Labor Laws Chapter-03 - CLRA
Labor Laws Chapter-03 - CLRA
Labor Laws Chapter-03 - CLRA
The object of the Contract Labour (Regulation and Abolition) Act, 1970 is to prevent
exploitation of contract labour and also to introduce better conditions of work. A workman
is deemed to be employed as contract labour when he is hired in connection with the work
of an establishment by or through a contractor. Contract workmen are indirect employees.
Contract labour differs from direct labour in terms of employment relationship with the
establishment and method of wage payment.
Contract labour, by and large, is not borne on pay-roll nor is paid directly. Contract
workmen are hired, supervised and remunerated by the contractor, who, in turn, is remunerated
by the establishment hiring the services of the contractor.
Employment Relationship
Traditional or normal employment relationships are based on a contract of employment under
which the worker agrees to perform certain work for the employer. The employer undertakes
to provide the material and resources, with which the worker performs the work, and to pay
for the work. Typically, the worker provides nothing more than the skills or qualifications with
which the task is performed. This relationship is characterised by economic and organisational
dependency and is commonly seen as a “master–servant” or “employer–employee” relationship.
Commercial Relationships
Employers frequently enter into commercial contracts with other enterprises to obtain goods
and/or services that are needed for the purpose of carrying on his/her business. In the building
industry, many specialists such as plumbers, electricians or carpenters may tender for contracts
on a construction project when the general builder does not have the necessary skills.
These contracts are entered into by two separate businesses and are deemed to be
between independent parties placed on an equal footing. The party performing the work will
generally provide the tools, equipment, labour and skills necessary to complete the agreed
task. The commercial contract does not afford either party with any special legal protection
beyond those laws which support the contract.
2. Ibid.
Chapter 3 The Contract Labour (Regulation and Abolition) Act, 1970 279
is made. These workers may be individuals or teams who move from job to job, site to site
or plantation to plantation looking for work; they may equally agree to work on a single fee
basis where the pay for a completed job is the same regardless of how many individuals work
to complete the job.
A contract labour situation can also arise when an employer hires workers to carry out
the normal business of his/her enterprise but seeks to give them the status of an independent
subcontractor or self-employed contractor. This situation is distinct from that where the worker
is genuinely self-employed and able to enter into a commercial business arrangement with the
enterprise.
Often an individual trades person may not be able to find work with a company or
enterprise and may be forced to look for work for themselves. In the building and wood
industries, this situation will generally force the worker to travel from one site to the next
looking for work. The worker may be hired to work on a site for a period of time to complete
a certain task such as plumbing, concrete pouring or harvesting. The enterprise may decide to
treat the worker as a self-employed contractor or as an independent sub-contractor as a means
to avoid their employment responsibilities. Although the enterprise might call the worker
self-employed or independent, the reality is very different. Independent workers, in this
situation, almost never have the same degree of independence or equality needed to establish
a commercial contract for work as outlined above. By referring to the worker as self-employed
or independent, the enterprise is creating an illusion of a commercial contract as a means of
avoiding employment responsibilities towards the worker.
in the host country or are classed as illegal immigrants and so they are particularly likely to
undertake contract labour. In addition to developing a more flexible workforce, employers
perceive that access to contract labour affords them the benefit of avoiding their obligations
under employment laws and protections. Contract labourers are rarely organised in trade
unions and therefore the use of contract labour also allows employers to avoid the constraints
that they associate with union representation and collective bargaining.
From the workforce perspective, the need for income is too often a greater concern
than how it is earned. Paid work on a contract labour basis is frequently the worker’s only
alternative to unemployment. The economic need of workers effectively places them in
a weak position from which they have to negotiate improved terms and conditions. Demographic
surveys reveal that increasing numbers of women and older workers are entering the paid
workforce. It is argued that these groups are more likely to accept or even chose more flexible
employment arrangements. The availability of workers looking for casual, part time or home-
based work encourages employers to adopt non-standard work practices.
water and first-aid facilities, and in certain cases rest rooms and canteens, have been made
obligatory. Provisions have also been made to guard against details in the matter of wage
payment.”3
Act in a Nutshell
The Contract Labour (Regulation and Abolition) Act contains 35 provisions and is divided
into seven chapters. The Central Act, as its preamble shows, is to regulate the employment
of contract labour in certain establishments and to provide for the abolition in certain
circumstances and for matters connected therewith. Under sub-section (4) of S. 1, the Act
applies to the establishments mentioned therein as well as to every contractor who employs
the number of workers referred to in Cl. (b). There is no controversy that the Act applies to
the appellant establishment. Section 2 defines the various expressions such as “appropriate
Government”, “contract labour”, “contractor”, “establishment” and “principal employer”.
Chapter II deals with the Advisory Boards. Section 3(1) empowers the Central
Government to constitute the Central Advisory Contract Labour Board to advise it with
regard to matters arising out of the administration of the Act. Sub-section (2) provides for
the composition of the said Board and from Cl. (c), it is seen that among other persons, the
said Board is to consist of the representatives of the contractor, workmen and the industries
concerned. Under the proviso to sub-section (3), the number of members nominated to
represent the workmen shall not be less than the number of members nominated to represent
the principal employers and the contractors. Section 4 deals with the constitution of a similar
Advisory Board by the State Government. The said State Advisory Board is also to comprise,
among other persons, the representatives of the industry, the contractor and the workmen.
A proviso to sub-section (3) of S. 4, similar to the proviso to sub-section (3) of S. 3, has also
been enacted.
Chapter III, containing Ss. 6 to 10, deals with the registration of establishments
employing contract labour. Section 6 deals with the appointment of registering officers by
the appropriate Government by notification in the Official Gazette. Section 7 makes it
compulsory on the part of every principal employer of an establishment to which the Act applies
to make an application to the registering officer within the time prescribed for registration
of the establishment. Section 8 deals with revocation of registration in the circumstances
mentioned therein. Section 9, dealing with the effect of non-registration, prohibits the principal
employer of an establishment to which the Act applies from employing contract labour if the
establishment has not been registered under S. 7 within the time prescribed, or in the case
of an establishment in respect of which registration has been revoked under S. 8. Section 10,
which prohibits the employment of contract labour and which is an important provision, is as
follows:
(1) Notwithstanding anything contained in this Act, the appropriate Government may,
after consultation with the Central Board or, as the case may be, a State Board,
prohibit, by notification in the Official Gazette, employment in contract labour in
any process, operation or other work in any establishment.
In the well-known public interest litigation case relating to workmen engaged in various
Asiad projects.6 The Supreme Court, while considering the preliminary objection that a writ
petition under Art. 32 could not be maintainable unless it complained of a breach of some
fundamental right and since writ petitions before the Supreme Court merely alleged violation
of the labour laws, held that the same was not maintainable and was liable to be dismissed.
But the Court observed:
“…there is the complaint of non-observance of the provisions of the Contract Labour
(Regulation & Abolition) Act 1970 and the inter-State Migrant Workmen (Regulation
of Employment and Conditions of Service) Act 1979 and this is also in our opinion a
complaint relating to violation of Art. 21. This Article has acquired a new dimension as
a result of the decision of this Court in Maneka Gandhi v. Union of India (1978) 2 SCR
621(663): (AIR 1978 SC 597) and it has received its most expansive interpretation in
Francis Coralie Mullin v. The Administrator, Union Territory of Delhi (1981) 2 SCR 516:
(AIR 1981 SC 746). Where it has been held by this Court that the right of life guaranteed
under this Article is not confined merely to physical existence or to the use of any faculty
or limb through which life is enjoyed or the soul communicates with outside world but it
also includes within its scope and ambit the right to live with basic human dignity and the
State cannot deprive any one of this precious and invaluable right because no procedure by
which such deprivation may be effected can ever be regarded as reasonable, fair and just.
Now the rights and benefits conferred on the workmen employed by a contractor under the
provisions of the Contract Labour (Regulation and Abolition) Act 1970 and the Inter-State
Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979 are
clearly intended to ensure basic human dignity to the workmen and if the workmen are
deprived of any of these rights and benefits to which they are entitled under the provisions
of these two pieces of social welfare legislation, that would clearly be a violation of Art.
21 by the Union of India, the Delhi Administration and the Delhi Development Authority
which, as principal employers, are made statutorily responsible for securing such rights and
benefits to the workmen.”7
Chapter I
PRELIMINARY
6. Peoples’ Union for Democratic Rights v. Union of India, AIR 1982 SC 1473.
7. Ibid. at p. 1485 per Bhagwati, J.
Chapter 3 The Contract Labour (Regulation and Abolition) Act, 1970 287
(b) to every contractor who employs or who employed on any day of the preceding
twelve months twenty or more workmen:
Provided that the appropriate government may, after giving not less than two months’
notice of its intention so to do, by notification in the Official Gazette, apply the provisions
of this Act to any establishment or contractor employing such number of workmen less than
twenty as may be specified in the notification.
(5) (a) It shall not apply to establishments in which work only of an intermittent or
casual nature is performed.
(b) If a question arises whether work performed in an establishment is of an
intermittent or casual nature, the appropriate Government shall decide the
question after consultation with the Central Board or, as the case may be, a
State Board, and its decision shall be final.
Explanation: For the purpose of this sub-section, work performed in an establishment
shall not be deemed to be of an intermittent nature—
(i) if it was performed for more than one hundred and twenty days in the preceding
twelve months, or
(ii) if it is of a seasonal character and is performed for more than sixty days in a year.
of contract labour. The underlying policy of the Act is to abolish contract labour, wherever
possible and practicable, and where it cannot be abolished altogether, the policy of the Act is
that the working conditions of the contract labour should be so regulated as to ensure payment
of wages and provision of essential amenities. That is why the Act provides for regulated
conditions of work and contemplates progressive abolition to the extent contemplated by S. 10
of the Act. Section 10 of the Act deals with abolition while the rest of the Act deals mainly
with regulation. The dominant idea of S. 10 of the Act is to find out whether contract labour
is necessary for the industry, trade, business, manufacture or occupation which is carried on
in the establishment.10
Section 2: Definitions
(1) In this Act, unless the context otherwise requires,—
(a) appropriate Government means,—
(i) in relation to an establishment in respect of which the appropriate
government under the Industrial Disputes Act, 1947 (14 of 1947), is the
Central Government, the Central Government;
(ii) in relation to any other establishment, the Government of the State in which
that other establishment is situated;
(b) a workman shall be deemed to be employed as contract labour in or
in connection with the work of an establishment when he is hired in or in
connection with such work by or through a contractor, with or without the
knowledge of the principal employer;
(c) contractor, in relation to an establishment, means a person who undertakes to
produce a given result for the establishment, other than a mere supply of goods
or articles of manufacture to such establishment, through contract labour or who
supplies contract labour for any work of the establishment and includes a sub-
contractor;
(d) controlled industry means any industry the control of which by the Union has
been declared by any Central Act to be expedient in the public interest;
(e) establishment means—
290 Labour and Industrial Laws
Work of an establishment
The phrase work of an establishment is categorically interpreted and described by the Supreme
Court in Gammon India Ltd. v. Union of India13 and the following observations are made.
The petitioners contend that they are not contractors within the definition of the Act.
They advance two reasons. First, the work of the petitioners is not any part of the work of
the principal employer nor is it the work “in connection with the work of the establishment”,
namely, principal employer. Second, the work of the petitioners is normally not done in
the premises of the “establishment” of the principal employer. By way of illustration, it is
said that if a banking company, which is an establishment and which carries on its business
in Delhi, employs the petitioners to construct a building in Allahabad, the building to be
constructed is not the work of the bank. It is said that the only work of the bank as an
establishment is banking work and, therefore, the work of construction is not the banking
work of the establishment. Therefore, the petitioners contended that the workmen employed by
the petitioners are not workmen in connection with the work of the establishment.
The Court observed that the contention of the petitioners is unsound. When the banking
company employs the petitioners to construct a building, the petitioners are in relation to
the establishment contractors who undertake to produce a given result for the bank. The
petitioners are also persons who undertake to produce the result through contract labour.
The petitioners may appoint sub-contractors to do the work. To accede to the petitioners
contention that the construction work which is away from the place where the industry, trade,
business of the establishment is carried on is not the work of the establishment is to render
the words “work of any establishment” devoid of ordinary meaning. The construction of
the building is the work of the establishment. The building is the property of the establish-
ment. Therefore, the construction work is the work of the establishment. That is why a
workman is deemed to be employed as contract labour in connection with the work of an
establishment.
The place where business or trade or industry or manufacture or occupations is carried on
is not synonymous with “the work of the establishment” when a contractor employs contract
labour in connection with the work of the establishment. The error of the petitioners lies in
equating the work of the establishment with the actual place where the business, industry or
trade is carried on and the actual work of the business, industry or trade.
The expression “work of an establishment” means the work site where the construction
work of the establishment is carried on by the petitioners by employing contract labour. Every
clause of a statute is to be construed with reference to the context and other provisions of
the Act to make a consistent and harmonious meaning of the statutes relating to the subject
matter. The interpretation of the words will be by looking at the context, the collocation of
the words and the object of the words relating to the matters. The words are not to be viewed
detached from the context of the statute. The words are to be viewed in relation to the whole
context. The definitions of contractor, workmen, contract labour, establishment, principal
employer all indicate that the work of an establishment means the work site of the establish-
ment where a building is constructed for the establishment. The construction is the work
of the establishment. The expression “employed in or in connection with the work of the
establishment” does not mean that the operation assigned to the workmen must be a part
or incidental to the work performed by the principal employer. The contractor is employed
to produce the given result for the benefit of the principal employer in fulfilment of the
undertaking given to him by the contractor. Therefore, the employment of the contract labour,
namely the workmen by the contractor, is in connection with the work of the establishment.
The petitioners are contractors within the meaning of the Act. The work which the petitioners
undertake is the work of the establishment.
Now it is construed that if the work of the contractor is part and parcel of the work
of the establishment and is not a separate activity carried on by the contractor for his own
purpose, then such work would definitely be the work of an establishment. However, what
is to be seen in each particular case is, what is the main purpose of the activity carried
on by the person. If the main purpose of the activity is totally unrelated to the activity of
the establishment, though incidentally it may be pertaining to the work undertaken by the
establishment, then such an activity undertaken by the person would not be covered by
the mischief of the provision. In each particular case, therefore, what is to be determined is,
whether there is a direct nexus between the activity of the establishment and the activity of
the person with whom the establishment has entered into some transaction.
Chapter 3 The Contract Labour (Regulation and Abolition) Act, 1970 293
The next thing to be determined is, whether there is any direct nexus established between
the activity of the establishment and the end product of the activity of the person with whom
the establishment has entered into the transaction.14
Section 2(1)(c)
“Contractor, in relation to an establishment, means a person who undertakes to produce
a given result for the establishment, other than a mere supply of goods or articles of manufacture
to such establishment, through contract labour or who supplies contract labour for any work of
the establishment and includes a sub-contractor.”
The above definition can be analysed as follows:
(i) A contractor is a person who undertakes to produce a given result for the establish-
ment through contract labour;
(ii) A contractor is a person who supplies contract labour for any work of the
establishment;
(iii) A contractor includes a sub-contractor;
(iv) A person whose only obligation towards the establishment is a mere supply of
goods or articles of manufacture to such establishment cannot be a contractor for
the purpose of the Act.
Furthermore, the definition may be divided into three parts, such as substantive part,
exclusive part and inclusive part. The substantive part may be the first part of the definition,
i.e. contractor, in relation to an establishment, means a person who undertakes to produce a
given result for the establishment; exclusive part may be the second part of the definition,
i.e. other than a mere supply of goods or articles of manufacture to such establishment; and
inclusive part may be the last part of the definition which speaks contractor includes sub-
contractor.
Thus, the basic requirement for a person to be ‘contractor’ in terms of the definition is
that he must either execute his contract through ‘contract labour’ or supply ‘contract labour’.
14. State of Gujarat v. Sarabhai Chimanlal Sheth & Co. [1984] 2 LLJ 334.
15. H.C. Bothra v. Union of India [1976] Lab IC 1199 (Gau).
294 Labour and Industrial Laws
Chapter II
(2) The committee constituted under sub-section (1) shall meet at such time and places
and shall observe such rules of procedure in regard to the transaction of business at
its meetings as may be prescribed.
(3) The members of a committee shall be paid such fees and allowances for attending
its meetings as may be prescribed:
Provided that no fees shall be payable to a member who is an officer of Government or
of any corporation established by any law for the time being in force.
The Supreme Court in Food Corporation of India Workers’ Union v. Food Corporation
of India16 misread S. 5 of the Act as it issued the writ of mandamus and accordingly directed
all the State Governments except the State of Madhya Pradesh for appointing a committee
under S. 5 of the Act within three months.
It is submitted that S. 5 of the Act empowers only the Central Board or the State Board,
as the case may be, to constitute the committees and it has nothing to do with the State
Government. After reading Ss. 3, 4 and 5, the following points are noted.
Section 3: The Central Government shall, as soon as may be, constitute a Board.
Section 4: The State Government may constitute a Board.
Section 5: The Central Board or the State Board, as the case may be, may constitute
such committees.
Section 3 is a mandatory one whereas S. 4 is discretionary. If the State Government
will not exercise its power under S. 4, it is presumed that the State Government cannot be
directed to constitute a State Advisory Board, so writ of mandamus may not lie; whereas the
Central Government can be directed to constitute a Central Board in case of non-compliance
of mandatory provision of S. 3 of the Act. The Court can issue the writ of mandamus and
direct the Central Government to constitute a Board as required under S. 3 of the Act.
Section 5 provides altogether a different connotation. Section 5 provides that the Central
Board constituted under S. 3 and the State Board constituted under S. 4, as the case may be,
may constitute such other committees as it may think fit. So it appears that S. 5 confers a
discretionary power on the Central and State Boards to constitute such other committees.
Chapter III
REGISTRATION OF ESTABLISHMENTS
EMPLOYING CONTRACT LABOUR
The word misrepresentation has not been defined in the Contract Labour (Regulation &
Abolition) Act, 1970. Hence it is worthwhile to refer S. 18 of the Indian Contract Act, 1872.
Section 18 of the Indian Contract Act, 1872 defines ‘misrepresentation’ as follows:
“Misrepresentation” means and includes—
(1) the positive assertion, in a manner not warranted by the information of the person
making it, of that which is not true, though he believes it to be true;
(2) any breach of duty which, without an intent to deceive, gains an advantage to the
person committing it, or anyone claiming under him; by misleading another to his
prejudice, or to the prejudice of any one claiming under him;
(3) causing, however innocently, a party to an agreement, to make a mistake as to the
substance of the thing which is subject of the agreement.
The registering officer has to provide reasonable opportunity to the principal employer
of the establishment to be heard before revoking the registration of any establishment and to
obtain the previous approval of the appropriate Government for such revocation.
should not bypass the Board constituted under the Act before issuing notification under
S. 10(1). Consultation with the Central Board or the State Board, as the case may be, is
mandatory and condition precedent to the issuance of prohibition notification under S. 10(1)
of the Act.
(iv) Under the Explanation which really relates to Cl. (b), the decision of the appropriate
Government on the question whether any process, operation or other work is of
perennial nature, shall be final.
In 2003, two important cases, i.e. National Thermal Power Corporation Ltd. v. Karri
Pothuraju19 and Mishra Dhatu Nigam Ltd. v. M. Venkataiah20 were decided by the Supreme
Court on 13-08-2003 where facts of both the cases were very much similar and both the
cases were decided by the same judges, namely S. Rajendra Babu and Doraiswamy Raju, JJ.
As both the cases deal with the same issue, it is not necessary to discuss both the cases in
detail. Hence National Thermal Power Corporation Ltd. case is considered for discussion. In
National Thermal Power Corporation Ltd. case, an appeal had been filed against the order
dated 27-11-1996 of a Division Bench of the Andhra Pradesh High Court in Writ Appeal
No. 385 of 1996, whereunder the Division Bench, while setting aside the order of the learned
Single Judge in Writ Petition No. 3793 of 1992, allowed the claims in the writ petition
to the extent and subject to the conditions specified in the order. The appellant, National
Thermal Power Corporation Ltd., Ramagundam Super Thermal Power Station, is a Public
Sector Undertaking of the Government of India. It started a canteen in the year 1983 for the
benefit of the employees of their unit through a contractor, and from that time onwards, it
was being run through contractors engaged from time to time. The total number of employees,
at the relevant point of time, were said to be 2300 and about 54 persons were said to have
been working in the canteen in various capacities—cooks, servers, cleaners, etc. It is not in
controversy that the appellant is a factory governed by the provisions of the Factories Act and
S. 46 of the said Act, 1948 casts a mandatory duty and obligation on the appellant to provide
and maintain a canteen for the benefit of all those serving in the unit. The respondents, at least
many of them, were said to be working from the year 1983, though engaged by contractors.
The Deputy Manager, Administration and his subordinates were said to supervise the working
of the canteen in respect of preparation, service and maintenance, to ensure quality of service
and make beneficial to the workers. It is also claimed that the said authority issued identity
cards also to the workers for entering the factory premises. Apparently, taking advantage of
certain decisions of courts, including the Supreme Court, the respondent-workers moved the
High Court by means of the writ petition filed under Art. 226 of the Constitution, seeking for
a direction to the appellant to regularize their services with attendant benefits.
The appellants disputed the claim, contending that the canteen was run as a beneficial
measure, to cater to the needs of workers in the unit, that contractors used to be engaged
periodically, at times different contractors for different period, depending upon the successful
offer made pursuant to invitation of tenders, that they have nothing to do with the total
strength of workers engaged by such contractors, that they are neither workers relating to the
manufacturing activities of the appellant-undertaking nor they perform any work incidental
thereto or by any means could claim to be workers of the appellant within the meaning of the
Industrial Disputes Act, 1947. The control, if at all, was said to be to ensure that there is no
industrial unrest on account of the manner of running the canteen and proper food articles are
made available hygienically and at the rates stipulated without sacrificing the quality of the
appellant to consider the claims of the workers as to whether they satisfy the requirements
and whether they are otherwise unfit for confirmations. In the light of all these, we are
unable to countenance the challenge to the decision of the High Court, as either legitimate
or valid one. The appeal, therefore, fails and shall stand dismissed. No costs.”26
26. National Thermal Power Corporation Ltd. v. Karri Pothuraju, AIR 2003 SC 3647 at p. 3649 per
Rajendra Babu, J.
27. AIR 2001 SC 3527.
Chapter 3 The Contract Labour (Regulation and Abolition) Act, 1970 305
Writ Jurisdiction vis-à-vis Abolition of Contract Labour
In view of the provision in S. 10 of the Act, it is only the appropriate Government which has
the authority to abolish the system of contract labour in accordance with the provisions of
the said section. No court including the industrial adjudicator has jurisdiction to do so. The
exclusive jurisdiction to abolish contract labour in any establishment lies with the appropriate
Government and therefore the High Court can neither issue a writ to abolish the contract labour
nor prevent a principal employer from engaging contract labour where no order under S. 10
of the Act, abolishing contract labour, is passed by the appropriate Government. The Supreme
Court has categorically dealt with the issue in B.H.E.L. Workers Association, Hardwar v.
Union of India28 and observed that it is not possible for this Court in an application under Art.
32 of the Constitution to embark into an enquiry whether these thousand and odd workmen
working in various capacities and engaged in multifarious activities do work identical with
work done by the workmen directly employed by the B.H.E.L. and whether for that reason
they should be treated not as contract labour but as direct employees of the B.H.E.L.
The learned counsel appearing for the B.H.E.L. Workers Association advanced the
extreme argument that the Court must declare a total ban on the employment of contract
labour in public sector undertakings. It was argued that the employment of contract labour has
been frowned upon by various committees appointed by the Government and the Parliament
itself thought that the employment of contract labour was undesirable and, therefore, enacted
the Contract Labour (Regulation and Abolition) Act, 1970. It was submitted that in order to
give effect to the intention of Parliament as well as the Directive Principles of State Policy, the
Court should declare illegal the employment of contract labour by the State or by any public
sector undertaking as a public sector undertaking is a State for the purposes of Art. 12 of
the Constitution of India. In other words, the counsel wants the Supreme Court by its writ to
abolish the employment of contract labour by the State and by all public sector undertakings.
But their Lordships observed:
“We are afraid that, that would be nothing but the exercise of activity with which function
the Court is not entrusted by the Constitution…. It is not for the court to enquire into the
question and to decide whether the employment of contract labour in any process, operation
or other work in any establishment should be abolished or not. This is a matter for the
decision of the Government after considering the matters required to be considered under
S. 10 of the Act.”29
In Steel Authority of India Ltd. v. Union of India (AIR 2006 SC 3229) which is popularly
known as SAIL-II case wherein the Supreme Court held that the CLRA Act is a complete
code by itself. It not only provides for regulation of contract labour but also abolition thereof.
Relationship of employer and employee is essentially a question of fact. Determination of the
said question would depend upon a large number of factors. Ordinarily, a writ court would
not go into such a question. The Court further held that neither the Labour Court nor the writ
court could determine the question as to whether the contract labour should be abolished or
not, the same being within the exclusive domain of the Appropriate Government.
legislative intent of making the erstwhile contract labourers direct employees of the employer
on abolition of the intermediary contractor. If it is held that on abolition of contract labour
system the erstwhile contract labourers are to be thrown out of the establishment lock, stock
and barrel, it would amount to throwing the baby out with the bathwater.
Therefore, it is submitted that the Court took a pragmatic approach and cast a duty
on the principal employer to absorb the contract labour once a notification for abolition of
the contract labour is made under S. 10(1) of the Act. Otherwise, the true intention of the
Act would be frustrated. The intention of the Act is to abolish the contract labour wherever
and whenever there is possibility, but not throwing the workers out of job rather through
absorption.
However, the Air India case was overruled prospectively in Steel Authority of India
Ltd. v. National Union Waterfront Workers27 and the Supreme Court took just a diametrically
opposite view to that of Air India case. The Court in this case observed that neither S. 10 of the
CLRA Act nor any other provision in the Act, whether expressly or by necessary implication,
provides for automatic absorption of contract labour on issuing a notification by appropriate
Government under sub-section (1) of S. 10, prohibiting employment of contract labour, in any
process, operation or other work in any establishment. Consequently, the principal employer
cannot be required to order absorption of the contract labour working in the establishment
concerned.
The concept of automatic absorption of the contract labour on issuance of notification
under S. 10 prohibiting employment of contract labour in an establishment is neither alluded
to in the report of the Joint Committee of Parliament on the Contract Labour (Regulation and
Abolition) Bill, 1967 nor in the statement of Objects and Reasons of the Act. The scheme of
the Act is to regulate conditions of workers in contract labour system and to provide for its
abolition by the appropriate Government as provided in S. 10 of the CLRA Act. The various
regulatory and welfare measures provided under the various provisions of the Act clearly
bespeak treatment of contract labour as employees of the contractor and not of the principal
employer. It is, therefore, difficult to perceive in S. 10 any implicit requirement of automatic
absorption of contract labour by the principal employer in the establishment concerned
on issuance of notification by the appropriate Government under S. 10(1) prohibiting
employment of contract labour in a given establishment.
It is important to mention here the view expressed by the Hon’ble Finance Minister
while presenting 2001–02 Budget. He said that the rigidities inherent in the existing
legislation regarding contract labour inhibit growth in the employment in many service
activities. Section 10 of the existing Act envisages prohibition of contract labour in work/
process/operation if the conditions set therein like perennial nature of job, etc. are fulfilled.
Section 10 enables the contract labour engaged in prohibited jobs to become direct employees
of the principal employer. To overcome this difficulty and at the same time to ensure the
protection of labour, it is proposed to bring an amendment to facilitate outsourcing of
activities without any restriction as well as to offer contract appointments. It would not
differentiate between core and non-core activities, and provide protection to labour engaged
in outsourced activities in terms of their health, safety, welfare, social security, etc. It would
also provide for larger compensation based on last drawn wages as retrenchment compensation
for every year of service.
Chapter 3 The Contract Labour (Regulation and Abolition) Act, 1970 309
The aforesaid measures, according to the Finance Minister, would promote industrial
investment in labour-intensive and export-oriented activities, providing for renewed industrial
growth, while, at the same time, would safeguard the interest of workers.
The aforesaid statement of the Finance Minister received mixed reaction from the
employers’ and workers’ Federation. The Employers’ Federation of Southern India (EFSI)
welcomed Mr. Sinha’s announcement as a ‘major step’. They felt that the proposal would
benefit the medium scale industries, which are the ones that need to adopt new technology and
reduce the labour force. They also felt that if the amendments go through, the labour market
will become more flexible, more workers can be hired legitimately.
On the other hand, the Trade Unions feel that with the proposed amendment of the
Contract Labour (Regulation and Abolition) Act, employers would go in for more contractual
appointments. Further, the proposed amendment would facilitate outsourcing of activities to
contract labour and also ease the appointment of contract labour.
As per the recent press statement, the Government’s Draft Bill to amend the Contract
Labour (Regulation and Abolition) Act is ready and is proposed to be introduced in
Parliament in its current session. The Amendment Bill will take away from the 1970 Act
its power to abolish contract labour in various jobs, which are of perennial nature. The
amendment Bill seeks to delete the provision under which any contract employment can be
prohibited. It will provide complete freedom to an employer to decide the activities “which
he will like to outsource”.31
The Second National Commission on Labour recommended on this issue as follows:
The Commission is conscious of the fact that in the fast changing economic scenario and
changes in technology and management, which are entailed in meeting current challenges, there
cannot be a fixed number of posts in any organisations for all time to come. Organisations
must have the flexibility to adjust the number of this workforce based on economic efficiency.
It is essential to focus on core competencies if an enterprise wants to remain competitive. We
would, therefore, recommend that contract labour shall not be engaged for core production/
services activities. However, for sporadic seasonal demand, the employer may engage temporary
labour for core production/service activity. We are aware that off-loading, perennial, non-core
services like canteen, watch and ward, cleaning etc. to other employing agencies to take care
of three aspects:
1. there have to be provisions that ensure that performed perennial core services are not
transferred to other agencies or establishments;
2. where such services are being performed by employees on the payrolls of the
enterprises, no transfer to other agencies should be done without consulting,
bargaining(negotiating) agents; and
3. where the transfer of such services does not involve any employee who is currently
in service of the enterprise, the management will be free to entrust the service to
outside agencies. The contract labour will, however, be remunerated at the rate of a
regular worker engaged in the same organisation doing work of a comparable nature
or if such worker does not exist in the organisation, at the lowest salary of a worker
31. See S.C. Srivastava, Impact of Repeal of Section 10 of the Contract Labour (Regulation and Abolition)
Act, 1970, Management of Contract Labour in India, Shri Ram Centre, New Delhi (2004), p. 119.
310 Labour and Industrial Laws
Chapter IV
LICENSING OF CONTRACTORS
32. Government of India (2002), Report of the Second National Commission on Labour, Chapter 13,
pp. 47–48, Para 6.109.
Chapter 3 The Contract Labour (Regulation and Abolition) Act, 1970 311
Section 12 provides two aspects, namely licensing of contractors from undertaking or
executing any work through contract labour except under and in accordance with a licence.
A licence may contain such conditions including conditions as to hours of work, fixation
of wages and other essential amenities in respect of contract labour. Such licence is issued
on payment of such fees and on the deposit of such sum, if any, as security for the due
performance of the conditions as may be prescribed.
Chapter V
(2) Without prejudice to the generality of the foregoing power, such rules may provide
for—
(a) the date by which the canteens shall be provided;
(b) the number of canteens that shall be provided, and the standards in respect of
construction, accommodation, furniture and other equipment of the canteens; and
(c) the foodstuffs which may be served therein and the charges which may be made
therefore.
of Calcutta that respondents were engaged as contract labour by Bhagwat Prasad Choudhury,
contractor, and while they were working, they were refused payment of the full wages. As
a consequence, they laid claim for payment of the amount. Ultimately, the Division Bench
directed, by the impugned judgment, that the appellant shall be liable to pay the arrears of the
balance of the amount of the wages.
The learned counsel appearing for the appellant contended that the arrears of wages are
not wages under S. 21 of the Contract Labour (Regulation and Abolition) Act, 1973 and that,
therefore, the appellant is not liable to make the payment to the respondents. The Supreme
Court rejected the contention and observed that S. 21 postulates the responsibility for payment
of wages. Under S. 21(1), a contractor shall be responsible for the payment of wages to each
worker employed by him as contract labour and such wages shall be paid before the expiry of
such period as may be prescribed.
Whereas S. 21(4) prescribes that in case the contractor fails to make payment of wages
within the prescribed period or makes short payment, then the principal employer shall be
liable to make payment of wages in full or the unpaid balance due, as the case may be, to
the contract labour employed by the contractor and recover the amount so paid from the
contractor either by deducting from any amount payable to the contractor under any contract
or as a debt payable by the contractor. That liability has been prescribed under sub-section (2)
of S. 21 of the Act thereof which says that every principal employer shall nominate a
representative duly authorised by him to be present at the time of disbursement of wages by
the contractor and it shall be the duty of such representative to certify the amounts paid as
wages in such manner as may be prescribed. Thus, it is clear that the principal employer is
required to pay the wages. The term ‘wages’ includes the balance of wages or arrears thereof.
Under these circumstances, the Supreme Court dismissed the appeal.
Chapter VI
Presidency Magistrate or a Magistrate of the first class shall try any offence punishable under
this Act.
Chapter VII
MISCELLANEOUS
The proviso further clarifies that the contract labour will continue to be entitled to the
more favourable benefits available to them under any agreement, contract of service or standing
orders in respect of any matters notwithstanding that they received benefits in respect of other
matters under this Act. Section 30(2) authorises the contract labour to enter into agreements
with the principal employer or contractor, as the case may be, for more favourable terms than
are provided under this Act.
(i) the time within which facilities required by this Act to be provided and
maintained may be so provided by the contractor and in case of default on the
part of the contractor, by the principal employer;
(j) the number and types of canteens, rest-rooms, latrines and urinals that should be
provided and maintained;
(k) the type of equipment that should be provided in the first-aid boxes;
(l) the period within which wages payable to contract labour should be paid by the
contractor under sub-section (1) of section 21;
(m) the form of registers and records to be maintained by principal employers and
contractors;
(n) the submission of returns, forms in which, and the authorities to which, such
returns may be submitted;
(o) the collection of any information or statistics in relation to contract labour; and
(p) any other matter which has to be, or may be, prescribed under this Act.
(3) Every rule made by the Central Government under this Act shall be laid as soon as
may be after it is made, before each House of Parliament while it is in session for
a total period of thirty days which may be comprised in one session or in two
successive sessions, and if before the expiry of the session in which it is so laid or
the session immediately following, both Houses agree in making any modification
in the rule or both Houses agree that the rule should not be made, the rule shall
thereafter have effect only in such modified form or be of no effect, as the case may
be; so, however, that any such modification or annulment shall be without prejudice
to the validity of anything previously done under that rule.
(4) Every rule made by the State Government under this Act shall be laid, as soon as
may be after it is made, before the State Legislature.
In State of Haryana v. Charanjit Singh (AIR 2006 SC 161) the Supreme Court held
that the doctrine of ‘equal pay for equal work’ is not an abstract doctrine and is capable
of being enforced in a Court of law. But equal pay must be for equal work of equal value.
The principle of ‘equal pay for equal work’ has no mechanical application in every case. If
the educational qualifications are different, then also the doctrine may have no application.
A mere nomenclature designating a person as say a carpenter or a craftsman is not enough
to come to the conclusion that he is doing the same work as another carpenter or craftsman
Chapter 3 The Contract Labour (Regulation and Abolition) Act, 1970 323
in regular service. The quality of work which is produced may be different and even the
nature of work assigned may be different. It is not just a comparison of physical activity. The
application of the principle of ‘equal pay for equal work’ requires consideration of various
dimensions of a given job. The accuracy required and the dexterity that the job may entail
may differ from job to job. It cannot be judged by the mere volume of work. There may be
qualitative difference as regards reliability and responsibility. Functions may be the same but
the responsibilities made a difference. Thus normally the applicability of this principle must
be left to be evaluated and determined by an expert body. These are not matters where a
writ Court can lightly interfere. Normally a party claiming ‘equal pay for equal work’ should
be required to raise a dispute in this regard. In any event the party who claims ‘equal pay
for equal work’ has to make necessary averments and prove that all things are equal. Thus,
before any direction can be issued by a Court, the Court must first see that there are necessary
averments and there is a proof. If the High Court, is on basis of material placed before it,
convinced that there was equal work of equal quality and all other relevant factors are fulfilled
it may direct payment of equal pay from the date of the filing of the respective writ petition.
Rule 25 requires that the Commissioner is to analyse the pleadings, evidence and
documents placed on record and to arrive at a conclusion as to whether the workmen are
performing the same duties as have been performed by the regular employees.
In Panki Thermal Station v. Vidyut Mazdoor Sangthan (AIR 2009 SC 2373) the Supreme
Court provides guidelines to the Labour Commissioner how to reach into conclusion that both
contract labour and pay-roll employees are performing same and similar work so that Rule
25 could be applied. The Supreme Court held that in the Commissioner’s order there is no
discussion as to how the Commissioner arrived at the conclusion about similarity of work. The
Commissioner ought to have considered on the basis of pleadings and materials placed by the
parties. The Commissioner was required to arrive at a conclusion that the workmen had been
performing the same duties as are being performed by regular employees.
In U.P. Rajya Vidyut Utpadan Board v. U.P. Vidyut Mazdoor Sangh [AIR 2010 SC
(Supp) 300] the Supreme Court interpreted the concept of “same and similar” and provides
some inputs what constitutes same and similar thereby Rule 25 would be attracted. The fact
of the case is as follows:
Uttar Pradesh Vidyut Mazdoor Sangh (hereinafter referred to as ‘Union’), made an
application under Rule 25(2)(v)(a) of the Uttar Pradesh Contract Labour (Regulation and
Abolition) Rules, 1975, (‘Rules, 1975’ for short) before the Labour Commissioner, Kanpur
praying therein that order be passed for payment of the same wages and other facilities in
favour of contract labour working in second filtration plant of Anpara Thermal Power Project
as are being paid by the employer to its employees in the main filtration plant. The Union set
up the case that there are two filtration plants in Anpara Thermal Power Project; out of these
plants in one plant (for the sake of convenience, hereinafter referred to as ‘main plant’) regular
employees are employed by the Electricity Board while in the other filtration plant, contract
labour is being employed through contractors. In both filtration plants, the nature of work
done by all these employees is same but the workers are paid their wages at different rates.
Twenty six workers, who have been directly appointed by the Electricity Board, are being
paid regular pay scale with permissible allowances etc. while twenty eight contract workers
engaged through two contractors are paid at the rate of ` 61 per day for unskilled work and
324 Labour and Industrial Laws
` 71.50 per day for semi-skilled work. The Union asserted that work in both the filtration
plants is of the same nature.
U.P. Rajya Vidyut Utpadan Board resisted the application made by the Union on diverse
grounds. That there are two water filtration plants in Anpara Thermal Power Project was
admitted. However, it was submitted that main filtration plant is permanent having the capacity
of treating three million gallons water per day while the second one is temporary having the
capacity of treating three lac gallons per day. It was further submitted that from permanent
filtration plant, supply is given to the entire colony and ITI passed/trained operators are being
appointed by the department to run it; these appointments are made by the selection committee
through selection procedure on the basis of eligibility and advertisement by the Board. The
permanent plant runs 24 hours; it has six pumps and each has the capacity of 170 H.P. The
chemicals are mixed at this plant mechanically and for its operation eligible and responsible
employees are required. In the other filtration plant which is of temporary nature, employees
are engaged through contractor for its operation. The temporary filtration plant is operated by
skilled and semi-skilled employees who are engaged by contractors. These workers are paid
wages at the rate declared by the labour department. The Board submitted before the Labour
Commissioner that the work of the employees in the two filtration plants cannot be compared
and, therefore, the employees working in the temporary filtration plant are not entitled to the
same wages and facilities as are being paid to the regular employees working in the main
filtration plant.
The Labour Commissioner, however, did not considered the reply submitted by the Board
and vide his order dated October 24, 1998 held that the contract labour in temporary filtration
plant should be paid the wages at the rate admissible to the workers in the main plant.
The Board challenged the order of the Labour Commissioner by filing writ petition
before the High Court of Allahabad. The Single Judge dismissed the writ petition on May 14,
1999 holding that the findings recorded by the Labour Commissioner required no interference.
Same view was also endorsed by the Divisional Bench as well.
The Supreme Court observed that Rule 25(2)(v)(a) incorporates the principle of ‘equal
pay for equal work’. By statutory provision, it is mandated that the employees engaged by
the employer through contractor who perform the same or similar kind of work must be
paid the same wages and facilities as being paid to the employees employed directly by the
principal employer of the establishment. In case of any controversy as to whether the workmen
employed by the contractor perform the same or similar kind of work as employed directly by
the principal employer of the establishment, the Labour Commissioner has been empowered
to resolve such dispute.
The Supreme Court further observed that (which may be considered the most important
observation from the management’s perspective):
“Nature of work, duties and responsibilities attached thereto are relevant in comparing and
evaluating as to whether the workmen employed through contractor perform the same or
similar kind of work as the workmen directly employed by the principal employer. Degree
of skill and various dimensions of a given job have to be gone into to reach a conclusion
that nature of the duties of the staff in two categories are on par or otherwise. Often the
difference may be of a degree. It is well settled that nature of work cannot be judged
by mere volume of work; there may be qualitative difference as regards reliability and
responsibility.”
Chapter 3 The Contract Labour (Regulation and Abolition) Act, 1970 325
In the instant case, the Labour Commissioner has not evaluated the facts placed before
it. The order of the Labour Commissioner passed on October 24, 1998 which reads as follows:
“I have fully considered all the facts and perused the records and documents produced
by the parties. On the basis of the facts submitted, there is no reason before me on the
basis of which the contract labour engaged through contractors who is working the similar
work, should be given wages at a lesser rate than the permanent employees. Only minimum
qualification could be the basis for the worker of both the plants to some extent. Therefore,
considering all the facts my opinion is that 28 contract labour in temporary plant through
contractor M/s. Eastern Engineering Corporation and M/s. Kheroni Constructions Company
should be paid the wages at the rate admissible to the workers/labours in permanent plant.
This is my decision in respect of application ... .”
As a matter of fact, the present appellants specifically set out the details of works in
two water filtration plants thus:
There are two water filtration plants in Anpara Project. One is permanent having
the capacity of treating 3 million Gallon water per day (3 M.G.D.) or 30 lacs gallon per
day and the second is temporary having capacity of treating 3 million Gallons per day i.e.
3 lacs gallons per day. From permanent treatment plant, water supply is given to the entire
permanent colony. This plant is very important and permanent. Therefore, I.T.I. passed/
trained operators are being appointed by the department to run it. The appointments are being
made by the Selection Committee through selection procedure on the basis of eligibility and
advertisement by the Board. Therefore, the operators and employees appointed on this plant
are permanent employees of the department and they are fully responsible for the work done
by them. The equipments installed at this plant are of permanent nature and it is being run
24 hours (day and night). There are 6 pumps at this plant and each has the capacity of
170 H.P. and consumes 9302.40 watts electricity. The chemicals are mixed at this plaint
mechanically and for its operation eligible and responsible employees are required. The salary
of these employees comes in the payscale of permanent employees who have been appointed.
There are 26 employees have been appointed and working in this plant.
The other filtration plant is of temporary nature and is being operated till the next phase
of the project is completed and after the completions of next phase it will be closed. From this
plant water is supplied to the temporary colony and project area. It is being operated through
contractor. The Department makes the payment to the contractor on the basis of item wise
as per the work executed and not labour wise. The contractor used to make payment to his
employees on the basis of minimum wages declared by the Government from time to time
and not less than that amount. The contractor gets this plant operated by his 3 unskilled and
3 semi-skilled employees.
It is submitted that the above facts show that it will not be justiciable to compare the
work and facilities of the employees working in permanent filtration plant with the employees
working in Temporary Filtration Plant. The Labour Commissioner did not apply its mind
judiciously rather reached into conclusion which is unwarranted. The Labour Commissioner
ought to have evaluated to the nature of duties of the staff in the two categories, degree
of skill and dimensions of the job for reaching the conclusion that the work done by the
contract labour in the second filtration plant is same or similar to the kind of work done by
the employees employed by the principal employer directly in the main plant. There is no
discussion at all by the Labour Commissioner as to how he arrived at the conclusion about
326 Labour and Industrial Laws
similarity of work. The evidence let in by the parties and the materials placed by them seem
to have not at all been considered by the Labour Commissioner.
Therefore the Supreme Court allowed the appeal and held as follows:
“We are afraid, the consideration of the question as to whether the workmen employed
by the contractors in the second filtration plant perform the same or similar kind of work
as the employees directly employed by the principal employer in the main plant by the
Labour Commissioner as well as High Court is highly unsatisfactory. In a situation such as
this, we are constrained to set aside the impugned judgment of the High Court as well as
the order dated October 24, 1998 passed by the Labour Commissioner, Uttar Pradesh. The
application made by the Union under Rule 25(2)(v)(a) of the Rules, 1975 is restored to the
file of Labour Commissioner, Kanpur, Uttar Pradesh for fresh consideration in accordance
with law.”
operation or other work of the establishment in regard to which the prohibition notification
has been issued, it shall give preference to the erstwhile contract labour if otherwise found
suitable, if necessary by giving relaxation of age. The Supreme Court in SAIL-I (2001)
case did not specifically deal with the legal position as to when a dispute is brought before
the Industrial Adjudicator as to whether the contract labour agreement is sham, nominal
and merely a camouflage, when there is no prohibition notification under Section 10(1) of
CLRA Act.
Further, the Supreme Court in 2009 in International Airport Authority of India v.
International Air Cargo Workers’ Union (AIR 2009 SC 3063) held that where there is no
abolition of contract labour under Section 10 of CLRA Act, but the contract labour contends
that the contract between principal employer and contractor is sham and nominal, the remedy
is purely under the Industrial Disputes Act. The industrial adjudicator can grant the relief
sought if it finds that contract between principal employer and the contractor is sham, nominal
and merely a camouflage to deny employment benefits to the employees and that there is in
fact a direct employment, by applying tests like:
(i) who pays the salary;
(ii) who has the power to remove/dismiss from service or initiate disciplinary action;
(iii) who can tell the employees the way in which the work should be done, in short who
has direction and control over the employees.
The facts of the International Airport Authority of India v. International Air Cargo
Workers’ Union (AIR 2009 SC 3063) are as follows:
The International Airport Authority of India (IAAI) established a cargo complex at
Madras. Under an agreement it granted a licence to a private company to be its ground
handling agent in respect of export, import and transshipment of cargo consignments. Under
the said agreement, licensee (Airfreight) was to receive payment from the owners of the cargo
for the work done, had to engage the services of required number of workers for handling
the cargo and be responsible for payment of wages to the workers. It was also required to
pay a licence fee to IAAI. Subsequently, IAAI decided to take over the ground handling
work and entrust it to a new licensee by inviting competitive tenders. Therefore, IAAI
informed its licensee that the ground handling agency operations should be handed over to
its officers. In the circumstances, the workers employed by the licensee in connection with
the ground handling work, who were likely to be retrenched/discharged, made an appeal to
IAAI to provide them employment. They also filed a writ petition seeking a direction to IAAI
to employ all those workers who had been employed by the licensee in connection with the
ground handling work at the Madras Airport cargo complex. In view of the appeal made by
the said workers, IAAI unilaterally came forward with a scheme to mitigate their hardship,
and filed a memo before the High Court. Under the scheme IAAI offered to accommodate
the workers, except by way of regular absorption, in services of IAAI till it makes its own
arrangement by giving contract for handling of cargo to a Society to be formed by workers of
erstwhile licensee. The High Court recorded the memo filed by IAAI and dismissed the writ
petition in view of the agreement expressed by the counsel for Workers Union. Thereafter,
a Society was formed and IAAI entered into a contract with the Society to provide workers
for handling of cargo. When the term of contract was coming to an end, the workers raised
Chapter 3 The Contract Labour (Regulation and Abolition) Act, 1970 329
an industrial dispute demanding direct employment in service of IAAI. On a reference being
made the Industrial Tribunal directed absorption of workers in services of IAAI on ground
that the memo filed by IAAI in writ petition was a ploy to defeat legitimate right of workers
to permanent status. The memo was a settlement and the Workers Union was pressurized to
enter into the settlement. The contract entered into with workers’ Society was sham, nominal
or camouflage.
The Supreme Court held that the memorandum filed by IAAI was not a settlement
between the parties, but was only an unilateral proposal by IAAI in a pending writ petition,
and in view of the fact that the Union was agreeable to such a course and did not press the
relief of absorption or direct employment under IAAI, it is not possible to hold that the terms
of the memorandum were terms of a settlement arrived at by IAAI from a dominant position,
by applying pressure on the workers. This is not a case of the workers giving up any right
or interest, but a case of a benefit or concession being voluntarily extended by IAAI as a
responsible organization, to mitigate hardship.
The finding that the workers were entitled to continue as direct casual labour of
IAAI but for change in their status as contract labour, affected by IAAI is incorrect. The
workers were the employees of licensee. IAAI had no obligation to give them employment
on termination of licence. It was only on humanitarian grounds and to mitigate the hardship
of these workers, IAAI proposed to give the cargo handling work to the society of workers.
It also agreed purely as an interim measure to employ them as casual labourers till contract
with society gets entered. Therefore, the direct casual employment given to the workers was
purely an interim or ad hoc measure as part of the package proposal made by IAAI in its
memorandum. The workers worked for less than 240 days as casual labourers under IAAI and
were not entitled to claim the benefit of neither Section 25F nor regularisation on the basis of
such short casual service as daily rated employees.
The fact that IAAI was directly making payment to workers of society and also was
taking penal action on workers is based on no evidence. As such the finding that the contract
for supply of contract labour was paper contract is improper. Merely because the contract
labours work is under the supervision of the officers of the principal employer, it cannot be
taken as evidence of direct employment under the principal employer.
In International Airport Authority of India case, the following three questions arise for
consideration of the Supreme Court:
(i) Whether the agreement between the contractor society and the IAAI in regard to
cargo handling work was sham and nominal and consequently, the workers engaged
as contract labour in regard to cargo handling work, were the direct employees of
IAAI?
(ii) Whether the status of loaders-cum-packers engaged in cargo handling work was
illegally changed from that of direct casual labour to contract labour in violation of
Section 9A of the Industrial Disputes Act, 1947?
(iii) In the absence of a notification under Section 10 of CLRA Act prohibiting
the employment of contract labour in the process/operation of cargo handling
work, whether the workmen employed as contract labour are entitled to claim
absorption?
330 Labour and Industrial Laws
Considering the facts of the case the Supreme Court held as follows:
(i) The contract labour agreement between IAAI and the society was not sham, nominal
or as a camouflage and the contract labour were not the direct employees of IAAI.
(ii) There was no violation of Section 9A of the Industrial Disputes Act.
(iii) In the absence of a notification under Section 10 of CLRA Act prohibiting the
employment of contract labour in the operation of cargo handling work, the workmen
employed as contract labour are not entitled to claim absorption.
In Bengal Nagpur Cotton Mills v. Bharat Lal, (2011) 1 SCC 635 where the Supreme
Court cited the decision of International Airport Authority v. International Air Cargo Workers’
(AIR 2009 SC 3063) which reads as follows:
“If the contract is for supply of labour, necessarily, the labour supplied by the contractor
will work under the directions, supervision and control of the principal employer but that
would not make the worker a direct employee of the principal employer, if the salary is paid
by contractor, if the right to regulate employment is with the contractor, and the ultimate
supervision and control lies with the contractor.
The principal employer only controls and directs the work to be done by a contract labour,
when such labour is assigned/allotted/sent to him. But it is the contractor as employer, who
chooses whether the worker is to be assigned/allotted to the principal employer or used
otherwise. In short, worker being the employee of the contractor, the ultimate supervision
and control lies with the contractor as he decides where the employee will work and how
long he will work and subject to what conditions. Only when the contractor assigns/sends
the worker to work under the principal employer, the worker works under the supervision
and control of the principal employer but that is secondary control. The primary control is
with the contractor.”
It is submitted that the Supreme Court has indirectly allowed the Principal Employer
to have only secondary supervision and secondary control which would not be a ground for
declaring the contract labour as the employee of Principal Employer and it may not fall within
the realm of sham and camouflage.
In 2014 in National Aluminium Co. Ltd v. Ananta Kishore Rout [AIR 2014 SC (Supp)
1469] where NALCO had established two schools for the benefit of the wards of its employees.
The Writ Petitions were filed by the employees of each school for a declaration that they be
treated as the employees of NALCO on grounds of, inter alia, real control and supervision
by NALCO. The Supreme Court while answering the issue observed that it is the duty of the
Court to ascertain whether there is complete control and supervision by the NALCO. In this
regard, reference was made to the case of Workmen of Nilgiri Coop. Mkt. Society Ltd. v. State
of T.N. (2004) 3 SCC 514, wherein this Court had observed as follows:
“The control test and the organization test, therefore, are not the only factors which can
be said to be decisive. With a view to elicit the answer, the Court is required to consider
several factors which would have a bearing on the result: (a) who is the appointing authority;
(b) who is the paymaster; (c) who can dismiss; (d) how long alternative service lasts;
(e) the extent of control and supervision; (f) the nature of the job e.g. whether it is
professional or skilled work; (g) nature of establishment; (h) the right to reject.”
Accordingly the Supreme Court held that there may have been some element of control
with NALCO because its officials were nominated to the Managing Committee of the said
Chapter 3 The Contract Labour (Regulation and Abolition) Act, 1970 331
schools. However, it was observed that the above-said fact was only to ensure that the schools
run smoothly and properly. In this regard, the Court observed as follows:
“. ... However, this kind of “remote control” would not make NALCO the employer of these
workers. This only shows that since NALCO is shouldering and meeting financial deficits,
it wants to ensure that the money is spent for the rightful purposes.”
In 2014 in Balwant Rai Saluja v. Air India Ltd. (2014) 9 SCC 407 the Supreme Court
while dealing with a statutory canteen issue held as follows:
“The workers engaged by a contractor to work in the statutory canteen of a factory would
be the workers of the said factory, but only for the purposes of the Act, 1948, and not for
other purposes, and further for the said workers, to be called the employees of the factory
for all purposes, they would need to satisfy the test of employer–employee relationship and
it must be shown that the employer exercises absolute and effective control over the said
workers.”
In 2018 in Chennai Port Trust v. The Chennai Port Trust Industrial Employees’ Canteen
Workers Welfare Association and Ors [2018 LLR 612 (S.C.)] where the Chennai Port Trust
engaged the contract labour through a Co-operative society called “Chennai Port Trust Industrial
Employees Co-operative Canteen Limited” to run and manage the canteen. It has been running
since 1964. The employees working in the canteen have formed an Association known as
“Chennai Port Trust Industrial Employees Canteen Workers Welfare Association.”(Here in
after Association)
The Association filed a writ petition in the High Court at Madras against the Chennai
Port Trust espousing the cause of their members (employees working in the Canteen) and
sought a writ of mandamus against the Chennai Port Trust directing the Port Trust to treat the
employees working in the Canteen to be the regular employees of the Chennai Port Trust and
accordingly pay them all attendant and monetary benefits at par with the regular employees
of the Chennai Port Trust.
The Chennai Port Trust mainly opposed the writ petition on two issues:
First, the Chennai Port Trust has no control whatsoever over any of the activities of the
Canteen in question including any control over its employees; and
Second, the question as to whether the canteen employees are to be treated as employees of
the Chennai Port Trust or not is a question of fact, and, therefore, the writ petition is not the
effective remedy to decide this question. According to the Chennai Port Trust, such issues
should be raised before the Industrial Tribunal for its adjudication.
The Writ Court (Single Judge) allowed the writ petition filed by the Association and
accordingly issued a writ of mandamus against the Chennai Port Trust and granted the reliefs
claimed by the Association. The Chennai Port Trust felt aggrieved and filed intra court appeal
before the Division Bench in the High Court. The Division Bench dismissed the appeal and
upheld the order of the Single Judge, which has given rise to filing of the present appeal
before the Supreme Court by way of special leave by the Chennai Port Trust.
The Supreme Court relied upon its earlier judgement of Indian Petrochemicals
Corporation Ltd. and Anr. v. Shramik Sena & Ors., [(1999) 6 SCC 439] where the issues and
facts of the Petrochemical Corporation case are similar to the case in hand. The fact of the
case reveals that:
332 Labour and Industrial Laws
(a) The Rules framed by the Society for running the canteen shall be subject to the
approval of the Chairman is not denied. This proves that the ultimate control of the
administration of the canteen is with the Port Trust.
(b) It is only the workers belonging to the Port Trust who are eligible to become
members of the Society and not others.
(c) It is only the nominee of the Port Trust who can act as the Chairman of the
Co-operative Society.
(d) The Port Trust administration has the right to audit the accounts of the canteen.
(e) Contractors shall be nominated by the Registrar only in consultation with the
Chairman of the Chennai Port Trust.
(f) The Executive Engineer (Mechanical) of the Port Trust has been nominated as the
President of the canteen and the entire canteen affairs are handled and controlled by
the Chief Mechanical Engineer of the Port Trust.
(g) The financial matters are controlled by the Financial Adviser and Chief Accounts
Officer of the Port Trust.
Therefore the Supreme Court dismissed the appeal and held that all canteen workers
would be declared as the employees of the Port Trust.
In 2018 in Food Corporation of India v. Gen. Secy. FCI India Employees Union and
Others [2018 LLR 1057 (S.C.)] where the FCI in its Chennai Branch Office engaged 955
contract labour through a Contract Labourers’ Society to carry out the business operation.
A dispute arose between FCI and around 955 employees working in the Branch office
at Chennai as to whether these 955 employees are the employees of the FCI or they are
employed by the Contract Labourers’ Society to work in the FCI to carry out their business
operation and secondly, whether these 955 employees are entitled to claim regularization of
their services as FCI employees.
As the dispute could not be resolved amicably hence the matter was referred to Industrial
Tribunal and the Tribunal held that 955 employees would be regularized by FCI. FCI filed
the writ petition where the Single Judge of the High Court dismissed the writ petition and
up held the award of Tribunal. FCI felt aggrieved and filed intra court appeal to the Division
Bench where the Division Bench also dismissed the appeal and hence FCI approached the
Supreme Court.
The Supreme Court observed that:
1. The agreement with the contract labourer for doing the work had come to an end in
1991 and thereafter it was not renewed;
2. All the 955 workers were being paid wages directly by the FCI;
3. The nature of work, which these workers were performing, was of a perennial nature
in the setup of the FCI;
4. All 955 workmen were performing their duties as permanent workers; and
5. No evidence was adduced by the FCI in rebuttal to prove their case against the
workers’ Union.
Therefore the Court held that 955 employees would be regularized.
* * *