A STUDY ON THE REGULATION OF CONTRACT LABOUR IN INDIA

6.5Labour and Industrial Law

Faculty-in-charge:

Ms. KasturiGakul

(Assistant Professor of Law)

Submitted by-

Moon Mishra

UID: SF0117029

B.A LL.B (3rd year, 6th Semester)

National Law University and Judicial Academy, Assam

Guwahati

31st May 2020

 TABLE OF CONTENTS

List of Cases………………………………………………………...………………..……..ii

List of Statutes…………...……………………………………………………………..…..iii

List of Abbreviations………...………………………………….………………………….iii

1. Introduction……………………………………………..……………………………..1

1.1. Aims and Objectives…………………………...…………….

………………………..2

1.2. Scope and

Limitations…………………………………………………………………2

1.3. Literature

Review……………………………………………………………………...3

1.4. Research Questions………………………………………...…………….

……………3

1.5. Research Methodology……………………………………….

……………………..…4

2. Contract Labour: An Overview…………………………………………………………

3. The Contract Labour (Regulation and Abolition) Act, 1970: An Overview……………

4. Judicial Intervention and Contract Labour in India……………………………………..

5. Conclusion and Suggestions…………………………………………………………..

Bibliography…………………………………………………………………………………….

i
 TABLE OF CASES

S. No. NAME OF THE CASE CITATION

1. Air India Statutory Corporations v. United (1969) 3 SCR 995
Labour Union
2. BHEL Workers’ Association v. Union of India (1985) 1 SCC 630

3. Catering cleaners of southern railway v. UOI 1987 AIR 777

4. Gujarat Electricity Board v. Hind Mazdoor Sabha 1995 AIR 1893

5. Indian Airlines v. Central Government Labour (1987) 2 LLN 111 (Del)

Court
6. Labourers Working on Salal Hydro Project v. J. & K., (1983) 2 SCC 181
State
7. Lionel Edwards Ltd. v. Labour Enforcement [1977] 51 FJR 199 (Cal)
Officer,
8. National Federation of Railway Porters, Vendors 1996 SCALE (5)397
& Bearers v. UOI ,
9. People’s Union for Democratic Rights v. Union (1982) 3 SCC 235
of India
10. R.K.Panda v. SAIL 1994 SCC (5) 304

11. Ram Singh v. Union Territory of Chandigarh (2004) 1 SCC 126

12. Sankaran Mukherjee v. UOI 1990 AIR 532

13. Standard Vacuum Oil Refinery Company v. Their (1960) LLJ II

Workmen,
14. Steel Authority of India Ltd v. National Union 2001 LLR 691 (SC)
Waterfront Workers & Others

ii
 TABLE OF STATUTES

1) 1970- Contract Labour (Regulation & Prohibition) Act

TABLE OF ABBREVIATIONS

AIR All India Reporter

Anr. Another

AP Andhra Pradesh

Bom Bombay

Cal. Calcutta

Corp Corporation

Cri Criminal

ed Edition

L.J. Law Journal

LR Law Report

Mad Madras

Ors. Others

SC Supreme Court

SCC Supreme Court Cases

Supl/Supp Supplementary

UOI Union of India

v. versus

Vol Volume

iii
Abstract

In this paper, effort has been made by the researcher to study the laws and the measures
enacted to regulate contract labour in India. An attempt has been made to study the issue of
contract labour in India, and its causes. The researcher has studied the Contract Labour
(Regulation and Abolition) Act, 1970, which was enacted to regulate Contract Labour in
India, and attempted to analyse the provisions of this Act. An effort has been made to
understand if there is any scope of betterment in the present law.Also, the judicial
interpretations on the issue of contract labour has been critically examined in the light of the
present scenario.

Keywords: Contract Labour, Regulate, Law, Judicial.

1. INTRODUCTION

Contract labour is a significant and growing form of employment. It exists in almost every
sphere of the employment, industries, allied operations and also prevalent in the service
sector. It generally refers to workers engaged by a contractor for other organisation. The
exploitation of contract labour in employment is one the biggest concern of the government
as the contract labour have little bargaining power, social security and often engaged in the
hazardous industries with lesser facilities and security. To regulate this system, the
government enacted the Contract Labour (Regulation & Prohibition) Act, 1970.

Contract workers form a large part of the total workforce in India. Most of these workers are
engaged in seasonal or occasional employment as and when they are called for. The primary
sectors that mainly function through contract labour are loading and unloading of goods and
materials; catering including canteen services; security services; civil and construction works;
electrical/ air conditioning/ painting/ whitewashing; house-keeping services; computer
maintenance, etc.

Contract labourers are usually recruited through contractors who work as a link between the
actual employers and the workers. However, over time such contractors are indulging in large
scale misuse and abuse of power. Workers are especially abused by being paid lesser wages

1
than agreed upon, being forced into employment that is harmful to physical or mental health
etc.

Ensuring the welfare of the labour sector in the nation is the prime responsibility of the
Central Government. For this reason, the Central Government has enacted several legislations
aimed at securing the welfare of the labour class. However, the rights conferred to contract
workers by way of the Constitution and various other labour laws are generally poorly
enforced. Although there are trade unions to secure the rights and welfare of the workers,
they primarily cater to the vested interests of the trade union leaders. In SMEs, the situation is
even worse; there is total anarchy and the workers are left all to themselves.

Therefore, in order to secure the rights and address the welfare of contract labourers, the
Government deemed it fit to pass the Contract Labour (Regulation and Abolition) Act 1970.

1.1 AIM AND OBJECTIVES

The aim of this project is to provide a comprehensive analysis of the measures in place to
regulate contract labour in India. The project aims at explaining and analysing the basic
features of the Contract Labour (Regulation and Abolition) Act, 1970. It also encapsulates the
causes behind the genesis of this Act. It aims to critically analyse the existing legal position
of India on the issue of contract labour.

The objectives of the project are as follows:

1. To study the meaning of Contract Labour,

2. To study and analyse the provisions of Contract Labour (Regulation and Abolition)
Act, 1970, and;
3. To critically analyse the judicial pronouncements on the issue of Contract Labour.

1.2 SCOPE AND LIMITATION

The scope of this project is that it studies the issue of contract labour in India, and its causes.
It has a comprehensive analysis of the provisions of the Contract Labour (Regulation and
Abolition) Act, 1970. It also involves the background of the enactment of this Act. It covers
the judicial pronouncements on the matter of contract labour. It also includes the existing
legal position of India on this issue and its impact on the contract labourers.

2
The limitation of this project is that it only focuses on the Contract Labour (Regulation and
Abolition) Act, 1970. It does not take into account the other statutes or legislations which
benefits or affects the contract labourers.

1.3 LITERATURE REVIEW

Dr.H.L. Kumar1 has given a very elaborate account of the Contract Labour (Regulation
and Abolition Act) 1970, in the 9th edition of his book titled , “Practical Guide to Contract
Labour Regulation & Abolition Act & Rules”. Not only this book comprehensively explains the
provisions of the Act, but provides for landmark judgements pronounced for those provisions.
The judicial interpretations are very well explained. The first chapter of this book covers the
genesis of the Contract Labour (Regulation and Abolition) Act, 1970, which includes the
legislative intent behind the enactment of this Act. It gives a good account of the objectives of the
Act, supported by various judicial pronouncements.
D.C. Mathur’s,2 “Contract Labour in India” is a good source to study the issue of contract labour
in India. It highlights the social and economic causes of contract labour in India in a concise
manner. The hardships faced by the contract labourers is very objectively explained. The book
also provides for the background of the enactment of the Contract Labour Act, which came into
force in 1970. The background of the Act not only includes the legislative background but also
the administrative actions, enquiries, and reports which were ordered by the executive to
understand the contract labour problems. However, the provisions of the Contract Labour Act are
not provided in an elaborated manner.
Ashis Das3 has explained the problems of the contract labour in a very structural manner
in his article titled “Contract Workers in India: Emerging Economic and Social Issues”. The
article also very well highlights the loopholes in the legal measures available for the contract
labourers and points the need of the hour to deal with the issue in a more practical manner with
more practical manner. The suggestions recommended by the author constitute are balanced
keeping in mind the interests of the labours and the economic needs of the country.

1.4 RESEARCH QUESTIONS:

1. What is the meaning of Contract Labour?
2. What was the Contract Labour (Regulation and Abolition) Act, 1970 enacted?

1
H.L. KUMAR, PRACTICAL GUIDE TO CONTRACT LABOUR REGULATION & ABOLITION ACT & RULES, (9th ed.
2016).
2
D.C. MATHUR, CONTRACT LABOUR IN INDIA, (1st ed. 1989).
3
Ashis Das, Contract Workers in India: Emerging Economic and Social Issues, 40(1) ,INDIAN JOURNAL OF
INDUSTRIAL RELATIONS 242, 265 (2004)

3
 3. How does the Contract Labour (Regulation and Abolition) Act, 1970 regulate
Contract Labour?
4. What are the judicial pronouncements to curb the issue of Contract Labour in India?

1.5 RESEARCH METHODOLOGY

In this project, the researcher has adopted analytical type of research and a doctrinal method
of data collection. Doctrinal research methodology is essentially a library-based study, which
means that the materials needed by a researcher may be available in libraries, archives and
other data-bases. The researcher has used computer laboratory and used various websites to
get important data related to this topic. 20th Edition of Bluebook citation is used as a mode of
citation for footnoting

Data has been collected from secondary sources like books, journals, web sources etc. No
primary source like survey data or field data was collected by the researcher.

4
 2. CONTRACT LABOUR: AN OVERVIEW

The system of employing contract labour is prevalent in most industries in different

occupations including skilled and semi-skilled jobs. 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.4 Contract workmen are indirect employees; persons who are hired,
supervised and remunerated by a contractor who, in turn, is compensated by the
establishment. Contract labour has to be employed for work which is specific and for definite
duration. Inferior labour status, casual nature of employment, lack of job security and poor
economic conditions are the major characteristics of contract labour. While economic factors
like cost effectiveness may justify system of contract labour, considerations of social justice
call for its abolition or regulation. The condition of contract labour in India was studied by
various Commissions, Committees, and also Labour Bureau, Ministry of Labour, before
independence and after independence.5

The practices of employing labour through contractors and other agencies, thus, avoiding the
direct nexus between the employers and their workmen, was very common. Thus, entire
factories were farmed out to contractors requiring them to produce the goods in such factories
through machinery owned by the employers, and thereafter, the goods were marked under the
employer’s brand name. This ensured that the workmen were paid much lower wages than
they would be entitled to under direct employment. This system led to whole-scale
exploitation of labour, and a series of demands were made before tribunals for the abolition
of contract labour system. The tribunals entertained the claims, and in many cases, granted
the demands through their awards. In case of Standard Vacuum Refining Co. of India Ltd. v.
Workmen6, a leading case on the subject, the Supreme Court upheld the right of workmen to
seek abolition of contract labour on behalf of the contractors’ workmen, and enumerated
some of the circumstances in which such abolition can be directed.7

There was considerable agitation by the workmen and their unions for the abolition of
contract labour, especially in certain cases where it was absolutely necessary to regulate the

4
Paramita Ray, Contract Labour System In India: Issues And Perspectives 4(1) INTERNATIONAL JOURNAL OF
LAW AND LEGAL JURISPRUDENCE STUDIES (2016).
5
D.C. MATHUR, CONTRACT LABOUR IN INDIA, (1st ed. 1989).
6
Standard Vacuum Refining Co. of India Ltd. v. Workmen, (1960) LLJ II, p. 233 (India).
7
Ashis Das, Contract Workers in India: Emerging Economic and Social Issues, 40(1) ,INDIAN JOURNAL OF
INDUSTRIAL RELATIONS 242, 265 (2004)

5
terms and conditions of service under which such labour could be employed. Thus the
Contract Labour (Regulation & Abolition) Act 1970, was passed by the Parliament and came
into force on September 1970.

6
 3. THE CONTRACT LABOUR (REGULATION AND ABOLITION) ACT, 1970:
AN OVERVIEW

The object of the Contract Labour (Regulation and Abolition) Act, 1970 is to regulate the
employment of contract labour in certain establishments and to provide for its abolition in
certain circumstances. Wherever it is not practical to abolish the contract labour system, the
Act provides for its regulation so as to ensure better service conditions and basic amenities to
the contract labourers.

3.1 LEGISLATIVE INTENT BEHIND ENACTING THE ACT

The genesis of government concern in India towards the plight of contract labour can be
traced back to the decade beginning with 1860 when a modest legislative action was initiated
with reference to the contract labour employed in plantations. 8From then onwards up to the
setting up of the Royal Commission of Labour in 1929, most of the protective and
ameliorative measures can be characterized as sporadic, limited and half-hearted. The Royal
Commission of Labour recommended the abolition of the jobber’s role in recruitment all over
the country.

The plight of contract labour and the need for action was highlighted by all Inquiry
Committees set up during the fifteen years that followed the Royal Commission Report. The
strong concern generated by such recommendations forced the government into action and
several measures to regulate their working conditions have been implemented in the past
independence period.9

The Bihar Labour Enquiry Committee (1940) also condemned the practice of engagement of
labour through contractors by stating that, “the contractors ordinarily lacked a sense of moral
obligation towards labourers which the employers or the managers are expected to have, and
therefore, do not often hesitate to exploit the helpless position of labour in their charge”. 10The
Bombay Textile Labour Enquiry Committee (1937), agreeing generally with the findings and
recommendations of the Royal Commission on Labour felt that: “If the management of the
mills do not assume responsibility for such labour, there is every likelihood of its being
sweated and exploited by the contractor.11 It was therefore recommended that “contract
8
D.C. MATHUR, CONTRACT LABOUR IN INDIA, (1st ed. 1989).
9
H.L. KUMAR, PRACTICAL GUIDE TO CONTRACT LABOUR REGULATION & ABOLITION ACT & RULES, (9th ed.
2016).
10
Bihar Labour Enquiry Committee Report (1940).
11
Bombay Textile Labour Enquiry Committee Report (1937).

7
system of engaging labour should be abolished as soon as possible and that workers for every
department in a mill should be recruited and paid directly by the management”.12

These developments were instrumental in bringing to the fore the shortcomings of the
practice of engagement of labour through contractors. However, very little tangible action
legislative or executive, followed these findings and recommendations. It was the Labour
Investigation Committee (1946), which in its report examined in detail the nature of
workforce needs of the industry. Pointing out that the system of contract labour was very
much in vogue, the Committee recommended the abolition of contract labour system,
wherever possible, and regulation of the system in all other cases.13

Subsequently, the Indian Labour Conference at its 19th and 20th Sessions (1961-62)
considered the reports of the Labour Bureau and recommended legislative action for abolition
of contract labour system in certain types of work as mentioned by the Supreme Court in
Standard Vacuum Oil Refinery Company v. Their Workmen.14This was followed by the
setting up of a Tripartite Committee, which was assigned with the task of drafting the outline
of legislation. Based on the Tripartite Committee’s recommendations, the Ministry of Labour
drafted the Contract Labour Bill, which was considered and discusses at the 23rd Session of
the Indian Labour Conference, wherein no consensus could be arrived at. The Government of
India, didn’t wait, and drafted its own Bill. The Bill was amended based on the
recommendations of the National Commission on Labour, headed by Justice P.B.
Gajendragadkar (1969). The Bill was passed by both the Houses of Parliament and
subsequently received Presidential Assent on 5th September, 1970. It came into effect on
10th February, 1971.

A perusal of the statement of objects and reasons reveals that Contract Labour is sought to be
abolished in such categories, which may be notified by the appropriate government, on the
basis of the prescribed criteria. In respect of other categories, the service conditions of
contract labour are sought to be regulated.

3.2 SALIENT FEATURES OF THE ACT

A contract labourer is defined in the Act as one who is hired in connection with the work of
an establishment by a principal employer through a contractor. While a contractor is the
12
Ibid
13
Labour Investigation Committee (Main Report), p. 80.
14
Standard Vacuum Oil Refinery Company v. Their Workmen, (1960) LLJ II, p. 233 (India).

8
supplier of contract labour for the organization, a principal employer is a person responsible
for the control of the establishment.

1. Applicability

This Act extends to the entire Indian State and applies to those establishments and contractors
which employ 20 or more workmen or employed such number of 20 or more workmen on
any day of the preceding 12 months as contract labour.15

A person engaged for ‘job contract’ or ‘work contract’, who is required to produce a given
result for the establishment is contractor for the purposes of the Act and is accordingly
covered by the Act.16 The definition of the term ‘contractor’ within the Act also includes a
sub-contractor, who merely supplies contract labour for any work of the establishment. A
workman is deemed to be employed as contract labour in or in connection with the work of
an establishment who is hired in or in connection with such work by or through a contractor,
with or without the knowledge or the principal employer. The term ‘establishment’ for the
purpose of the Act means, (i) any office or department of the Government or a local
authority, or (ii) any place where any industry, trade, business, manufacture or occupation is
carried on.17

The work site may or may not belong to the Principal Employer, but that will not stand in the
way of application of the Act or in holding that a place or work site where industry, trade,
business, manufacture or occupation is carried out is not an establishment. 18 It is notable that
the Act is not confined to private employers but also applies to the government.19

2. Registration of Establishments and Licensing of Contractors

Section 6 provides for the appointment of registering officers by the appropriate Government
for the purposes of this Act. If a principal employer falls within the vicinity of this Act then,
such principal employer and the contractor will have to apply for registration of the
establishment and license respectively with the appropriate authorities. 20 The Act also

15
Contract Labour (Regulation and Abolition) Act, 1970, Acts of Parliament, Act No. 37 of 1970.
16
Contract Labour (Regulation and Abolition) Act, 1970, Acts of Parliament, Act No. 37 of 1970.
17
Lionel Edwards Ltd. v. Labour Enforcement Officer, [1977] 51 FJR 199 (Cal) (India).
18
BHEL Workers’ Association v. Union of India, (1985) 1 SCC 630 (India).
19
H.L. KUMAR, PRACTICAL GUIDE TO CONTRACT LABOUR REGULATION & ABOLITION ACT & RULES, (9th ed.
2016).
20
Contract Labour (Regulation and Abolition) Act, 1970, Acts of Parliament, Act No. 37 of 1970.

9
provides for temporary registration in case the contract labour is hired for a period not more
than 15 days. Any change occurring in the particulars specified in the Registration or
Licensing Certificate needs to be informed to the concerned Registering Officer within 30
days of such change.21

From a combined reading of Section 7 and Rules 17 & 18 of the Contract Labour (Regulation
and Abolition) Central Rules, 1971 (hereinafter referred to as the Rules), it appears that the
Principal Employer has to apply for registration in respect of each establishment. Another
important point to note is that a License issued for one contract cannot be used for an entirely
different contractual work even though there is no change in the Establishment. The law
mandates that every establishment to which the Act applies has to register with the registering
officer. The government also has the power to prohibit employment of contract labour in any
process, operation or other work in any establishment. 22 The Act further stipulates that no
Contractor to whom the Act applies can undertake or execute any work through contract
labour without having a license issued by the licensing officer.23 Failure to obtain a licence
amounts to a criminal offence under Sections 16 to 21 of the Act read with Rules 41 to 62 of
the Rules.24

3. Health and Welfare of Contract Labour

Regarding the facilities to be provided to contract labourers, the Act stipulates that every
Contractor employing contract labour to whom the Act applies has to provide canteen,
restrooms, latrines, urinals, first aid facilities etc. 25Also, the Courts have ruled that the
Government will be responsible for enforcement of those amenities where Contractors
engaged by it for executing its project fail to provide the amenities to its workers. The
Government’s failure to perform its obligation amounts to a violation of Article 21 of the
Indian Constitution and labourers can enforce this right by way of writ petition under Article
32 of the Constitution.26

4. Payment of Wages

21
Samriddhi Pandey, Contract Labour (Regulation and Abolition) Act, 1970 – A Critical Analysis, LEGAL BITES,
(May 18, 2018) https://www.legalbites.in/contract-labour-regulation-and-abolition-act-1970-critical-analysis/.
22
Contract Labour (Regulation and Abolition) Act, 1970, Acts of Parliament, Act No. 37 of 1970.
23
Contract Labour (Regulation and Abolition) Act, 1970, Acts of Parliament, Act No. 37 of 1970.
24
Labourers Working on Salal Hydro Project v. State of J. & K., (1983) 2 SCC 181 (India).
25
Contract Labour (Regulation and Abolition) Act, 1970, Acts of Parliament, Act No. 37 of 1970.
26
People’s Union for Democratic Rights v. Union of India, (1982) 3 SCC 235 (India).

10
Every contractor has been made responsible for payment of wages to each worker employed
by him as contract labour. For ensuring the regular payment of the minimum wages to the
contract labour, the Act provides that the wages to the contract labour are to be paid in the
presence of the authorized representative of the principal employer, who has to certify that
the wages as per the stipulation have really been paid to the contract labour. 27 If 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
but he can recover the amount so paid from the Contractor.28

The contract labour that performs same or similar kind of work as regular workmen will be
entitled to the same wages and service conditions as regular workmen as per the Contract
Labour (Regulation and Abolition) Central Rules, 1971.29

5. Classification

Contract labour, in law, is classified in two categories – bona fide contract labour and mala
fide contract labour. The former indicates that there is no bogus, sham or camouflage contract
between the Contractor and the Principal Employer. The latter, on the other hand, implies a
contract where there is bogus or sham. When the contract is bona fide, the Government can
abolish the contract labour under Section 10 of the Act. When the contract is mala fide,
Industrial Tribunals are empowered to declare the contract workmen as the workmen of the
Principal Employer. Such a declaration is given after lifting the veil and considering the
factors such as control, supervision and direction by the Principal Employer and ascertaining
as to how absolute and pervasive they are in nature.30

6. Enforcement

In the Central sphere, the Central Industrial Relations Machinery (hereinafter referred to as
the CIRM) has been entrusted with the responsibility of enforcing the provisions of the Act

27
Contract Labour (Regulation and Abolition) Act, 1970, Acts of Parliament, Act No. 37 of 1970 (India).
28
Indian Airlines v. Central Government Labour Court, (1987) 2 LLN 111 (Del), Contract Labour (Regulation
and Abolition) Act, 1970, Acts of Parliament, Act No. 37 of 1970 (India).
29
Amartya Bag, Regulatory Overview of Contract Labour in India, IPLEADERS INTELLIGENT LEGAL SOLUTIONS,
( August 26, 2014) https://blog.ipleaders.in/regulatory-overview-of-contract-labour-in-india/.
30
Ram Singh v. Union Territory of Chandigarh (2004) 1 SCC 126 (India).

11
and the rules made thereunder, through Inspectors, Licensing Officers, Registering Officers
and Appellate Authorities appointed under the Act.

4. JUDICIAL INTERVENTION AND CONTRACT LABOUR

Initially, the judiciary seemed reluctant to interfere in giving an appropriate relief to contract
labour through their absorption whenever they approached the court through a writ petition.

12
For instance,3 in B.H.E.L Workers Association, Hardwar v. UOI 31the court observed that to
abolish and absorb labour was a legislative activity with which the court was not entrusted
under the constitution. In Catering cleaners of southern railway v. UOI32 , the court held that
writ of mandamus directing central government to abolish the contract labour system cannot
be issued because section 10 had vested the power in the appropriate government. In the
circumstances, the appropriate order to make according to Court, was to direct the Central
government to take suitable action under sec. 10 of the Act within six months from the date
of order. It was also observed that without waiting for the decision of the Central
government, the Southern Railway was free on its own motion to abolish the system and
regularise the services of the employees.33

However, in Sankaran Mukherjee v. UOI34 the Supreme Court which had earlier refused to
interfere in cases to abolish and absorb contract labour directed the abolition and subsequent
absorption of employees stressing on the fact that the CLRA Act,1970 should be construed
liberally so as to effectuate its objects. Similarly, in R.K.Panda v. SAIL35 , the court held that
normally it would not exercise its jurisdiction under Article 32 or 136 to adjudicate over
matters of absorption but in this case it directed that the contract labour as were continuing in
respondents’s employment for the last 10 years in spite of change of contractors should be
absorbed as regular employees. Also, in National Federation of Railway Porters, Vendors &
Bearers v. UOI36 , the court gave directions to regularise employees based on a report by
Central Assistant Labour Commissioner.37

The next major case was the Gujarat Electricity Board v. Hind Mazdoor Sabha38 where it
was held that only the appropriate government can abolish contract labour in accordance with
section 10 and no court or industrial adjudicator has jurisdiction. On the matter of absorption,
the Supreme Court observed that on the abolition of the contract labour, the labour seem to be
in a worse position than before as they can neither be employed by the contractor nor is there
any obligation cast on the principle employer to engage them in his establishment by the

31
Supra Note 10.
32
Catering cleaners of southern railway v. UOI , 1987 AIR 777 (India).
33
H.L. KUMAR, PRACTICAL GUIDE TO CONTRACT LABOUR REGULATION & ABOLITION ACT & RULES, (9th ed.
2016).
34
Sankaran Mukherjee v. UOI, 1990 AIR 532(India).
35
R.K.Panda v. SAIL , 1994 SCC (5) 304(India).
36
National Federation of Railway Porters, Vendors & Bearers v. UOI, 1996 SCALE (5)397(India).
37
Amartya Bag, Regulatory Overview of Contract Labour in India, IPLEADERS INTELLIGENT LEGAL SOLUTIONS,
( August 26, 2014) https://blog.ipleaders.in/regulatory-overview-of-contract-labour-in-india/.
38
Gujarat Electricity Board v. Hind Mazdoor Sabha, 1995 AIR 1893(India).

13
CLRA Act, 1970. They tried to gauge the legislative intent in this regard and concluded that
no provision for automatic absorption must be out of the fear that such a provision would
amount to forcing the contract labour of the principle employer. The court concluded that in
this regard the industrial adjudicator could be of help. He has the jurisdiction to change the
contractual relationship and also make new contracts between the employer and employees
under the Industrial disputes Act 1947.

Section 10 applies only where there exists a genuine contract. If contract is not genuine then
the workers of the so called contractor can raise an industrial dispute for declaring that they
were always employees of the principle employer and can ask for subsequent absorption.
However, in case the adjudicator decides that the contract was genuine he may refer the
workmen to appropriate government for abolition under section 10 but only if the dispute is
espoused by the direct workmen of the principle employer (as otherwise the dispute will not
be an industrial dispute under sec 2(k))39

The above judgment neglects practical realities and has three fold limitations. Firstly, the
court does not define in practical sense what a genuine or a sham contract is. Secondly,
inestimable thrust has been imposed on regular employees of the principle employer to
espouse the cause of the contract labour, which is highly unimaginable in the real sense.
Lastly, there is a long experience of existence of inordinate delays in the reference of
industrial disputes by the appropriate government for adjudication. In this regard once
industrial adjudicator refuses or rejects the reference on the ground that the dispute is not an
industrial dispute, the contract labour cannot dream of resolving their grievances.

Subsequently, Air India Statutory Corporations v. United Labour Union 40 ruled that on the
abolition of the system of contract labour the workmen were entitled for absorption, and the
court had powers under the Art.226 to direct the employers to absorb such workers. There is
no need to make a reference under Sec.10 of ID Act for adjudication of dispute for absorption
on abolition of contract labour in the industry. The raising of industrial dispute by the
contract labour which is to be espoused by the regular workmen once the system is abolished
was done away with.

39
Samriddhi Pandey, Contract Labour (Regulation and Abolition) Act, 1970 – A Critical Analysis, LEGAL BITES,
(May 18, 2018) https://www.legalbites.in/contract-labour-regulation-and-abolition-act-1970-critical-analysis/
40
Air India Statutory Corporations v. United Labour Union, (1969) 3 SCR 995(India).

14
However, soon post-globalisation and liberalisation period showed the judiciary wavering
from its earlier stand. The judiciary was lead on this path by a series of government initiatives
to simplify labour laws and to provide more flexibility to employers to ‘hire and fire’. In
order to encourage investment and expansion by employers they felt justified in their actions. 

4.1 EXISTING LEGAL POSITION AND ITS IMPACT ON CONTRACT

LABOURERS

Air India decision was overruled by Steel Authority of India Ltd v. National Union
Waterfront Workers & Others41 a five judge bench, wherein the court held that even in the
cases where the system of contract labour is abolished, the erstwhile contract labour who
might have put up years of service as contract labour under the same principal employer
cannot be absorbed as a matter of right as there was no such provision in the Act. However, if
it was a sham contract the contract labour could raise an industrial dispute and deserve
absorption. Thus prospectively it became fruitless for the contract workers to approach either
court or the appropriate Government to abolish the system of contract under the sec.10 of the
Act.

The SAIL judgment is very harsh on contract labour in the establishment where it is
abolished. On abolition, the contract of the principle employer with contractor in regard to
contract labour comes to an end. Though the contract labour is still employed under the
contractor, he can as well be terminated as a consequence of the notification, without
payment of retrenchment compensation or following provisions of Industrial dispute act.42

Though sub-contracting operations reduce the work of the permanent employees and
contribute to high profits which contribute towards high bonus, the regular employees are
hardly sympathetic to the interests of contract labour as they argue that sub-contracting
hampers creation of job opportunities. So, essentially a notification for abolition leaves a
labour unemployed and helpless for the lack of any judicial remedy.

Another major resulting trend of SAIL case was that progressively more and more employers
requested for registration for employing contract labour and an unprecedented increase in
Contract labour. Prior to this judgment there was always a threat and chance that courts may

41
Steel Authority of India Ltd v. National Union Waterfront Workers & Others, 2001 LLR 691 (SC)(India).
H.L. KUMAR, PRACTICAL GUIDE TO CONTRACT LABOUR REGULATION & ABOLITION ACT & RULES, (9th ed.
42

2016).

15
rule such contract as sham or illegitimate and direct for its abolition thus paving the way for
the absorption of such contract workers. But as this judgment removed all hopes of
regularization of the contract workers after the abolition of the contract labour it became
futile for the workers to seek any such abolition. Thus, The CLRA in effect started to protect
the employers and not the employees in terms of avoiding any long term employment
relationship and consequent liabilities including the benefits of working condition, collective
bargaining and rightful compensation package.

5. CONCLUSION AND SUGGESTIONS

16
We have come to an era of industrialization when multinational companies, their Indian
cohorts, various global financial agencies and the Indian Government have all been baying
for the blood of the workers. The industrial scenario is one where the prevailing management
theories lay emphasis on ‘just-in-time’ production. This postulates, in the current
management parlance, ‘flexibility’ of labour. This only means more contract labour, more
casual labour, fewer rights for unionisation etc. The official policy appears to be that the
workers will have to sacrifice if the country’s economy is to survive. The practice of
employing contract labour might be efficient and economical from the employer’s
perspective. However, earning profit by exploiting labour cannot be permitted in a
democratic country and welfare state that ideally functions for the people.

To ensure the proper administration of justice is to make the contract labourers aware of their
rights and responsibilities so that they are able to detect violation of the law and take
necessary steps to remedy the same. Further, it is necessary to facilitate the workers to
complain to an independent authority in a confidential manner; and giving punishment or
reward to a supervisor on the basis of such complaints is a more effective way of combating
corrupt practices.

The Act is silent with regard to the absorption of contract labour by the principal employer
after the issuance of the prohibition notification issued under Section 10 of the Act. The Act
needs to be amended so long as to contain specific provision in this regard.

The Contract Labour (Prohibition and Abolition) Act is a great endeavour on the part of the
Central Government to further the interests and ensure the welfare of the working class.
However, the drawbacks and loopholes in the Act leave much to be desired. The need of the
hour is a complete reformation of the Act so that it can be in tune with the current day and
age. The drawbacks of the Act are only pulling it behind and preventing it from achieving its
end goal. A thorough reform with a carefully chalked out plan will not only ensure the
welfare of the workers but also enable the gradual and effective abolishment of contract
labour in the long run

17
 BIBLIOGRAPHY

REPORTS

1. Bihar Labour Enquiry Committee Report (1940).

2. Bombay Textile Labour Enquiry Committee Report (1937).
3. Labour Investigation Committee (1946).

BOOKS

1. H.L. KUMAR, PRACTICAL GUIDE TO CONTRACT LABOUR REGULATION & ABOLITION

ACT & RULES, (9TH ED. 2016).
2. D.C. MATHUR, CONTRACT LABOUR IN INDIA, (1st ed. 1989).

JOURNALS

1. Paramita Ray, Contract Labour System In India: Issues And Perspectives4(1)

INTERNATIONAL JOURNAL OF LAW AND LEGAL JURISPRUDENCE STUDIES (2016)
2. Ashis Das, Contract Workers in India: Emerging Economic and Social Issues,
40(1) ,INDIAN JOURNAL OF INDUSTRIAL RELATIONS 242, 265 (2004)

INTERNET
1. Amartya Bag, Regulatory Overview of Contract Labour in India,IPLEADERS
INTELLIGENT LEGAL SOLUTIONS, ( August 26, 2014)
https://blog.ipleaders.in/regulatory-overview-of-contract-labour-in-india/

2. Samriddhi Pandey, Contract Labour (Regulation and Abolition) Act, 1970 – A

Critical Analysis, LEGAL BITES, (May 18, 2018) https://www.legalbites.in/contract-
labour-regulation-and-abolition-act-1970-critical-analysis/

LEGAL DATABASES

1. Manupatra Online Resources

2. SCC OnLine
3. Jstor

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