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Supreme Court on Outsourcing Workers: A Landmark Judgment

 

Supreme Court on Outsourcing Workers: A Landmark Judgment

Summary

The Supreme Court of India, in Dharam Singh & Others v. State of Uttar Pradesh (Civil Appeal No. 8558 of 2018, decided on 19 August 2025), ruled that governments and public institutions cannot exploit workers by keeping them on daily wages or outsourcing arrangements for decades. The Court held that the State is a constitutional employer, not a market player, and therefore cannot deny fair treatment to workers performing permanent and recurring duties. The judgment directed the regularisation of long-serving employees with arrears, benefits, and pension rights, while quashing the State’s refusal to create posts due to “financial constraints.”

Highlights

  • Case concerns: Daily wage workers in the U.P. Higher Education Services Commission engaged since 1989–92.

  • Issue: Whether long-term daily wagers can be denied regularisation because of a lack of sanctioned posts and financial constraints.

  • High Court stance: Dismissed the workers’ plea, relying on Uma Devi (2006), holding that no rules or vacancies existed.

  • Supreme Court ruling:

    • Financial constraints cannot be used as an excuse for denying fair employment.

    • Outsourcing and ad-hocism cannot be a shield for exploitation.

    • Workers performing perennial duties must be treated as regular employees.

  • Relief granted:

    • Regularisation from 24 April 2002.

    • Creation of supernumerary posts if needed.

    • Payment of arrears, recalculated pensions, and benefits.

    • Compliance affidavit to ensure accountability.

About the Case

  • The appellants (six employees) worked as peons, attendants, and a driver for the Commission from 1989–1992.

  • They were paid as daily wagers and later consolidated pay, but continued doing permanent, essential work.

  • The Commission itself recommended the creation of posts for them, but the State repeatedly rejected the proposal, citing financial crisis and a ban on new posts.

  • The High Court dismissed their petitions, saying there were no vacancies and relying on the Uma Devi judgment.

  • The workers appealed to the Supreme Court.

Supreme Court’s Findings

  1. Financial excuses are not valid
    The Court said “financial constraints” cannot override fairness, reasonableness, and constitutional duties. Public employment must be organised with dignity and legality.

  2. Nature of work is key
    The employees were doing continuous, permanent functions (sorting applications, dispatch, driving, support tasks). Such perennial work must be placed on sanctioned posts.

  3. High Court Decision
    Both the Single Judge and Division Bench wrongly treated the case as a mere plea for regularisation under Uma Devi. They failed to examine the arbitrariness of the State’s refusal to create posts.

  4. Use of Uma Devi clarified

    • Uma Devi distinguished between illegal and irregular appointments.

    • The present workers were not illegally appointed; they were engaged by a statutory body, with continuous service.

    • Recent cases like Jaggo v. Union of India (2024) and Shripal v. Nagar Nigam Ghaziabad (2025) emphasised that Uma Devi cannot be misused as a shield to justify exploitation.

  5. Outsourcing criticized
    The Court strongly warned that outsourcing cannot replace regular posts when the work is continuous. Outsourcing as a tool to evade obligations is unconstitutional.

  6. Constitutional obligation
    The State is a constitutional employer bound by Articles 14 (equality), 16 (equal opportunity in public employment), and 21 (right to life and dignity).

Judgment and Directions

  • The State’s refusals of 1999 and 2003 were quashed.

  • Regularisation: All appellants to be regularised from 24 April 2002.

  • Supernumerary posts: To be created where needed to accommodate workers.

  • Financial relief:

    • Payment of arrears with 6% compound interest if delayed.

    • Recalculation of pension, gratuity, and other retirement benefits for retired workers.

    • Compensation to families of deceased employees.

  • Compliance: State must file an affidavit confirming implementation within four months.

Impact of the Judgment

  1. For workers: A major victory against decades of Outsourced employment. Long-serving daily wagers and outsourced workers now have stronger legal protection.

  2. For governments: They must re-examine outsourcing practices. They cannot avoid the regularisation of permanent roles by citing budgetary limits.

  3. For jurisprudence: This ruling adds to the line of cases after Uma Devi, striking a balance between preventing backdoor appointments and protecting workers from exploitation.

  4. For policy purposes, departments must maintain proper records, justify outsourcing decisions, and ensure compliance with Articles 14, 16, and 21.

Conclusion

The Supreme Court’s decision is a landmark in labour rights and constitutional governance. It reiterates that the dignity of workers cannot be sacrificed for financial convenience. Public institutions must reflect the reality of permanent work in their staffing patterns, and cannot perpetuate exploitation under temporary or outsourced labels. The ruling not only delivers justice to the appellants but sets a strong precedent for protecting thousands of similarly placed workers across the country.


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