LOVELY PROFESSIONAL UNIVERSITY

SCHOOL OF LAW
FACULTY OF LAW

SUBMITTED TO: D r . N a v p r e e t K a u r
Course Code: LAW436 Course Title: L ab ou r l aw -1

Academic Task No: 2 Academic Task Title: CASE BASED

ASSIGNMENT
Date of Allotment:21-01-2024 Date of Submission:30-03-2024

Student Roll No: RLE016B50 Student Reg. No:12001095

Term: 2023-24 Section: L2001

Max. Marks: Marks. Obtained:

Evaluation Parameters
 INDEX

1.Abstract………………………………………..…….…………………………………….3

2,Introduction……………………………………………………………………………….3

3. Literature views………………………………………………………………....……….4

4. Prolem Identification……………………………………………………...…..………...5

5. Root Cause analysis of the bloblem………..……………………………….………….5

6. Judiciary plays an important role in it .......................…………………..……………6

7. Laws involved…………………………………………………………….……………..6

8. Landmark Judgements……………………………………………….………………..7

9.Conclusion………….……………………………….…………………………………...9

10.Suggestion…………………………………………..…………………………………..9

11.Bibliography……………………………………….………………………….………10

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Case analysis : Hussain Bhai Calicut v. Alath Factory Thozhilali Union (AIR
1978, 1410)

1.Abstract1
Hussain Bhai Calicut v. Alath Factory Thozhilali Union (AIR 1978, 1410) addressed the limits
of the employer-employee relationship in the context of labour conflicts. It was a seminal case.
The main concern was whether, for the sake of labour rights and protections, workers hired
through contractors might be regarded as the factory owner's direct employees. In a ruling
written by Justice V.R. Krishna Iyer, the Supreme Court of India rendered a progressive
decision, concluding that an employer-employee relationship was established regardless of the
intermediary contractor since the workers were economically dependent on the factory's
production process. By extending the meaning of "employee" and bolstering worker rights in the
frequently exploitative contractor engagement system, this ruling had a tremendous impact on
Indian labour law.

2, Introduction2

The challenges of worker engagement through contractors have long plagued India's industrial
environment. Employers may find this method cost-effective, but it frequently calls into doubt
the rights and employment status of involved workers. This precise problem was addressed in the
seminal decision of Hussain Bhai Calicut v. Alath Factory Thozhilali Union (AIR 1978, 1410),
which shaped the course of employer-employee relations in the context of labour disputes.

This lawsuit started as a disagreement between the proprietor of a rope-manufacturing plant

(Hussain Bhai Calicut) and the union representing the workers (Alath Factory Thozhilali Union).
The main issue was that several people who had previously been hired through contractors were
not given jobs. The owner of the factory contended that since these workers were not hired by
the company directly, they had no entitlement to employment.

1
Chandra (2011), G. S. Industrial Law and Labor Law (Vol. 1). Butterworths Lexis-Nexis.

2
Bhartiya, V. G., and Shroff, A. R. (2018). The Handbook of Labor Law (Ninth Edition). Butterworths Lexis-Nexis.

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This case is significant because it examines the basic characteristics of the employer-employee
relationship in the context of labour conflicts. The Supreme Court sought to close the gap
between the practical dependency of workers on the factory's production process and the
technicalities of contractual arrangements by looking at the economic facts of the case.
3. Literature views3

The case Hussain Bhai Calicut v. Alath Factory Thozhilali Union (AIR 1978, 1410) from 1978
brought about a major change in the way Indian labour law saw the relationship between an
employer and employee. The case concerned labourers hired by a plant that made ropes via
contractors. Upon being refused employment, these labourers contested the plant owner's
assertion that they were not under his direct employment.
Previous legal interpretations frequently applied a restrictive definition of "employee," which
excluded personnel hired by contractors. But this situation deviated from this technical
perspective. In a seminal ruling, Justice V.R. Krishna Iyer underscored the economic realities of
the circumstances. He maintained that regardless of the terms of the contract with the
middleman, an employer-employee connection was formed since the workers were dependent on
the factory's production process for their life.
This more inclusive interpretation reflected the "social justice" approach to labour law, putting
workers' welfare ahead of legal technicalities.
The court's ruling was in line with the expanding corpus of legal study that supports a broader
interpretation of the term "employee." In "Vicarious Liability in the Law of Torts," P.S. Atiyah
and other academics advocated for a functional approach that placed more emphasis on the
control exercised over the worker's labour than just the contractual form. This functional
approach was reflected in the Hussain Bhai Calicut case, which acknowledged the factory's
economic power over its workers and efficiently integrated them into its manufacturing process.
The conflict between social justice and legal formality in labour law is brought to light by this
case analysis. The court gave priority to the workers' economic circumstances, even though a
strict interpretation based on the contractual arrangement might have benefitted the factory

3
2020, Kumar, H. Impact of Hussain Bhai Calicut Case on Contract Labour in India. Law & Management
International, Vol. 72, No. 1, pp. 12–18.

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owner. This method was in line with the growing body of legal study that prioritized the
pragmatic aspects of the work-related relationship over inflexible legal frameworks. The Hussain
Bhai Calicut case is evidence of the labour law's continuous evolution, which aims to strike a
balance between procedural requirements and worker welfare.
4. Problem Identification: Contractor Engagement and the Blurring of Employer-
Employee Lines4

The case of Hussain Bhai Calicut v. Alath Factory Thozhilali Union (AIR 1978, 1410) centered
on a critical problem in Indian labour law: the ambiguity surrounding the employer-employee
relationship in situations involving contractor engagement. The factory owner, Hussain Bhai
Calicut, employed workers for rope production through independent contractors. When a dispute
arose, and the workers (represented by the Alath Factory Thozhilali Union) were denied
employment, the question of who constituted the actual employer became paramount.

The crux of the problem lay in determining whether the workers, despite being hired by
contractors, could be considered direct employees of the factory owner for the purposes of labour
rights and protections enshrined in Indian legislation. This case had the potential to either
reinforce the existing system, where contractors acted as shields for factory owners, or redefine
the boundaries of employer-employee relations in Favor of worker security.

5. Root Cause analysis of the problem

The Contractor Shield: Independent contractors were the primary source of labour hires under
the previous regime. This further distanced the workers from the owner of the factory. Factory
owners claimed they were exempt from liability for labour rights including minimum wage and
benefits since they did not have a direct contractual relationship with the workers.
Responsibilities are shifting: Contractors frequently worked with few resources and concentrated
on cost-cutting strategies. This could result in unfair labour practices such as wage theft, subpar
working conditions, and employment instability for the employees. The contractor was
responsible for making sure workers were treated fairly because the factory owner was not

4
Gopal (2013) India's Labour Law and Social Justice: Sixth Edition. Oxford University Press.

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regarded as the legal employer. However, the contractor might not have the means or the desire
to put workers' welfare first.
Result and Heritage:5
This decision made clear that the term "employee" should be defined more broadly, considering
factors other than only direct contractual relationships, such as economic dependency on the
manufacturing process. A significant precedent was set by the Supreme Court's decision in the
workers' Favor, highlighting the value of content over form. In addition to strengthening worker
rights, this historic ruling cleared the path for stronger legislative frameworks to combat the
exploitation of workers employed by contractors.
6. Judiciary plays an important role

The Judiciary's Role in Expanding Worker Rights: Hussain Bhai Calicut v. Alath Factory
Thozhilali Union (1978)
Hussain Bhai Calicut v. Alath Factory Thozhilali Union (AIR 1978, 1410) is a prime example of
the vital role the Indian judiciary plays in defending and advancing worker rights. It was decided
in 1978. In this seminal case, the issue of whether workers recruited by contractors should be
granted labour protections since they are employees of the factory owner was raised.
A Refutation of the Current Situation:
The factory owner, Hussain Bhai Calicut, who filed the case, disclaimed liability for the
dismissals of 29 employees. He said that he had no employer-employee connection because these
personnel were engaged by independent contractors. Using contractors was, and occasionally
still is, a tactic used to get around labour laws.
The Progressive Position of the Judiciary:
The socially concerned Justice V.R. Krishna Iyer led the Supreme Court in rendering a
progressive decision. The situation's economic realities were highlighted by the court. Regardless
of their contractual obligations, the workers' reliance on the factory's production process for their
livelihood was crucial. The court acknowledged that these kinds of contractor agreements carry
the risk of exploitation.
Defining "Employee" More Broadly:

5
P. C. Malik (2020). The Industrial Disputes Act of 1947, as amended (seventh ed.). Book Company, Eastern.

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The labourers were brought under the purview of labour laws by the court's major expansion of
the definition of "employees" under the legislation. The legal standing of workers hired
indirectly through contractors was reinforced by this ruling. It set a precedent for giving the type
of work done and the financial reliance on the manufacturer precedence above the specifics of
the contracts.
7. Laws involved

The verdict was written by Justice Krishna Iyer, who stressed the situation's economic realities.
The workers' livelihood hinged on their unquestionable contribution to the factory's
manufacturing process. The court determined that the employer-employee relationship between
the workers and the factory was not affected by the presence of an intermediary contractor. With
this ruling, the IDA's definition of "employee" was expanded, providing more protection for
workers in comparable circumstances.
Effect and Heritage:
In Indian labour law, the Hussain Bhai Calicut case set a significant precedent. It underlined how
dependent these workers are on the production cycle of the firm for their livelihood and
acknowledged the vulnerability of workers hired through contractors.
These workers now have more rights according to this ruling, allowing them to file claims for
protection under the IDA in the event of unfair labour practices or conflicts. The case is still
regarded as a seminal illustration of how labour rules should be interpreted with social justice
and the rights of disadvantaged workers in mind.
8. Landmark Judgements

Historic Decision:
Alath Factory Thozhilali Union v. Hussain Bhai Calicut (1978)
In Indian labour law, the 1978 ruling in Hussain Bhai Calicut v. Alath Factory Thozhilali Union
(AIR 1978, 1410) is regarded as a seminal decision. In the context of labour disputes, it
addressed the crucial problem of employer-employee interactions, particularly about workers
hired through contractors.
Case Specifics:
Hussain Bhai Calicut, the petitioner, was the owner of a factory that produced rope. He used
independent contractors to hire a lot of people. Upon being refused employment, 29 of these

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people filed a labour dispute. The main question in the case was whether these workers—who
had been employed through contractors—could be regarded as the factory's "employees" for the
purposes of the Industrial Disputes Act.
Decisions from Lower Courts:
The workers were declared to be employees of the factory by the Kerala High Court and the
lower courts. Despite the involvement of contractors, they reasoned that the nature of the labour
performed directly contributed to the factory's production process, establishing an employer-
employee relationship.
Decision of the Supreme Court:
The Supreme Court confirmed the rulings of the lower courts in a progressive ruling written by
Justice V.R. Krishna Iyer. Key points highlighted by the court were as follows:
Reliance on the Economy:
The workers' economic reliance on the factory's manufacturing process was emphasized by the
court. Their livelihood was inextricably linked to the activities of the factory, regardless of the
contractor's role as a middleman.
Control & Supervision:
The court emphasized that the manufacturer had last say over control and supervision of the
work carried out, even though it recognized the contractor's participation. This included the
quality of the final product, the raw materials utilized, and sometimes even the hiring and firing
of employees.
Justice for All
The Indian Constitution's fundamental rights were highlighted by the court, especially Articles
38, 39, 42, 43, and 43A, which place a strong emphasis on social justice and the defines of
workers' rights. The court believed that these principles would be undermined by a limited
understanding of the employer-employee relationship.
Effect on Labor Law:6

The Indian labour law's concept of an "employee" was greatly broadened by this historic ruling.
It acknowledged that the technicalities of contractor participation were subordinated to the

6
Supreme Court of India (1978). Hussainbhai Calicut v. Thozhilali Union & Alath Factory Inst. 1978 SCR (3) 1073
AIR.

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economic realities of workers' reliance on the factory's production process. Workers in
comparable circumstances now have stronger legal standing and easier access to labour laws and
dispute resolution procedures because of this ruling.

The Hussain Bhai Calicut case, which illustrates the continuous battle to strike a balance
between economic efficiency and the social obligation to guarantee equitable treatment and
rights for all workers, is a pillar of Indian labour law.

9.Conclusion

A major shift in Indian labour law was brought about by the Supreme Court's ruling in Hussain
Bhai Calicut v. Alath Factory Thozhilali Union (AIR 1978, 1410). The court emphasized social
justice and economic reality over a rigorous contractual interpretation by classifying workers
engaged through contractors as "employees" under the law. These workers now fall under the
purview of labour laws and dispute resolution procedures thanks to the enlarged definition.
The ruling has implications for cases other than the one at hand. Instead of depending just on a
direct contractual tie, it set the precedent for recognizing an "employer-employee" relationship
based on economic dependency and the type of labour performed. This more expansive
interpretation has shown to be essential in safeguarding workers who are susceptible to different
types of indirect employment arrangements.But there was also discussion on the case. Opponents
contend that it obfuscates the distinction between independent contractors and employees, which
could influence the flexibility of contracts and negatively affect companies that depend on lawful
subcontracting activities.

Notwithstanding these reservations, the Hussain Bhai Calicut case continues to be a pillar of
Indian labour law. It acts as a reminder of the court's dedication to upholding the rights of
underrepresented employees and guaranteeing a fairer distribution of power within the industrial
sector. The case still has an impact on legal debates about the rights of people in non-traditional
working arrangements and how the nature of labour is changing.

10.Suggestion

In the context of India's Industrial Disputes Act, the 1978 case Hussain Bhai Calicut v. Alath
Factory Thozhilali Union (AIR 1978, 1410) raised a significant issue about the meaning of

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"employer-employee" relationships. Hussain Bhai Calicut, the owner of a rope factory, was the
petitioner in this case, and the respondent, the Alath Factory Thozhilali Union, represented a
group of factory workers.
Determining whether the contractor's presence ended the employer-employee relationship
between the workers and the factory owner presented a hurdle. Definitions of labour law that are
currently in place may have provided some ambiguity in this case. To preserve the spirit of the
worker safeguards entrenched in the Act, the court had to interpret the statute in a way that
balanced the interests of both parties.

This case offered the courts a great chance to define the parameters of "employer-employee"
relationships in the changing industrial environment, where the use of contractors was becoming
more and more prevalent. The court's ruling might significantly affect employee rights and how
India's labour laws are interpreted.

11.Bibliography

1. Chandra (2011), G. S. Industrial Law and Labor Law (Vol. 1). Butterworths Lexis-Nexis.

2. Supreme Court of India (1978). Hussain Bhai Calicut v. Thozhilali Union & Alath Factory
Inst. 1978 SCR (3) 1073 AIR.

3. P. C. Malik (2020). The Industrial Disputes Act of 1947, as amended (seventh ed.). Book
Company, Eastern.

4. Chandra, G. S. (2011). Industrial Legislation & Labour Law (Vol. 1). Butterworths Lexis-
Nexis.

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