The Supreme Court on December 16, 2025, ruled in favour of the Nandyal Municipal Council, setting aside a High Court direction that required the municipality to pay minimum time-scale wages and annual increments to workers engaged through private contractors. The ruling clarifies a crucial legal distinction between direct contractual employment and engagement through third-party contractors.
Background of the Case
The dispute arose from a batch of appeals filed by the Municipal Council of Nandyal, Andhra Pradesh, challenging a 2018 judgment of the High Court of Judicature at Hyderabad.
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The respondents were workers who had been engaged since the mid-1990s through contractors to perform various municipal duties. Over the years, contractors changed, but the workers continued performing the same tasks. Claiming parity with regular municipal employees, they approached the Andhra Pradesh Administrative Tribunal seeking regularisation and payment of minimum pay scale applicable to permanent staff.
The Tribunal rejected their claim. However, the High Court reversed that decision and directed the municipality to extend minimum pay scales and annual increments, prompting the appeals before the Supreme Court.
Appearing for the municipal council, counsel argued that the workers were never directly employed by the municipality. Payments were made to contractors, who in turn paid the workers, and statutory safeguards such as minimum wages and mandatory deductions were already built into the contracts.
“It was contended that any employment-related claim, if at all, lay against the contractor and not the municipality,” the court recorded.
The workers’ counsel countered that denying minimum pay scales was discriminatory, especially when they performed duties similar to regular employees. Relying on previous Supreme Court rulings, it was argued that even contractual workers cannot be denied fair wages when engaged by a State authority.
Court’s Observations
After examining the record, the bench focused on the nature of the employment relationship. The judges noted that while the workers had served for long periods, the relationship was not direct but routed through contractors.
“The key issue is whether a relationship through a third party can be equated with direct employment,” the bench observed.
The court explained that regular public employment follows a transparent selection process open to all eligible candidates. In contrast, contractor-based hiring is driven by the contractor’s discretion, without prescribed recruitment safeguards.
“If such distinctions are ignored, the entire structure of public employment would lose its sanctity,” the judges remarked.
The bench also clarified that there was no challenge to the legality of the contractor system itself, nor any finding that the contracts were a sham arrangement.
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Allowing the appeals, the Supreme Court set aside the High Court’s order dated August 23, 2018, and restored the decision of the Administrative Tribunal rejecting the workers’ claims.
“The impugned order is set aside, and the orders of the Tribunal stand restored,” the bench held.
The appeals were accordingly allowed, and pending applications were disposed of.
Case Title: The Municipal Council, Nandyal v. K. Jayaram & Others
Case No.: Civil Appeals arising out of SLP (C) Nos. 17711–17713 of 2019
Case Type: Service Law – Contractual Employment
Decision Date: 16 December 2025
