The Punjab and Haryana High Court has reversed its own order regularising employees engaged through a private outsourcing agency by the Pepsu Road Transport Corporation (PRTC), holding that a “master-servant relationship” must be established through documentary evidence such as an appointment letter or order. Merely working for an organisation, even under its supervision, does not make outsourced workers its employees, the court said.The observations form part of an order passed earlier this month by a division bench of Justices Harsimran Singh Sethi and Minderjeet Yadav, which allowed four appeals filed by PRTC against an April 22 order of a single bench. The single bench had directed PRTC to regularise the services of employees working through an outsourcing agency and extend other benefits, including the old pension scheme wherever applicable.The ruling is likely to affect nearly 2,000 workers employees who had been working with PRTC through M/s S.S. Service Providers. The posts, including those of drivers and conductors, were advertised by the private agency, which also issued their appointment orders.PRTC argued in the high court that there was no master-servant relationship between the corporation and the workers. Punjab Advocate General MS Bedi and PRTC standing counsel Abhilaksh Gaind submitted that not a single document showed that the Corporation had appointed the workers or conferred any employment status on them.Appearing for the workers, Senior Advocate Rajiv Pratap Atma Ram argued that their continuous service, the nature of their duties, applicable service rules and the Punjab Ad hoc, Contractual, Daily Wage, Temporary, Work Charged and Outsourced Employees Welfare Act, 2016, justified regularisation. They also relied on Rule 8 of the PRTC Employees (Conditions of Appointment and Service) Regulations, 1981, arguing that the rules contemplated engagement through an outsourcing agency and that the single bench had correctly determined the actual employer-employee relationship.The division bench disagreed, holding that the master-servant relationship could not be inferred merely from the nature of duties or supervisory control and had to be established through documentary evidence.Referring to the Supreme Court’s March 2025 judgment in The Joint Secretary, Central Board of Secondary Education and another versus Raj Kumar Mishra and another, the Bench observed: “For a person to claim employment under any organization, a direct master-servant relationship has to be established on paper.”Story continues below this adIn the present case, it noted, PRTC had never issued an appointment order to the workers or conferred on them any status, whether temporary, ad hoc or officiating.“Mere working with the PRTC, will not be good enough to treat the respondents as the employee of the PRTC for regularising the services of the such an employee,” the Bench said.The court also rejected reliance on the 2016 Act. It noted that Section 6 provides for outsourced employees to be taken on contract subject to prescribed conditions, including the state entity being financially capable of bearing the additional burden without transferring the liability to the state exchequer.There was nothing on record, the Bench said, to show that PRTC had taken the workers on contract or was financially capable of bearing the burden of their regular salaries.Story continues below this adThe court also drew a distinction between temporary employees appointed directly by PRTC and outsourced workers supplied by a private agency. “There has to be a clear distinction between a temporary employee appointed by the Corporation and an outsourced employee provided by an outsourcing agency,” it said.The Bench noted that the workers’ provident fund was managed by the outsourcing agency and their salaries were paid by the contractor. It also found no provision in the agreement under which PRTC could directly initiate disciplinary proceedings against or punish the outsourced workers.Rejecting the argument that the court should “lift the veil” to determine their actual employer, the Bench said: “Terms and conditions and recruitment made by outsourcing agency cannot be overlooked to declare an outsourced employee as the employee of the PRTC.”The workers had also cited PRTC’s regularisation of 110 similarly situated employees. The corporation, however, submitted that those workers were contractual employees directly on its rolls and had not been engaged through an outsourcing agency. The Bench accepted the distinction, holding that the two categories could not be equated.Story continues below this ad“…the benefit of regularization given to the contractual employees directly working with the PRTC, cannot be equated with an outsourced employee working with the PRTC through an outsourcing agency,” it held.Setting aside the previous order, the court said the view taken by the single bench was “not supported by the facts and the law” and could not be sustained.The writ petitions filed by the workers were dismissed and all four appeals filed by PRTC were allowed.