Employment LawSettlement with Contractors is not Binding on Workmen of Similar Nature

March 4, 20220

In the case of M/s Oil and Natural Gas Corporation Ltd. v. The President, Oil Field Employees Association & Ors., CA 1033 of 2022 decided on 04.02.2022, the Supreme Court held that any sort of settlement or contract entered into between the principal employer and the contractor shall not be binding on all other workmen of the similar nature.


The judgment delivered by the Bombay High Court (hereinafter referred to as “High Court”) on 30.01.2020, pursuant to the Writ Petition No. 13015 of 2019 which upheld the claims of workmen, making them entitled to fixation of allowance and payments as per the award of the Central Government Industrial Tribunal No. II, subject to certain modifications was challenged by way of an appeal in the Supreme Court, filed by Oil and Natural Gas Corporation or ONGC (hereinafter referred to as “the Appellant”).

The dispute involved a Direct Notice which was raised by a Union, the Oil Field Employees Association (hereinafter referred to as “the Union”), being represented by their President (hereinafter referred to as “the Respondent”) in the present appeal.

The employees who formed the Union were receiving their pays through different contractors appointed by the Appellant. However, as per the Appellant the employees were contractor’s workmen and not the workmen of the Appellant.

The Appellant had also entered into a settlement with the Union representing majority of the contractor’s workmen, over 77%, which was binding on all the other similar workmen, along with those which are represented by the Union.

The Appellant and the different Unions representing the workmen working for the Appellant entered into three Memorandum of Understanding (MoU) in the year 1992, 1995, 2000 which discussed the wages, allowances and other facilities which shall be provided by the contractors to the ‘contract labour’.

However, subsequently, six Unions representing workmen engaged by contractors submitted their charter of 28 demands to the Appellant and 57 of the Appellant’s contractors, which was thereafter admitted for conciliation. On the other hand, the intent of the Appellant was to introduce a “Fair Wage Policy” (FWP) which would cover contract employees.

Post negotiation, a Memorandum of Settlement was signed on 19.09.2016 (hereinafter referred to as “Settlement”) under which the FWP was extended to contract labourers of Western Offshore Unit, Mumbai and was agreed to be implemented at all work-centres of the Appellant. This settlement which was signed by the contractor’s representatives and the representatives of the six Unions was in consonance with Section 12(3) read with Section 18(3)(d) of the Industrial Disputes Act, 1947 (hereinafter referred to as “the Act”) and provided upward revision of wages, measures of social protection and job security for the workmen.

However, the Industrial Tribunal (hereinafter referred to as “the Tribunal”) and thereafter the High Court refused to enforce the abovementioned Agreement since it did not fall within the meaning of ‘settlement’ as per Section 18(3)(d) of the Act.


  1. Can the Respondent claim benefit directly from the Appellant as the Appellant’s employees?
  2. Is the Settlement binding on the Respondent?


The Appellant challenged the legality of the Order passed by the Tribunal and contended that the same was not maintainable as none of the workmen of the Unions were representing or trying to adopt the causes stated by the Appellant.

In addition to the aforementioned, the Appellant emphasized on the definition of ‘workmen’ as provided in Section 2(s) of the Act.

The Appellant contended that the settlement between the Appellant and the Union covered all the employees engaged by the contractors in consonance with Section 18(3)(d) of the Act.

The Appellant submitted that the Order of the High Court was perverse and asserted that the workmen of a contractor shall not be the workmen of the principal employer, i.e., the Appellant in the present case, and for the same, the Appellant placed reliance on the decision of the Supreme Court in the cases of Workmen of the Food Corporation of India v. Food Corporation of India [(1985) 2 SCC 136], Parimal Chandra Raha & Ors. v. Life Insurance Corporation of India and Ors. [(1995) Supp (2) SCC 611], Indian Petrochemicals Corporation Ltd. and Anr. v. Shramik Sena & Ors. [(1996) 6 SCC 439] and Steel Authority of India Ltd. & Ors. v. National Union Waterfront Workers & Ors. [(2001) 7 SCC 1].

The Appellant further contended that the employees engaged by the contractors cannot get an indirect entry into the establishment of the principal employer and relied upon the decision of Secretary, State of Karnataka & Ors. v. Uma Devi & Ors., [(2006) 4 SCC 1].

On the other hand, the Respondent contended that the concerned workmen are the employees of the Appellant and are entitled to claim the benefits directly from the Appellant.  Additionally, the Respondent challenged the validity of FWP.

First and foremost, the Respondent wanted to establish a uniform payment policy for all workmen irrespective of the fact that some have entered into contracts or settlement with respect to payment of wages and allowances with the Appellant.

The Respondent also contended that workmen are the employees of the Appellant and merely because they are being engaged by contractors, does not make them the contractor’s employees.

The Respondent also challenged the validity of the Settlement entered in light of Section 18(3)(d) of the Act, which cannot be made binding on the parties since the Settlement was not final due to certain procedural aspects.

The Respondent further submitted that the Settlement was for the employees of the contractor’s and that they are the employees of the Appellant as they are working for the Appellant since a long time.


The Supreme Court examined the contentions of both the parties and after duly noting the observations of the Tribunal and the High Court, the Supreme Court upheld the order of both the High Court.

With regards to the first issue, the Supreme Court held that even if it was not explicitly mentioned in the Tribunal’s order that the Respondent(s) were the employees of the principal employer, i.e., the Appellant, it was implied and the same was duly taken into consideration by the High Court as well while passing the Order.

With regards to the second issue, the Supreme Court relied on Ramnagar Cane and Sugar Company Ltd. vs. Jatin Chakravorty & Ors. [(1960) 3 SCR, 968], and General Manager, Security Paper Mill, Hoshangabad vs. R.S. Sharma and Others [(1986) 2 SCC 151], and observed that the binding nature of any settlement has been explained in detail in the said cases.

The Supreme Court held that the Settlement shall not be binding upon the minority Union and was essentially between the contractors and the workmen engaged therein. In the said Settlement, the Appellant is only a consenting party, which is very evident from the terms of the Settlement.

The Supreme Court affirmed that the order of the Tribunal, as amended and also upheld by the High Court, is just and fair. Since the High Court has taken a fair approach, the Supreme Court did not take a different view on account of principle of limited interference.

The Supreme Court also observed that the underlying issue in the present case was about receiving equal pay and pay at par with other workmen of the employer. The Respondent(s) herein are entitled to equal pay and receiving the same facilities and benefits like other employees of the Appellant and the Appellant cannot negate its responsibility with regarding to providing such benefits and equal pay.


The judgment highlights the position that merely because a settlement has been entered into between the majority of the union of workers and the employers, the minority shall not be barred from raising a separate industrial dispute whereby they claim to be direct employees of the principal employer.

It is also pertinent to note that in the event, the principal employer and the contractor enter into a settlement or a contract, such settlement or contract shall not be necessarily binding upon all the other workmen of the similar nature or on the minority Unions. Subsequently, if the workmen are engaged by the contractors of the principal employer, such workmen shall be entitled to the same benefits and facilities provided by the principal employer to the other employees or workmen of the organisation.

In an employment relationship, the virtue of social security and equality is extremely important and over the time, the courts have safeguarded the same.

For any query or feedback, please feel free to get in touch with chaitali.sadayet@amlegals.com or mridusha.guha@amlegals.com.

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