Industrial Disputes Act, Section 25F | Continuous Service of Casual Security Guards Entitles Them to Absorption Post-Merger Despite Third-Party Outsourcing : Calcutta HC

The Calcutta High Court has affirmed that long-serving casual workers, who have performed integral duties for over three decades under successive employers through corporate merger, cannot be denied absorption merely due to technical classification or post-merger policy changes. The judgment reinforces the principle that the nature and continuity of service, not labels, determine employment rights under industrial law.

Background & Facts

The Dispute

The dispute arises from the non-absorption of eight casual workmen by Indian Oil Corporation Limited (IOCL) following the merger of IBP Co. Ltd. with IOCL. These eight individuals were initially employed by IBP Co. Ltd. at its Budge Budge Liquid Oil Bottling Plant as casual security guards, but were engaged through formal interviews and performed duties continuously from the early 1990s. Despite being treated as permanent employees in practice - receiving basic pay, HRA, overtime, bonus, and having statutory deductions made for EPF, ESI, and Professional Tax - they were never regularized. In contrast, 16 other casual workers from the same group, who were canteen staff, were absorbed as permanent Junior Attendants in 2003 - 2004.

Key Facts

• The eight workmen were hired between 1989 and 1993 through formal interviews for posts such as General Workman, Service Staff, and Jr. Operator (Field).
• Their employment was continuous, with no breaks, spanning over 15 - 20 years before the merger.
• Monthly wages included Basic Pay, HRA, Overtime, and Bonus.
• Statutory deductions were made for Employees’ Provident Fund (EPF), Employees’ State Insurance (ESI), and Professional Tax - indicative of a master-servant relationship, not casual or contractual engagement.
• IOCL issued Identity Cards to two of the eight workmen in 2010.
• Exhibit W-5, prepared by IBP Co. Ltd. management in 2002, listed these eight as "Temporary Security Guards" at Budge Budge Plant since 1989 - 1993.
• The 16 absorbed workers were canteen staff; the eight were security guards.
• No documentary evidence was produced by IOCL to prove that the eight failed any regularization examination.
• The eight workers were part of a larger group of 24 casual workers whose industrial dispute was adjudicated in 2002, resulting in a "No Dispute" award.
• The 16 canteen workers were absorbed in 2003 - 2004; the eight were excluded without explanation.
• IBP Co. Ltd. merged with IOCL effective 1st April 2004, with formal amalgamation on 30th April 2007.
• The Scheme of Amalgamation, Clause 3.11(a), provided that all employees of IBP Co. Ltd. as of the Effective Date would become employees of IOCL on existing or similar terms, without interruption of service.
• IOCL outsourced its security services in 2014 under a Government of India memo dated 1st February 1994, which did not contemplate permanent security guard posts.

Procedural History

• 1989 - 1993: Eight workmen hired by IBP Co. Ltd. as casual workers.
• 2002: Industrial dispute raised by 24 casual workers (including these eight) before Central Government Industrial Tribunal (CGIT) under Reference No. 15 of 2002.
• 04.09.2002: "No Dispute" award passed; 16 canteen workers absorbed by IBP Co. Ltd. w.e.f. 01.03.2004; the eight excluded.
• 2003 - 2007: No fresh dispute raised by the eight workers against IBP Co. Ltd.
• 30.04.2007: Formal amalgamation of IBP Co. Ltd. with IOCL.
• 27.06.2007 & 17.03.2008: Representations made by the Union to IOCL seeking absorption.
• 23.06.2008: Dispute referred to Assistant Labour Commissioner (Central).
• 29.12.2009: Reference issued by the Central Government under Reference No. 19 of 2010, naming IOCL as the employer.
• 01.01.2019: Application by Indian Oil Shramik Union to substitute for Petroleum Employees Union rejected.
• 19.12.2023: CGIT passed award directing absorption of the eight workmen as Junior Attendants w.e.f. 01.03.2004 with full financial benefits.
• 18.01.2024: Award published by Central Government.
• 12.03.2026: Hearing concluded in writ petition before Calcutta High Court.
• 16.04.2026: Judgment delivered.

The Parties' Positions

Petitioner (IOCL): Argued that the eight workers were security guards, a category for which no permanent posts exist under IOCL policy; that absorption as Junior Attendants was beyond the scope of the reference; that the 16 absorbed workers were canteen staff under the Factories Act, 1948; that the CGIT erred in relying on IBP Co. Ltd.’s Standing Orders, which ceased to exist post-merger; and that the workers’ delay in raising the dispute after 2007 barred their claim.

Respondents (Union of India & Workmen): Contended that the eight workers were engaged as "General Workmen" through interviews, performed permanent duties, received all benefits of regular employees, and were similarly situated to the 16 absorbed workers. They argued that the distinction was artificial, violative of Article 14, and that the CGIT’s findings on continuous service and statutory deductions were correct.

Relief Sought

The workmen sought absorption as permanent employees with retrospective effect from 01.03.2004, with all arrears of pay, allowances, and benefits. IOCL sought quashing of the CGIT award, arguing it was illegal, beyond the reference, and contrary to the merger scheme.

The Legal Issue

The central question was whether casual workers who have performed continuous, integral duties for over three decades under successive employers through corporate merger, and who are similarly situated to other absorbed workers, can be denied absorption merely because their job title was "security guard" and the new employer has no permanent posts in that category.

Arguments Presented

For the Petitioner

IOCL contended that the CGIT exceeded its jurisdiction by directing absorption as Junior Attendants - a post not held by the eight workers and not contemplated in the reference. It argued that the merger scheme only transferred existing terms of employment, not created new posts. IOCL relied on Sri Arunangshu Chakrabarty v. M/s. Aaj Kaal Publishers and Comptroller and Auditor General of India v. K.S. Jagannathan to assert that absorption cannot be ordered where no vacancy exists. It further claimed that the workers’ failure to produce interview records justified an adverse inference, and that their delay in raising the dispute after 2007 amounted to laches.

For the Respondent/State

The Union and workmen argued that the nature of work, not job labels, determines employment status. They cited Jaggo v. Union of India to emphasize that long-serving temporary workers performing essential duties cannot be denied regularization merely due to administrative convenience. They highlighted that statutory deductions (EPF, ESI, PT) and payment of overtime and bonus established a permanent employment relationship. They also relied on Mahanandi Coalfields Ltd. v. Brajrajnagar Coal Mines Worker’s Union, where the Supreme Court rejected artificial distinctions between similarly situated workers. The respondents asserted that the CGIT’s reliance on IBP Co. Ltd.’s Standing Orders was valid because the workers’ service was continuous from 1989, and the merger did not break that continuity.

The Court's Analysis

The Court undertook a detailed review of the evidence and legal principles governing absorption of long-serving casual workers. It emphasized that the nature of work, continuity of service, and statutory benefits are decisive factors, not job titles or post-merger policy changes.

"The eight workmen were engaged through formal interviews, paid regular wages with HRA, overtime and bonus, and had statutory deductions made from their salaries - indicative of a permanent employment relationship, not casual or intermittent engagement."

The Court rejected IOCL’s argument that the CGIT erred in relying on IBP Co. Ltd.’s Standing Orders. It held that Clause 3.11(a) of the Scheme of Amalgamation explicitly preserved the continuity of service from the date of initial engagement with IBP Co. Ltd. Therefore, the Standing Orders of IBP Co. Ltd. remained relevant to determine the rights accrued by the workers prior to the merger.

The Court found IOCL’s claim that the 16 absorbed workers were canteen staff under the Factories Act, 1948, irrelevant. The CGIT had found that the eight workers were engaged as "General Workmen" and "Service Staff," not merely as security guards. The fact that they were later deployed as security guards did not alter the nature of their original engagement.

The Court also dismissed the argument that the workers’ delay in raising the dispute after 2007 barred their claim. It held that a fresh cause of action arose when the 16 workers were absorbed in 2003 - 2004, leaving the eight excluded. The merger did not extinguish their claim; it merely changed the employer.

The Court further noted that IOCL failed to produce any records of the alleged interviews or examinations that the eight workers allegedly failed. In the absence of such evidence, the adverse inference drawn by the CGIT was legally sound.

The Court cited Jaggo and Mahanandi Coalfields to affirm that denying regularization to long-serving workers who perform essential duties, while absorbing others in similar roles, constitutes an arbitrary classification violative of Article 14 of the Constitution.

"The distinction between the 16 absorbed workers and the eight petitioners is artificial and without any rational basis. Both sets performed continuous, integral duties for decades under the same management."

The Court concluded that the CGIT’s award was legally correct, factually supported, and aligned with the spirit of labour jurisprudence.

The Verdict

The writ petition was dismissed. The Calcutta High Court upheld the CGIT’s award dated 19.12.2023. The eight workmen are entitled to absorption as permanent employees with retrospective effect from 01.03.2004, with all arrears of pay, allowances, and benefits, including EPF, ESI, and other statutory entitlements. The Court rejected IOCL’s prayer for a stay, affirming that the award must be implemented without delay.

What This Means For Similar Cases

Absorption Cannot Be Denied on Technical Job Titles

• Practitioners must argue that the nature of duties, not job labels, determines employment status.
• Where workers perform permanent, integral tasks for over a decade, courts will look beyond titles like "casual" or "contractual."
• Employers cannot evade obligations by reclassifying roles post-merger or outsourcing.

Merger Does Not Erase Pre-Merger Service Rights

• Service continuity under Clause 3.11(a) of amalgamation schemes preserves all accrued rights.
• Standing orders of the transferor company remain relevant for determining entitlements prior to merger.
• Post-merger policies cannot override rights earned under prior employment.

Failure to Produce Records Creates Adverse Inference

• Employers must produce documentary evidence of selection processes, interviews, or examinations.

• Absence of such records will lead courts to accept the workers’ version of events.

• Allegations of failure to qualify without proof are legally unsustainable.

• Actionable Takeaway: In any industrial dispute involving long-serving casual workers, file affidavits detailing continuous service, statutory deductions, and job duties. Challenge any employer’s claim of "no vacancy" by citing Jaggo and Mahanandi Coalfields.

• Litigation Strategy: Always argue that Article 14 is violated when similarly situated workers are treated differently. Use Jaggo to highlight systemic exploitation and the state’s duty to uphold fair labour practices.

• Compliance Note: Employers must review their casual workforce and assess eligibility for regularization where service exceeds 10 years and duties are permanent.