing any notification under sub- section (1)
in relation to an establishment, the appropriate Government shall have regard
to the conditions of work and benefits provided for the contract labour in that
establishment and other relevant factors, such as-
(a) whether the process, operation or other work is
incidental to, or necessary for the industry, trade, business, manufacture or
occupation that is carried on in the establishment;
(b) whether it is of perennial nature, that is to say, it is
of sufficient duration having regard to the nature of industry, trade,
business, manufacture or occupation that is carried on in that establishment;
(c) whether it is done ordinarily through regular workmen in
that establishment or an establishment similar thereto;
(d) whether it is sufficient to employ considerable number
of whole-time workmen.
Explanation. -If a question arises whether any process or
operation or after work is of perennial nature, the decision of the appropriate
Government thereon shall be final.
A perusal of Section 10 would indicate
that the State Government can in certain cases prohibit contract labour which
would necessarily mean that it is only as regards the areas where State
government by exercise of powers under Section 10 can prohibit
it. The reference made by Sri.H.N.Muralidhar, learned counsel as regards Section 10, in my considered
opinion is completely misconceived inasmuch as Section 10 relates to
prohibition of contract labour in certain industries. The submission of
Sri.Muralidhar that unless there is prohibition of notification under Section 10, an employer can
engage contract labour, is according to me is again misconceived. Merely
because there is no notification under Section 10 of CLRA, the same would not
permit an employer who is not registered under Section 7 to enter into a
contract for contract labour with a contractor who is not registered
under Section 12. The requirement
of Section 7 and 12 are to be complied
with irrespective of whether there is a notification under Section 10 or not.
21.6. Section
10 only prohibits an engagement of a contract labour and would have no
bearing and is not a pre-requisite for a workman who is engaged by employer
under a contract to raise a dispute for redressal of his grievance.
21.7. In the present matter, the facts on record and which
are not in dispute indicate that the workman had been engaged by the employer
and were working with him, subsequently their services were shifted by the
employer to certain agencies without their consent and they were regarded as
contract labour. It is also on record that employer has not registered himself
under Section 7 of CLRA and the contractor has not registered under Section 12
of CLRA, let alone the labour being registered under the contractor as contract
labour. Thereafter the contractor terminated the contract which was accepted by
the employer resulting in the workers being without employment. The tribunal
has come to a categorical finding that the so-called agreement between the
employer and contractor is a sham agreement entered into with the sole purpose
and intention of making payment of lesser amount to the workers.
21.8. On enquiry if the agreement has been produced though
it was first contended by Sri.Muralidhar that agreement has been produced, he
is unable to show the same. A perusal of the list of document produced before
the Industrial Tribunal would establish that there is no such agreement between
the employer and the contractors which has been produced before the Industrial
Tribunal. Thus, not only are there no registration under Section 7 and 12 of
CLRA, but there is no agreement also between the employer and contractor.
21.9. In such a situation, it is clear that the claim made by
the employer is completely false one and sham. There is no need for this Court
to ascertain if the agreement is a camouflage, more so when the agreement
itself has not been placed on record.
21.10.The claim of the employer itself appears to be
completely dishonest and such a claim without due compliances appears to be
only for the purpose of depriving the workers of their due amounts.
21.11.Hence, I answer Point No.1 by holding that
notification under Section 10(1) of CLRA is not a pre-requisite for the Industrial
Tribunal to have a jurisdiction to decide the matters relating to reinstatement
or regularization of services of contract labour.
22. ANSWER TO POINT NO.2:Whether in the event of the
contract, arrangement of transaction between the employer and the contractor
being found to be sham, camouflage to make payment of lesser amounts to the
workman, then what is required to be paid. Could the workmen be directed to be
paid the same wages as that paid to other workmen?
22.1. As held in answer to point No.1, the employer is not
registered under Section 7,
the contractor is not registered under Section 12 and there is
no notification under Section 10(1) of CLRA.
There is no agreement between the employer and contractor,
as also the contractor and the workmen which has been placed on record.
22.2. The finding of the labour Court as regards the alleged
transaction being a sham and camouflage has already been upheld in answer to
point No.1 above. Once this Court comes to a finding that the agreement is sham
and camouflage, the workmen cannot be denied their just benefits. In the
present case, there is no agreement at all, it is only a contention by the
employer. The said contention is also sham and to cover up the liability of the
employer to make payment of due amounts to the workmen. The Hon'ble Apex Court
in SAIL's1 case has held that if a contract is found to be not genuine but mere
camouflage, so-called labour will have to be treated as employes of the
principal employer, who shall be directed to regularize the services of the
contract labour in the establish concerned subject to there being a vacancy and
if there is no vacancy, if the principal employer intends to employ regular
workmen, he shall give preference to the erstwhile contract labour, if found
suitable and if it is necessary, by relaxing the conditions as to maximum age
appropriately, taking into consideration the age of the workman at the time of
their initial employment by the contractor and also relaxing the condition as
to academic qualification other than technical qualification.
22.3. The workmen being in employment from the year 1995
onwards, it cannot be said that they lack any qualification. The workmen being
in employment from the year 1995 also indicates that there are vacancies. If
that be so, the workmen need to be adequately provided for and absorbed and
until such absorption would continue to render service as contract labour
directly under the employer with the employer making payment of equal pay for
equal work as held by this Court in TUMAKURU CITY CORPORATION v.
TUMKURU POURA KARMIKARA SANGHA4 case.
23. ANSWER TO QUESTION NO.3: Whether the works of house
keeping, painter, driver, typist, welder, cook, electrician, packer, loader,
unloader, can be said to be perennial work and not temporary work?
23.1. This question
is rendered academic on account of finding as regards point Nos.1 and 2.
However, the same requires to be answered. The work of house keeping viz.
cleaning and other services is required to be discharged on daily basis; in a
industry a painter is also required to be at hand since there are various paint
jobs which are required to be carried out from time to time; Drivers are
required on regular basis for transport of people; a typist would be required
on regular basis to type out certain documents; in a large establishment a
welder would be required for carrying out repairs; a cook is required on daily
basis for preparing food, more so three times a day for all the workmen; a
electrician in a industry is a regular feature and required to take care of any
electrical issues that arise; an industry manufacturing a product would require
packer, loader and unloader on regular basis, firstly to unload any raw
material which comes to the factory, secondly to unpack any item received and
pack an item to be transported, and load the same into the transport vehicle.
23.2. These jobs profiles being ones whose services are
required on a day today basis, as also for months on end. I am of the
considered opinion that these jobs are perennial in nature and therefore would
not be temporary as contended by Sri.H.N.Muralidhar, learned counsel.
24. ANSWER TO POINT NO.4:Whether the order passed by
Industrial tribunal suffers from any legal infirmity requiring interference at
the hands of this Court?
24.1. The Tribunal by way of impugned order directed
restoration of services of the workmen. Though the said order could have been
better worded, I do not find any infirmity with the said order inasmuch as the
Tribunal has come to a conclusion that the job profile is perennial in nature.
24.2. The Tribunal has come to a right conclusion that the
alleged agreement between the employer and the contractor is sham and
camouflage and the workers have been engaged for a long period of time and the
instrumentality of contract workers has been used only to deprive them of their
just amounts.
The interim order having earlier been passed directing the
employer to provide work for the workmen and the same not having been provided,
the labour court directed the employer to comply with the said order.
24.3. As afore-observed, the said order could have been
better worded, but the essential meaning of the operative portion of the said
order, which I can gather from reading of the entire order is that the alleged
contract being sham and camouflage, the labour Court instead of directing
continuation of service and later absorption has passed a short order, I do not
find any infirmity in the same, but, however, I am of the considered opinion
that the same is required to be explained which would be done in the operative
portion of this order.
25. ANSWER TO POINT NO.5: What order?
5.1. In view of my finding to the aforesaid points, I pass
the following:
ORDER .
The writ petition is dismissed.
ii. The workmen belonging to respondent-Union shall be
treated as employees of the petitioner. Petitioner shall regularize their
services subject to availability of vacancies and in the event of there being
no vacancies, as and when vacancies arise, the petitioner shall give preference
to the members of the respondent-Union, if they are found suitable by relaxing
the condition as to maximum age, as also academic qualifications. iii. The
petitioner shall maintain proper records of sanctioned posts, number of workmen
posted to such sanctioned posts or number of vacancies as and when vacancies
arise, the same shall be notified to the members of the Union who shall be
provided work at the petitioner's establishment. iv. Needless to say that the
petitioner shall reinstate the workman within a period of four weeks from the
date of receipt of copy of this order.
v. Petitioner to act on a printout of the uploaded copy of
this order on the website of this Court, if so furnished by the respondent,
without waiting for certified copy thereof. If petitioner has any doubt about
the order, petitioner may verify the contents of the order from the website of
this Court and or from the learned panel advocate appeared in the matter.
Sd/-
JUDGE LN
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