India: Implications of Employment of Personnel on Fixed Term Contract

Last Updated: 12 June 2002
Article by Shivaji Rao


Introduction :

In the year 1984 a new clause was added to the definition of retrenchment u/s 2(oo) namely sub sec. (bb) of the Industrial Disputes Act, 1947 which reads as under :

"Termination of service of the workman as a result of the non-renewal of the contract of employment between the employer and the workman concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained therein" ........ does not amount to retrenchment.

With the protection of the above amended clause the employer segment valiantly and excitedly started deploying labour on contract for a fixed term / thru contractor. However, over the period, a large part of the entrepreneurs (mis) used the said clause to the maximum extent for their handiness & gain. So at this point of anti-thesis, the judiciary particularly the Supreme Court and the various High Courts pitched-in and has been trying to build synthesis particularly with regard to interpretation of the said amended clause.

The views of the Supreme Court expressed in some of the recent land marked judgements with regard to termination of casual / temporary / fixed term contract employment has been discussed hereinafter.

It depends upon the supervision, control and the nature of activities being carried out by the employees as engaged through the contractor. The most important factor is that the nature of work which is of temporary and perennial nature. It is pertinent to refer one case where the petitioner, a residential university having 14 hostels to accommodate students and cafeterias to provide food services to the resident of hostels and others. There were about 175 employees in cafeterias and they claimed to be employees of the petitioner university with regular pay scales. The two disputes were referred to Labour Court for adjudication and Labour Court held in their favour and High Court in writ petition confirmed the same. Hence, an appeal was filed in Supreme Court. While rejecting the appeal it has been held that the hostel and cafeterias regulations framed under UP Agricultural University Act needs to unmistakable conclusion that the employees of the cafeterias cannot be worked be termed to be employees of the university in as much as the university has control over the running of the cafeterias. The above views were held by the SC in the case GB Panth University of Agriculture and Technology Vs. State of UP, 2000 LLR 1189(SC). The same views were also held by SC in the earlier cases namely Parimal Chandra Raha Vs. LIC 1995 JT(3) SC 268. In this case, the contract labour engaged in the canteens of Life Insurance Corporation held the labour deployed in the canteens are the employees of the LIC. Secretary, Haryana Electricity Board Vs. Suresh & Ors. 1999 LLR 433 (SC) .

As stated above that the intervention of the Judiciary depends on the supervision and control and the nature of activities being carried out by the employees as engaged through contractor or for a fixed term contract. There are some instances wherein SC has intervened when the employees have been terminated on cessation of the contract. In the case of Director, Institute of Management Development, UP Vs. Smt. Pushpa Srivastava AIR 1992 SC 2070, in this case the Apex Court has held that where the appointment is purely on ad-hoc basis and is contractual and by efflux of time, the appointment comes to an end, the person holding such post can have no right to continue in the post. This is so even with the person is continued from time to time on ad hoc basis for more than a year. He cannot claim regularisation in service on the basis that he was appointed on ad-hoc basis for more than a year. However, the management was directed to consider sympathetically if regularisation is possible. In another case State of Gujarat Vs. PJ Kampavat AIR 1992 SC 1685, in this case where the Chief Minister and Ministers appointed persons on their choice in their respective establishments and the order appointing the employees expressly stated not only that their services shall be terminated at any time without giving any notice and without assigning any reason but also that their appointment is for a limited period conterminous with the concerned Ministers tenure and they were also asked to execute undertaking in the above terms which they did the appointment was a contractual appointment conterminous with the tenure of the Ministers’ establishment, at whose choice and instance they were appointed. The appointees in question could not be deemed to be temporary government servants within the meaning of Bomaby Civil Service Rules in as much as the terms of their appointment clearly amount to an otherwise provision within the meaning of non-obstante clause.

In one case the Allh. High Court (2000 LLR 56) held that workman appointed on 5.6.86 as an English Typist and continue to work till 29.2.92 he was given an ad-hoc appointments with breaks. Last letter was given on 19.6.91 for fixed term employment till 1992. No doubt that the award of the Labour Court to reinstate him is illegal that the termination of the workmen appointed for fixed period amount to retrenchment but the termination amount to discrimination since two persons engaged subsequent to the appointment of the workman where working. The award is modified and the workman is to be reinstated. In another case Pramod Kumar Tiwari Vs. Hindustan Fertilizer Corporation Ltd 1994 LLR 465, the MP High Court held that the termination of a contractual appointment of a workman will not amount to retrenchment, since the same will be covered by Sec. 2(oo)(bb) of the Industrial Disputes Act which excludes certain terminations from the definitions of retrenchment. In the instant case an employee appointed for a project which lasted for 8 years, on closure of the project termination of such employee will not amount to retrenchment.

The recent judgement of SC in the case of Deepa Chandra Vs. State of UP & Ors. 2001 LLR 312. In this case a dispute was raised by the appellant on the ground that though he had put in more than 240 days in each year of service from 1982 - 1988 he had been retrenched without following procedure prescribed under Sec. 25F of ID Act. The Industrial Tribunal, therefore, on adjudication came to the conclusion that termination of service of the appellant is bad and in particular notice that persons have been employed subsequent to the appellant have been continuing in service, whereas the services of the appellant had been put to an end. In the circumstances, the Labour Court made an award granting the reinstatement with back wages with other consequential benefits that may follow from it. The High Court approached the matter, the HC set aside the award of theLabour Court. Subsequently, the SC approached the matter and held that the HC lost the sight of the point in issue i.e. where an employee had put in service more than 240 days in each year for several years whether his services can be put to an end without following procedure prescribed u/s 25 F of ID Act. If there has been violation that of such an employee will have to be reinstated in his original service on the same terms and conditions in which he was working earlier. Accordingly, the order passed by the Labour Court was restored by the SC.

In another case Keshod Nagarpalika Vs. Pankajgiri Jhavergiri 2000 LLR 416. The Gujarat HC has held that Sec. 25F of the ID Act, conditions precedent for retrenchment of workman. A workman must have worked for 240 days. In the present case, the workman has pleaded that he has worked for 16 months, the management did not contradict it, the award of the Labour Court granting him reinstatement with full back wages cannot be set aside.

In view of the above explained settled proposition of law, if an employee works more than 240 days in a year even the guard stipulated u/s. 2(oo)(bb) is of no use. Because one of the condition precedents u/s 25F denotes that "no workman employed in an industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until .... (conditions precedents)". Therefore, the word continuous service has to be understood as defined in Sec. 25B where the employee had completed service of 240 days, the provisions of Sec. 25F would be attracted. If a person is a workman as defined in the ID Act and the employer is the same, he earns continuous service by working for 240 days within a period of 12 calendar months preceding the date of retrenchment the same view was held by the Hon’ble High Courts of Rajasthan and MP. For the purpose of Sec. 25F a period of 240 days has to be counted from the day of the workman had joined the services even though on ad-hoc basis. This was held by SC in the case of Krishna Kumar Vs. UP SFEC Corporation (1994) III LLJ (supp.) 254 (SC) Further it is stated that even if the employee appointed on fixed term contract basis and such contract has been renewed from time to time, is right to claim for regular employment cannot be negated by way of contract.

Another segment of cases in this field is stop gap and temporary workmen. The Apex court has settled the position of law in the case of Jacob M. Puthuparambil and others, Vs. Kerala Water Authority and others, AIR 1990 SC 2228 that "such appointments were intended to be stop-gap temporary appointments to serve the stated purpose and not long term ones. The rule was not intended to fill a large number of posts in the service but only those which could not be kept vacant till regular appointments were made in accordance with the rules. But once the appointments continued for long, the services had to be regularised if the incumbent possessed the requisite qualifications. Employees who have been working on the establishment since long, and who possess the requisite qualifications for the job as obtaining on the date of their employment must be allowed to continue on their jobs and their services should be regularised. It is unfair and unreasonable to remove people who have been rendering service since sometime as such removal has serious consequences. The family of the employee which has settled down and accommodated its needs to the emoluments received by the bread winner will face economic ruination if the job is suddenly taken away. Besides, the precious period of early life devoted in the service of the establishment will be wholly wasted and the incumbent may be rendered `age barred' for securing a job elsewhere. It is indeed unfair to use him, generate hope and a feeling of security in him, attune his family to live within his earnings and then suddenly to throw him out of job. Such behaviour would be an affront to the concept of job security and would run counter to the constitutional philosophy, particularly the concept of right to work in Art.41 of the Constitution. Therefore, if interpreted consistently with the spirit and philosophy of the Constitution, which it is permissible to do without doing violence to any rule, it follows that employees who are serving on the establishment for long spells and have the requisite qualifications for the job should not be thrown out but their services should be regularised as far as possible".

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

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