No Employer-Employee Relationship Between Principal Employer & Workman Engaged Through Contractor : Delhi HC

Background Facts

The workman was a Driveway Sales Man (DSM) for Indraprastha Gas Limited (IGL) since 2001. He was terminated in 2005. He claimed that his services were ended illegally without compliance with the Industrial Disputes Act. IGL contested that he was not a direct employee but was hired through a contractor. The workman filed a claim before the Labour Court.

It was held by the Labour Court that where the principal employer retains full control over deployment, supervision, and the power to remove or replace personnel engaged through a contractor, then such contract is a sham. Further, an employer–employee relationship exists between the management and the personnel. Hence, the Labour Court directed his reinstatement with full back wages.

Aggrieved by the same, IGL challenged the award before the Delhi High Court by filing a writ petition.

It was argued by IGL that the workman was engaged and working under the direct supervision and control of the Contractor. Therefore, workman was in fact an employee of the contractor. Further the workman could not produce any appointment letter, salary slips, or muster rolls to prove his employment with IGL.

It was submitted that earlier the workman was denied the claim of regularisation as his status was of a contract labour engaged through the contractor. Further the workman also failed to prove that he had worked for 240 days in the year preceding the termination, which is a statutory precondition for illegal retrenchment. It was also submitted that IGL being a government undertaking, had an established recruitment procedure and none of the procedures were followed in workman's case.

On the other hand, the workman argued that he was directly employed by IGL as a Driveway Sales Man since 2001, working under its control and supervision at its CNG stations. He contended that his termination in 2005 was illegal, as it was carried out without any enquiry, notice, or compliance with the mandatory provisions of Section 25F of the Industrial Disputes Act.

To prove the employer–employee relationship, he relied on documents such as his original identity card, salary sheets, a Diwali gift record from 2001 with his name, and a copy of ex-gratia payment record to IGL employees and contingent staff. It was argued that IGL failed to produce any records to show how and when his employment was transferred to a contractor.

Findings of the Court

It was observed by the Court that the burden of proving an employer-employee relationship rests upon the claimant. However, the workman failed to prove it. The documents like identity card, a Diwali gift record, and an ex-gratia payment list lacked authenticity, as they did not have seal or stamp of the management or the signatures of any authorized officer. Therefore, documents were insufficient to establish the existence of an employer–employee relationship. Hence, such documents were not treated as conclusive proof of employment.

It was observed that the workman did not possess any appointment letter from IGL, and he was also unaware of the recruitment process. Further he used to receive his salary in cash without any PF or ESI deductions. It was found by the Court that the documents produced by IGL like the contract agreement, wage registers, attendance records, and PF & ESI documentation which were maintained by the contractor had the name of the workman. It was established that the workman was an employee of the contractor and not of IGL. Further the recruitment procedure for government organization was also not followed in workman's case, therefore, he was never a direct employee of IGL.

Relying upon the decision in Gopal v. Bharat Sanchar Nigam Limited, it was held by the court that a government organization cannot make appointments without issuing appointment letters and following the prescribed recruitment process.

Further relying upon the decision in Vinay Sharma & Ors. v. IGL, it was held by the Court that similar documents and claims by workmen seeking regularization were rejected as the workmen were engaged through contractors and were not direct employees of the management.

It was observed by the court that the Industrial Disputes Act is a beneficial legislation but it cannot be interpreted in a way to justify the grant of relief in cases where the claimant has failed to establish the essential foundational facts through credible evidence.

Consequently, the Labour Court's award was set aside by the court. It was clarified that wages received by the workman under Section 17B of the ID Act would be treated as compensation, therefore, the workman was not required to return it.

With the aforesaid observations, the writ petition filed by IGL was disposed of by the court.

Case Name : Indraprastha Gas Limited vs. Ambrish Kumar

Citation: 2025 LiveLaw (Del) 1748

Case No. : W.P.(C) 3743/2013

Counsel for the Appellant : Raj Birabl, Sr. Advocate along with Raavi Birbal, Adv

Counsel for the Respondents : Durgesh Kr. Pandey & Ritika Davis Franklin, Advs