Brief Facts
In M/s Premium Transmission Pvt. Ltd. v. State of Maharashtra & Ors. (Civil Appeal No. of 2026, arising out of SLP (Civil) No. 9970 of 2023, decided on 27.01.2026), the Supreme Court examined whether preliminary objections raised by management could eclipse conciliation proceedings and reference of an industrial dispute under the Industrial Disputes Act, 1947. Further, it also examined that whether contract labour engaged through licensed contractors could claim direct employment with the principal employer and establish employer-employee relationship with the management.

The dispute arose when contract labour engaged through registered contractors at Premium Transmission’s Aurangabad factory, apprehending termination, approached the Conciliation Officer directly with a charter of demands. These demands included absorption into the company’s muster rolls, recognition as permanent workmen, equal wages, arrears, and a declaration that the contracts were sham. The Conciliation Officer admitted the dispute, issued notice, and eventually submitted a failure report, leading to reference of the matter to the Industrial Court. The management challenged the reference arguing that no valid industrial dispute existed since no demand was first served on the employer. Premium Transmission approached the Bombay High Court to challenge the process. However, the High Court affirmed the reference and upon such affirmation, it was challenged before the Supreme Court.

Legal Submissions by the Parties

Appellant:

• It was contended that for an “industrial dispute” under Section 2(k) of the ID Act, a demand must first be raised with the employer and rejected. Direct approach to the Conciliation Officer was impermissible.
• It was further contended that the Union lacked locus standi, as the workers were contract labour supplied by registered contractors under the Contract Labour (Abolition & Regulation) Act, 1970, with no employer-employee relationship with Premium Transmission/Appellant.
• It was argued that the Conciliation Officer acted in undue haste, admitting the dispute without preliminary scrutiny, and the Deputy Labour Commissioner referred the matter mechanically.
• The Appellant relied on Sindhu Resettlement Corporation Ltd. v. Industrial Tribunal (1968) 1 SCR 515 and Prabhakar v. Joint Director, Sericulture Department (2015) 15 SCC 1 to argue that absence of a demand notice invalidates the dispute.

Respondents:

• It was argued that serving a demand notice directly on the employer often results in immediate termination, defeating protection under Section 33 of the Industrial Disputes Act.
• Further, that the Conciliation Officer has jurisdiction not only over existing disputes but also apprehended disputes under Section 12(1).
• It was further argued that the contracts were sham and camouflaged, with workers effectively under the control of the management, entitling them to regularisation.
• The Respondents relied on Shambu Nath Goyal v. Bank of Baroda (1978) 2 SCC 353, Vividh Kamgar Sabha v. Kalyani (2001) 2 SCC 381, and Cipla Ltd. v. Maharashtra General Kamgar Union (2001) 3 SCC 101 to support the validity of conciliation even without a prior demand notice.

Court’s Decision
The Supreme Court upheld the validity of the conciliation proceedings and the subsequent reference to the Industrial Court. It reiterated the caution in DP Maheshwari v. Delhi Administration (1983) 4 SCC 293 against allowing preliminary objections to derail industrial adjudication for years, thereby jeopardising industrial peace.

The Court held that a written demand notice is not a sine qua non for an industrial dispute to exist, except in cases involving public utility services. The Conciliation Officer is empowered to intervene even in apprehended disputes, and need not wait for escalation into unrest. The Conciliation Manual is only a guiding document and does not override statutory powers.

On the issue of contract labour, the Court referred to the Constitution Bench ruling in Steel Authority of India Ltd. v. National Union Waterfront Workers (2001) 7 SCC 1, clarifying that prohibition under Section 10 of the CLRA does not automatically result in absorption of contract labour. However, if contracts are found to be sham or camouflage, workers may be treated as direct employees of the principal employer. Determination of whether contracts are genuine or sham is a matter for the Industrial Court.

Accordingly, the Court referred the matter to the Industrial Court for determination of two issues, namely (i) whether the contracts through which the employment is provided to the contract labour are sham and nominal, and (ii) whether, considering the nature of work discharged by the workmen of the subject Union, the Management is the principal employer of the members of the Respondent- Union.

Furthermore, the Supreme Court compared the Industrial Disputes Act, 1947 (ID Act) with the Contract Labour (Regulation and Abolition) Act, 1970 (CLRA). When a notification under Section 10(1) of the CLRA is issued abolishing contract labour, it does not automatically result in absorption of contract workers as regular employees of the principal employer. The immediate effect is that contract labour in the prohibited process must cease, and the principal employer is barred from engaging them for that work. However, the workers remain employees of the contractor, who may employ them elsewhere where contract labour is permitted.

By contrast, if a contract is proved to be a sham or camouflage, where the principal employer retains direct control and supervision over the workers, the arrangement is disregarded as a legal fiction. In such cases, the workers are treated as employees of the principal employer, entitled to regularisation, back wages, and benefits. Determining whether a contract is genuine or sham involves disputed questions of fact, such as who supervised the work or paid wages, and must be adjudicated by Industrial Tribunals or Labour Courts and not in Writ jurisdiction Courts generally refrain from deciding such factual disputes under Article 226 of the Constitution.

Conclusion
The Supreme Court’s ruling underscores that preliminary objections cannot be used to stifle industrial dispute resolution at the threshold. Conciliation Officers have discretion to admit disputes, including apprehended disputes.

By affirming that written demand notices are not mandatory in all cases, the Court has strengthened the protective framework for workers, particularly contract labour vulnerable to termination. At the same time, it stated the principle from Steel Authority of India Limited and others v. National Union Waterfront Workers and Others (2001) 7 SCC 1 that automatic absorption of contract labour is not envisaged under the CLRA, and the genuineness of contracts must be adjudicated by industrial forums.

By - C. George Thomas and Gurkaranbir Singh