Outsourced Employees' Deployment In Transport Corporation Doesn't Establish Master-Servant Relationship: P&H High Court Sets Aside Regularisation
The Punjab and Haryana High Court has set aside a Single Judge's order directing regularisation of the services of drivers, conductors and other staff engaged through a private outsourcing agency with the Pepsu Road Transport Corporation (PRTC), holding that a master-servant relationship must be established through documentary evidence such as an appointment order, and cannot be presumed merely because the employees were deployed with and supervised by the Corporation for long, continuous periods. [2026 LL (PH) 325]
Justice Harsimran Singh Sethi and Justice Minderjeet Yadav said,
"the master and servant relationship needs to be established on the basis of documentary evidence and not merely on the basis of the nature of duties being performed or the supervisory control exercised over the employee of the Hon'ble Supreme Court of India in Civil Appeal No. 4014 of 2025 arising from (SLP (Civil) No. 19648 of 2023 titled “The Joint Secretary, Central Board of Secondary Education & Anr. v. Raj Kumar Mishra & Anr."
Referring to the Joint Secretary (supra) case, the Court said,
"A bare perusal of the above reproduction would show that, in the present case, there being no written order at any given point of time appointing the respondents by the PRTC in any capacity and the appointment of private respondents have been made by the private outsourcing agency, which cannot be treated as an appointment made by the PRTC so as to burden the PRTC with the liability of regularizing such employees in the service of PRTC."
The respondent-employees, working as Drivers, Conductors and in similar posts, had from inception been recruited and appointed by a private outsourcing agency, M/s S.S. Service Providers, and were merely deployed to perform duties with PRTC pursuant to a manpower-supply contract between PRTC and the agency.
They filed writ petitions seeking regularisation of their services with PRTC, not under any State regularisation policy, but relying on the Supreme Court's rulings including in Jaggo v. Union of India, 2025 — for the proposition that an employee working continuously for 10 years is entitled to regularisation.
The Single Judge allowed the petitions, treating PRTC as the employer "for all intents and purposes" and directing regularisation along with Old Pension Scheme benefits for those working before 01.01.2004.
PRTC represented by AG Maninderjit Singh Bedi argued that no document had ever been produced showing any appointment, or even temporary/ad hoc/officiating status, conferred on the respondents by PRTC at any stage, their appointment orders were issued solely by the private agency and that the issue of outsourced employees claiming regularisation stood squarely covered against them by a Division Bench ruling in Nishan Singh v. State of Punjab (2013).
The respondents argued that the PRTC's continuous deployment and supervisory control over them, coupled with the Punjab Ad hoc, Contractual, Daily Wage, Temporary, Work Charged and Outsourced Employees' Welfare Act, 2016, and Regulation 8 of the PEPSU Road Transport Corporation Employees (Conditions of Appointment and Service) Regulations, 1981 — which permits engagement of manpower through an outsourcing agency — justified treating them as PRTC employees, and that the Single Judge had correctly "lifted the veil" to identify the real employer.
The Division Bench held that a master-servant relationship must be proved through documentary evidence, not inferred from the nature of duties performed or supervisory control exercised, relying on the Supreme Court's ruling in Joint Secretary, CBSE v. Raj Kumar Mishra, Civil Appeal No.4014/2025, where it was held that a "direct master-servant relationship has to be established on paper," and that supervisory/jurisdictional control alone does not ipso facto create an employer-employee relationship.
The Court noted it was undisputed that PRTC never issued any appointment order, not even conferring temporary, ad hoc or officiating status, to any of the respondents at any point in their service.
Relying further on the Supreme Court's ruling in Municipal Council, Nandyal v. K. Jayaram, 2026 LiveLaw (SC) 38, the Court held that outsourced employees engaged through a contractor cannot claim regular pay-scale or regularisation even after long years of service, since the establishment's obligation is confined to paying the contractor, while the contractor bears the responsibility of paying wages to the actual workers, the relationship being indirect, mediated through a third party.
The Court held that the Division Bench ruling in Nishan Singh v. State of Punjab (2013), that there is no basis, even under Secretary, State of Karnataka v. Uma Devi, AIR 2006 to regularise an outsourced employee absent a master-servant relationship, squarely covered and governed the present case.
Addressing the respondents' reliance on Jaggo v. Union of India, the Court distinguished it on facts, holding that Jaggo dealt with a scenario impermissibly denying benefits to employees who were transferred to outsourcing arrangements after having initially been recruited directly, whereas here the respondents "from day one, were recruited by an outsourcing agency and have never been employees of the PRTC in any capacity, even till date."
The Court held: "the observations made by the Hon'ble Supreme Court of India in Jaggo's case... have to be read in the context of the facts of the case and cannot be read in isolation." A similarly-reasoned ruling in Pawan Kumar v. Union of India (2026) was held equally distinguishable on the same basis.
On the 2016 Welfare Act, the Court held that Section 6 only requires outsourced employees working continuously for three years preceding the Act's commencement to be taken on contract, and only if the concerned entity is financially capable of bearing the burden without transferring liability to the State exchequer, with no finding on record that PRTC had ever taken the respondents onto contract or that it was financially capable of absorbing them, and further noted the Single Judge had extended benefits even to 2017 appointees, beyond what the 2016 Act could support.
The Court also examined and rejected reliance on regularisation earlier granted to 110 "similarly situated" employees, accepting PRTC's submission that those employees were contractual employees directly on PRTC's rolls, not outsourced through a private agency and thus not comparable.
Moreover, the Court noted the provident fund and salary of the respondents were managed and paid by the outsourcing agency itself (which was described as their employer for PF purposes), a fact that went unrebutted and further undercut any claim of a direct employer-employee relationship with PRTC.
Allowing the bunch of appeals, the Court set aside the Single Judge's order dated 22.04.2026 and dismissed the writ petitions filed by the respondent-employees, holding that in the absence of any documented appointment by PRTC, the outsourced employees could not claim the status of PRTC employees so as to seek regularisation of their services.
Case Title: Pepsu Road Transport Corporation v. Daljeet Singh and others (and three connected appeals)
Mr. M.S Bedi , Advocate General, Punjab with Mr. Abhilaksh Gaind, Standing Counsel, PRTC and Mr. Rakesh Roy, Advocate for the appellant in LPA No.1556 of 2026 (O&M).
Mr. Hardeep Singh, Advocate for the appellant in LPA No.1549 of 2026 (O&M).
Mr. Anupam Singla, Advocate for the appellants in LPA No.1410 of 2026 (O&M).
Mr. L.S Sidhu, Advocate for the appellants in LPA No.1529 of 2026 (O&M).
Mr. Rajiv Pratap Atma Ram, Senior Advocate with Mr. Arjun Pratap Atma Ram, Advocate and
Ms. Shreya Kaushik, Advocate for the private respondents in
LPA Nos.1549, 1410 and 1556 of 2026.
Dr. Sumati Jund, Advocate for the respondents in LPA No.1529 of 2026 (O&M).
Mr. Arvind Gupta, Legal Advisor, PEPSU.