Class 1

The first principle of economics basically says that there is not enough for everyone. There have
to be laws for distributions, which then is Market Equilibrium.
However, the first principle of social justice is contradictory to this in the sense that distribution
should take into account the needs of the people rather than the market equilibrium cause people
may be underprivileged due to forces beyond their control. This contradiction is the cause of most
of the conflict, especially in labour law. How do you distribute the goods between people who do
work, who cannot work and who can work but do not.
In broader context, all of the wars in world have been ideological in context- collective economy
or individualist economy.
Classical Economy- Markets and Self-interest will guide economic activities. After 1920s
depression, Keynesian Economics offered another perspective of managing the demand side to
stimulate the economy. Another perspective to economics has been along the lines of Marxism-
socialism is a farce, it is only to transition towards a communist state.
Discusses general things about Marxism... capitalism is and always has been a formidable force
and maybe Marxists have underappreciated it. Bourgeoisie is not always an oppressor. Marx was
considered logical, while socialism has been considered as utopian. Marxism was logical because
it was based on the theory of contradictions etc etc and brought the concepts of social justice to
the fore.
Off late, the concept of social justice is dwindling. A narrative is there that the social justice
prompts/incentivises people to fail.
However, we are also seeing that the economy is kind of the driving force and beginning to have
a conscience of its own—we see economists coming every now and then and saying that if you do
this to the economy, the problem will be solved! We also see that in Covid, the moment the work
opportunities disappeared, the Political Economy stopped taking care of the person. This is why
we need social justice. But questions which also arise are that if the minimum wage rises, will it
lead to retrenchment and hence undermine social welfare on the other hand? What about the gender
consequences (People who have joined the labour force late would be affected but steps like high
minimum wage leading to lower opportunities), what about equal pay for equal work? ( all male
workers in nalsar are in canteen, all female in cleaning) this leads us to equal pay for equal value..
There are no answers, there are only trade-offs!
He keeps rambling.. Is social justice individualist or collectivist?
How can you legislate on what people would work on? How can you say that there should be 50
% representation of women in top echelons of powers? The terms here also become vague in their
formulations ---- equal pay for equal value, what does ‘value’ mean here?
Gustavo Gutierrez heres- a liberation theorist- fighting in Latin America,, bla bla bla. Legislating
is not an easy answer, even in scandavian countries which mandate equality, ratio of male
workers to female workers in quite skewed in engineering and nursing departments leading
to questions about significance of gender roles as well. These are hard facts.
There are no answers, there are only trade-offs! Shrirams asks, if this means that it is basically
majoritarianism which determines decision-making. Sir says bla bla, everything can turn into
majoritarianism.
Coming back, sir says how a uniform concept of proletariat being oppressed is false as that person
may go home and beat his children and wife and then become the oppressor.
Some Horatio Specter’s paper (uploaded on drive), Specter says that what then are the theoretical
justifications for Labour Law? Lassaisez faire economy will consider two entirely differently
placed individuals with asymmetrical bargaining powers to be equal (formally equal but not
substantially). This is where state intervenes with its might to prevent oppression by say fixing that
you cant work more than 100 hours a week.
Anik raises the point that competition will eliminate such problems (the generic laissez faire
argument). Sir says that concentration of power will eventually happen even in a competitive
market and hence a laissez faire market will not provide fair labour contracts. Further, there is
always an oversupply of labour.
Lastly sir says that while social reforms and social justice is definitely desirable, the viability of
securing them is the challenge.

Class 2

Some Chatari questions- recording started late-

Marx notes that under capitalism, absolute poverty has declined but the relative poverty
has increased. But then the world is inherently an unequal place.
As regards to taxation being a policy tool, Laffers curve in taxation- you cant incessantly
tax the rich.

What comes before? The community interests? Or Individual Interest?

Basically, he has been discussing that the market oriented economies have been successful
in lifting people out of absolute poverty. In fact some socialist policies have failed to some
the problems they intend, like in West Bengal, you cant find a bed in the public healthcare
system because of everything being free and causing so much demand vis a vis supply.
Even Scandinavian nations wanted to legislate on gender equality in positions in power.
Sir asks, why only positions of power and not other positions. Sir also asks that how do
you justify the hard data which says the representation in women in STEM field has
reduced? That has because in a welfare state in broader security nets, you are benefited if
you fail. So, now people have started following the interests- men in STEM field and
women in others. (Conservative Right Wing Literature presents these arguments)

He starts the actual class now. Above this were doubts from previous class.
Labour Law is basically a restriction in contract. You cannot work for more than these hours or
for a wage less than this etc etc.
The golden rule is that there is no golden rule of interpreting labour legislations/ industrial
jurisprudence.
Is Labour Law is bringing democracy into the private corporations? If yes, is it justified in doing
so?
The hypothesis to be explained today- the ability to exit is inversely proportional to the rights of
voice in that institution. Is there a right of workplace democracy?
We are comparing workplace rights to the institution of patriarchal marriage also here.
Did you choose to be a part of this country? If the answer is no, then you have the inherent
right to voice. This is because you can’t easily move out and the decisions of the state have
substantial impact on your life.
Can this be compared to the place of employment? Is the Emperor akin to Employer? Some
say that the worker does not have a real choice- so same democratic principle should be
applicable, while some say that the worker have much more liberty to move out of
employment contract as compared to a citizen- so same democratic principle should not be
applicable.
In a marriage, the women incur significant social, economic and societal costs of getting a
divorce and costs of not getting married as well.
The idea here, both in marriage and workplace is that State cannot interfere beyond a
certain limit and rather tries to increase the counter-veiling power of the women/employee
by providing them more voice to raise their voice or reduce the costs of seeking an exit.

Sir talks about the UFC Case. UFC is both a monopoly and monopsyas it is the only forum where
fighters can fight. The Fighters claim that they are employees, UFC claims that fighters are not the
product but the fight is the product. The fighters claim that no, they(fighters) are the products by
countering that what will happen to UFC if they don’t fight.
The normative question which arise here is—
Is it possible for the worker to be a worker and get the worker’s benefit (welfare, minimum wage
etc.) or is it possible for the worker to be commodity and get a worker’s right?
If it’s the latter, we have entered the second stage of communism as per Marx.

Class 2 notes from Anu’s WhatsApp message

Abhishek asked some wack question on Marx and impact of capitalism before recording started.
Marx itself said the gap is increasing between rich and poor thanks to capitalism. Sir and Chatte
apparently argued and for once damn he made sense apparently.
One of the bigger arguments that marx has brought up that taxing the rich higher, they won’t pay
taxes. So optimal level of taxes is one that would balance the capital in the system and so
efficiency. Highlighting issues with communism and how the community comes prior to the
individual. Rich getting richer and poor getting poorer is a farce- said read material if you want
to understand why. He’s rambling about question that abhishek asked as to how the premise of
social justice system is inefficient and leads to failure as the demand is more than the supply.
Example being the west Bengal healthcare system.
- What are labour laws? They are a complex set of restrictions on a freedom to contract.
- The Golden rule is that there is no rule to interpret industrial jurisprudence. The divide
between public and private is so messy that there it is not possible to have golden rule for
industrial jurisprudence.
- Sir answering Anshul doubt regarding basic income. He believes that the idea of basic
income in itself is skeptical. The idea of basic income in a developed and underdeveloped
country are different and so applying it universally does not make sense. Basic needs are not one
that can be universally set but one that would differ from place to place. How can one guarantee
that the person who is receiving the basic income has actually worked for it and not being given
or being given out.
- Okay guys now Anshul and sir are tripping each other and now finally decided to
continue with class.
- Enforcing democracy in a workplace is something that has been deliberated upon and in
today’s class will see if this can be put in place. We know that Corporates are the dominant
institution in the society and have been seen as unequal.
- Now to see if this is actually enforceable. One must compare corporates to State and
corporates to a patriarchal society marriage to understand if this democratic structure can
actually be enforceable.
- Will to establish that- “The ability to exit is inversely proportional to the right of voice in
that institution”.
- When comparing state and corporation, it is important to ask if the person had chosen to
be a part of the State aka if they chose to be a citizen and if they chose to be a part of this
institution. One cannot easily move out of a State also because the implication of the State has
also changed and are wider as today it is the State that decides if one is an illegal immigrant,
migrant etc. Hence it is necessary that the individual be given a voice in the institution as they
don’t have the free option to exit.
- This can be compared to place of employment as the employee also does not have a real
choice of leaving the workplace and the entry is similar to that when a person is born into a
certain family in a State.
- There are others who say this rationale is flawed and that workplace and State cannot be
same as employee has much more rights and liberty in choosing a workplace etc. unlike an
individual born into a certain State. And so same democratic principles of having to have a voice
in an institution because of lack of freedom to exit is not something that can be applied to a
workplace.
- Claim of inalienable right to voice does not hold any place in democracy as,
academicians such as Robert Dahl said that voice is your property. The govt has right to regulate
how you exercise your property, just like there are restrictions to fundamental rights.
- Patriarchal marriage and corporation can also be compared to each other where in a
patriarchal marriage the ability to exit is very limited for women due to social culture and
economic factors. A woman not getting married is also seen as problematic in the society and
similarly, in a workplace, not going to work is also seen as problematic by the society. Any
intervention from the State would be problematic but leaving them in absolute servitude also not
possible. This is why we then try to enhance these voices in the institution so that they have more
bargaining power such as maintenance laws, alimony laws etc. So, state here does not directly
legislate, but it facilitates. Limitation is that these limits are skewed as the extent of regulation by
State is difficult to set.
- By doing this, then the institution is trying to increase the ability to exit in a marriage.
Similarly, increasing the ability to exit a workplace is also something that the institution should
do by creating trade union, job security etc. This analogy is more similar than comparison
between corporation and State.
- Can we justify labour law or the intervention of State though complex laws?
The State should facilitate workplace democracy as there is limited ability to exit and
tremendous socio cultural pressure.
- Robert Nozik- the idea of one being oppressed is problematic and real.
- Illustration- in UFC (Ultimate Fighting Championship), the workers being given average
salaries but the UFC was earning in billions. Workers then claimed this to be a case of antitrust
as UFC is a monopoly as well as monopsony as they are the only entity in the fighting
championship business. The fighters came up with a contradiction that the fight is not what is
being sold and the UFC in itself is not a product. If the labourers aka the fighters are not there
then there would be no product. So, the fighters itself are the product- Ongoing case and can
follow up if interested.
- Question that is to be asked is – is it possible for a worker to remain a worker and get the
protection of a worker or as the UFC case exemplifies, is it only possible for a worker to get the
benefits of a worker if he is a commodity?

Paradox of Decent Work- 21st July 2021

• International Labor Organization: 100 years of existence. Criticized to be a face-lift institution

that does not do much. Inception of the ILO was based on the premise that to give labor’s
justice through an organized set up. If you can’t control labor conflicts, the entire structure of
capitalism would fall. The idea of ILO initially was to resolve problems between employees.
• As a result of this, the critical theorists had said that the institution is bottlenecked with labor
unrest all across the country.
• This is a response to the economics of 1980’s. The entire structure of Fordism taken over by
the Keynesian economics (supported by it). The format of economics is based on primary
understanding that you can generate demand in your home country. There was a belief in mass
production and mass consumption. Henry Ford promoted this form of economics. The idea of
consumption and production was fairly simple then, which was to generate home or domestic
demand. The intention is to have a product mass produced and the cycle continues. But when
the system failed in the 1980’s owing to a profit crisis, this system internalized production and
consumption cannot survive.
• This was followed by a New Liberal order in the 1980’s. The neo-classical order coming in
the 1980’s, the idea of welfare state, labor security and labor protection tumbles. The Fordist
side failed, there was a shift from a demand side economics to a supply side economics.
• Taxes were lowered, the companies were ready to reduce labor restrictions, regulations and
policy. Labor was termed as cost post 1980’s because of supply side economics.
• Social clause is prima facie something, which is beneficial. You don’t engage in trade with
countries, who are engaging in child labor, if they have something of the sort of oppressive
labor.
• Social clause was opposed by developing and under-developed nations. It was also opposed
by third world feminists. They looked at the social clause in international trade agreements,
that entrenches and enhances the dominance of a particular group of countries. You see certain
countries who have passed the first phase of capitalism without giving a shit about labor laws,
and now these countries are forcing the other countries to maintain labor standards. These
nations owing to the clause, who rely heavily upon cheap labor, would end up not never even
start climbing the ladder. They would never even think utilizing cheap labor and producing
much more and reducing the cost and climb up the economic slope.
• Feminists looked at the social clause in a different sense all together. They saw labor laws to
be of great high standard. ILO had a system of a male bread earner and there was no significant
scholarship or academic impact regarding female bread earners within the ILO. The idea of
able-bodied man to do mass production and consumption, the feminists considered the social
clause to be problematic. They said that the idea of social clause is to increase the standards of
labor. The idea of social clause would only apply to the tip of ice berg which is the formal
sector. These countries are heavily reliant on the informal sector. In regards to the informal
sector, the employers would automatically hire less people in the formal people, and the people
who had jobs in the formal sector would lose their jobs. The pressure would come on the
informal sector, and the cheap labor tends to be characteristic of women labor and child labor.
As a result of tremendous amount of pressure on the premise of economics disparity, we did
not have the same starting and thereafter you can’t impose these standards on it. If the same is
imposed, it would harm women more than men, since the women are already entrenched in the
informal sector. Much more labor participation in the informal sector, more supply would mean
less demand and less salaries, which would affect women and children. Compliances increases
costs, reduction of labor force from the formal sector. These laborer’s would come down to
the informal sector.
• ILO comes in here and proposes something to resolve this. How development can become
freedom. Amartya sen says that the idea of development is that it enhances the being of
individuals. The idea that was prevailing was that they had to represent market and
development through a new scheme. That had to have a Human Face. ILO comes in 1999 and
releases a Decent Work agenda as a solution of social justice requirement and reconcile the
concerns of the labor and production and producers. This was very important for the ILO.
• Decent Work Agenda had 4 pillars:
o Respects your rights at work.
o Employment generation
o Social Protection
o Social Dialogue
Development can be looked at as freedom, not by the lenses of colloquial concepts like GDP and
GNP. The very fact that you participate in the market is a testament to the fact that you are living
quality has freedom. Development also has broader purposes.

Idea of economic imaginary: capitalist hegemony. Every idea has certain social realities.
Capitalism would have certain social realities.

Does the decent work agenda create economic imaginaries, which the neo-classical economics
allow capitalism to thrive?

Did the decent work agenda entrench what it was supposed to fight again?
Like Social Dialogue, this overcame 200 years of labor resolutions processes like collective
bargaining and government intervention. It was based on ADR. It symbolizes a move away from
it to economizing work processes. The economic imaginary which was created. Does the entrench
the neo-liberal economic ideas. Decent work agenda applied to both formal and informal
employment. The move away from this form of capitalism to something human, was the purpose
of the Decent Work Agenda. Does this ensure a move away or to something which creates two
classes that are inherently contradictory?

How did the Decent Work Agenda prop up?

Shift away from Fordism to 1980’s economics. Generate enough surplus in the domestic economy.
Globalization of capitalism, idea of women participation in the work force increase. Wherever
capitalism was entering, there were certain social structural changes that were coming up. One
such social structural change that came up was that it was taking over natural resources, lands and
mines, and these people were now homeless. These people flouted in the social cultural labor and
hence there was an increase in labor. It affected their homes and livelihood, which was until then
safe. When there is a higher supply of labor, there is a possibility of reduction of labor standards.
Each country in its own wanted to attract international capital. They were willing to reduce to the
bottom or bring down their labor standards. As a result of which, most of the work which was
informal was delegated to these nations.

Labor Law – II

24th July

Decoding Constitutional Paradoxes through Bhagwati (Pretty much a commentary)

Dude starts off by giving the example of Supreme Court in saying that when the SC has come in
and spoken about how the government is providing the vaccines and has taken a high-headed
approach to the vaccination drive in the country. If we scrutinize at the SC as an institution for the
privileged, we understand that for the poor and the under-privileged, the SC is basically a hoax
and whatever that has been inscribed is a hoax. This has been reflective in the recent judgement
that came out regarding the entire debate of the vaccine discourse, wherein the SC has categorically
ordered those vaccines to be provided for all.

Similarly, there have been a lot of debates in the spectrum of socio-economic rights wherein the
SC has taken a “high-handed preachy” stance because it acknowledges its own limitations. The
question that arises here is for the underprivileged and the poor, where do they go if not the
Supreme Court? The solution to this would be the basic idea that in a democracy, in order for one
to have their rights recognized is to not approach the SC. The best forum would be that of an
electoral bargaining, wherein one creates a class of their own and bargain during the election
process.

In a democracy, if one is rich and elite the Constitution works for them, if one is not then the
Constitution is simply a mirage. The majority of the Constitution making discourse has basically
been a bargain between the elite and the union class. Otherwise, the idea of Constitution making
itself would falter and becomes highly problematic if it went ahead and tried to give space to every
competing rights.

From a socio-economic rights perspective, the SC has failed miserably. It has had its own debates,
discourses and presented its own political ideology but the idea of any actual or real change
happening because of a SC judgement is not found. In terms of understanding or in terms of
creating real change in the strict context of socio-economic rights, the SC fails. The questions that
arise here are How and Why?

(Refers to cases of Bandhua Mukti Morcha v. UoI and PUDR v. UoI)

If we look into Article 23 and 24, which are rights against exploitation, and take a step back, we
find that the entire premise of exploitation comes from a socialist standpoint which comes from
the fact that in the laissez-faire idea of state, the notion of individual oppression and exploitation
arose because of the nature of work. From an extreme Communism standpoint, the idea of work
itself leads to exploitation. From a socialist standpoint, the idea of laissez-faire state based on the
premise of two formal individuals come together, engage in an agreement where both of them are
free and unless the contract is rendered through unfree consent, the State has no role to play.
From that perspective, what ends up happening is that there are certain fixed norms and standards
that define the notion of unfree consent; which is the idea of coercion, undue influence, fraud,
mistake and misrepresentation. A Jamadar and a Forced Laborer, from the strict sense of laissez-
faire state, when they are entering into an agreement, they are formally equal assuming there is
free consent from both parties.
From the left communist perspective of looking at exploitation, it is observed that the entire
premise of basing governance on individuals is the fundamental reason of what causes exploitation
or the source of exploitation, wherein these individuals are formally free in the eyes of law. As per
the normative idea of freedom of contract, it can be observed that the freedom of contract does not
accept anything such as the theory of unequal bargaining power as a valid ground on which a
contract can be declared to be void. Therefore, it is understood that the doctrine of freedom of
contract cannot be sitting well with the idea of unequal bargaining power. The source of
exploitation from a left-oriented point of view is the entire notion of laissez-faire governance on
the basis of an individual who is formally free.

The paradox of social justice from the lens of recognizing and respecting socio-economic rights
lies in the fact that even while recognizing or enforcing these rights, social justice has to take help
of the individual. In the judgement, it is observed that there have been a lot of contradictions to
say that there has been progress of the society from a status-based idea to a contract-based idea. If
the society has transcended, the means of work or the production process also has to change. In
this particular structure of the society, we cannot have a mode of work that remotely resembles
that of yesteryears. From this perspective, Bhagwati touches upon the individual idea of
fundamental rights. He constantly harps on this idea that it is a society in which the individual has
to have the ultimate respect and dignity. And only when the individual’s socio-economic rights
are respected that such his civil and political rights get respected as well. From a normative
standpoint, this is a fundamentally problematic judgement.

To precisely connect the aforementioned ideas, dude says that the entire normative idea of
exploitation from the left socialist comes from the fact that there is an entire political structure
which is the laissez-faire state which is based on this notion that individuals are formally free and
the role of the government is strictly limited. When two individuals who are formally free are
willing to enter and engage into an agreement which cannot have the essence of unfree consent,
such agreement is valid. In this structure, a jamadar or a contractor with his concentration of
economic wealth and a worker are formally free. The biggest criticism here is that though these
parties to the contract or agreement might be formally free on pen and paper, there are multiple
subjectivities which exist. The academic left considers the law or the idea of governance that is
placed on formally free individuals coming together under the premise of free contract as the main
source of exploitation. Bhagwati while dealing with judgements like Bandhua Mukti Morcha and
PUDR v. UoI, he takes this entire premise and envisages it into a paradox. He says that since the
society has transgressed in its form and structure, bonded labor is a reminiscent of a past labor
process or a status-based society, which can no longer be accepted in a society in which the
individual is ultimately dignified in a contract-based society. From that perspective, Bhagwati
engages in this paradox as he relies on the same individual who is the main source of oppression
in the laissez-faire state in order to protect a class of people who are oppressed and exploited. The
normative idea where Bhagwati failed is that he located the idea of exploitation and he tried to
protect these workers from exploitation by the means of an individual, and the individual was the
primary reason why these workers were exploited in the first place. In Bandhua Mukti Morcha, he
himself comes and says that we cannot adopt a laissez-faire approach to these kinds of matters,
and adopt more of a hands-on approach. But then again, while engaging in it, he rather sticks to
political rhetoric and comes up with the fallacy that only through the individual can the
communitarian rights of these particular group of workers be respected and protected.

Fin.

27th July: Right against Exploitation (continued)

There are 2 landmark judgements arising out of articles 23 and 24 of the Constitution – PUDR
vs. UoI and Bandhua Mukti Morcha vs. UoI. These judgements deal with labour oppression
during the Asian Games(?) and mines and quarries in Haryana respectively. The structure of both
these judgements is the same. It starts with how the Court has unlimited power when it comes to
dealing with cases under Article 32 and Bhagwati then delves into the idea that the purpose of
PIL is not adversarial in nature. The fun part of this judgement is where one tries to excavate the
liberal and social justice fallacies/limitations of liberalism and social justice. The first limitation
is in the very understanding of what exploitation is. Normatively, you can look at exploitation
through two lenses – Marxist and Socialist sense of the term.
Marx categorised the exchange of labour power with wages as the source of exploitation because
the labourer produces much more than he receives (this becomes profitable, thereby a capitalistic
exploitation). From the Socialist perspective, this entire idea comes from the notion of the
individual-based laissez faire state. According to socialists, exploitation originated from the
classical way of thinking in Economics. The notion of property helped classicals to understand
how interpersonal relationships structure themselves in employment. Through this sense of the
term, it would mean that the government has no role to play when it comes to understanding
interpersonal relations, especially in a work environment which are mediated through contracts.
This is where the paradox starts. We have an entire structure based on individuals and
individualism who say that two equal subjects irrespective of their subjective differences (the
employer coming with his own socio-economic concentration of wealth and the employee
coming with a lack of such concentration thereof) are formally free to come together and decide
what is right for them. The paradox starts from relying upon individualism to prevent
exploitation (which is a caste idea because it stems from and is reminiscent of the feudal caste
structure) His point basically is that liberals, in trying to liberate the exploited workers from the
realms of the feudal structure, are trying to base their arguments on individualism which was the
cause of oppression in the first place.
The entire stance of being a social liberal proponent aims at taking a paternalistic view towards
people whom you want to save.1
Bhagwati himself understands the limitations of what he is trying to do. According to him, the
entire mandate of the Constitution is social justice and there cannot be political and civil liberties
unless there is social, economic and cultural enlightenment. Paradox (from above) starts when he
uses the individual to take away the exploitation which initially begun with the individual and
due to individualism. He is basing his entire argument of exploitation under Article 21 which is
an individual right. In addition to that, he is taking the caste and class based idea of exploitation
and he is basing it on the individual?
Why is paternalism paradoxical?
In order for you to be a liberal or multiculturalist, you have to give space to each and every
culture. But what ends up happening is that you engage is ethnocentricism, i.e., you try and
impose your own values while judging others’ cultures. This sense of disgust is where
paternalism arises.
He quoted Bandhua judgement: “There are also two other matters in respect of which it is
necessary for us to give directions. The first is that, apart from poverty and helplessness, one
additional reason why the workmen employed in stone quarries and stone crushers are deprived
of the rights and benefits conferred upon them under various social welfare laws enacted for
their benefit and are subjected to deception and exploitation, in that they are totally ignorant of
their rights and entitlements. It is this ignorance which is to some extent responsible for the total
denial of the rights and benefits conferred upon them.” Who is ignorant? The worker – Bhagwati
is imposing some amount of liability on the worker because of his paternalistic ideas that the
worker himself/herself doesn’t know his/her rights. (Shriram is confused by this and so am i)
Bhagwati delves into Article 23 that deals with begar and other forms of forced labour. Begar is
labour without remuneration. If other forms of forced labour take colour from begar, then what
happens when a worker is paid ₹10 for work worth ₹100? Isn’t that forced labour also? Other
forms of forced labour should not have the embargo of being defined as begar – that would result
only in zero remuneration work to be categorised as forced labour. Forced labour needs to have a
wider interpretation and must include any form of force – economic, sexual, etc. “The word
’forced’ should not be read in a narrow and restricted manner so as to be confined only to
physical or legal ’force’ particularly when the national character, its fundamental document has
promised to build a new socialist republic where there will be socio-economic justice for all and
every one shall have the right to work, to education and to adequate means of livelihood.”
1
his words not mine
Read the highlighted parts of PUDR and Bandhua*

Labour Law Lecture 4

Till now we have been talking about constitution and labour from a different perspective. How
have public order and all restricted to curb individual rights. We are trying to tread between two
contradictory thought processes.

Today we will deal with three cases in same light

1. First case – Marxist way of understanding rights of labour – interest of labour is always
against interest of public but Interest of public (society) is never against the interest of
labour (worker) – this is best illustrated in Article 19 interest clause – also seen in the
example of let’s say you are driving in a car, even if you are liberal or Marxist, if there is
a strike or bandh by workers you will still feel annoyed and irritated (hence interest of
society of labour is against public interest)
2. [He said nothing of this sort about second or third case]

Idea behind discussing all these judgements – presenting one stream of thoughts that you can create
an entire nation in the garb of individual rights, and ever subserve a class or collective rights.
PG’s critique of Justice Chandrachud – cost and benefits of incorporating of Social Justice – PG
says DyC talks about battle of laborers in getting their dignity sanctified in something like
Factories Act – section 5 of FA stated that states can exempt application of Factories Act to certain
class of factories in case of public emergencies – he also defines what is a public emergency
(including internal disturbances)

Kameshwar Prasad v State of Bihar

Question – What are the kind of restrictions on the right to demonstrate under Article 19?
Facts – Bihar, in one of the service rules, state that you cannot engage in demonstrations or strikes.
Right of strike was decided in later case, we will look at only the aspect which says you cannot
engage in “demonstration”. Definition of demonstration – your expression of internal feelings
through outward signs – can be peaceful as well as non-peaceful – and can lead to infringement of
public order, national security etc. Problem with this specific rule was that it banned EVERY
POSSIBLE demonstration – problem was this included peaceful demonstrations (for instance,
wearing black ribbon on your mouth as demonstration against sexual harassment with your
colleague). Govt argued that if you allow each and every possible fundamental right to every
labour, there is a chance of indiscipline, and then public disorder – because if an employee is
posted at one place and says I have freedom of movement then it will be chaotic – right to speech
is curtailed when govt stops them from divulging confidential information – if each and every FR
is given then it will lead to total anarchy.
High Court –Though Right of demonstration is available under article 19(1)(a) and 19(1)(b), it
does not necessarily follow that it is available to govt servants as well. [Very unclear what HC
actually said – you can leave this point and just read SC’s reasoning – he just said “HC” once and
I got confused]
Supreme Court – Court says that just because you are a govt employee, you do not cease to be a
citizen, thus, you cannot deny them FRs. Employees also argue that FRs are not available to certain
classes like defense personnel (Article 33) – which means that exceptions can be made to
applicability of FRs. Court says there are two specific classes already mentioned in article 33,
which means that consti implies that FRs are generally available to govt servants, but just to these
2 classes of govt citizens we don’t want to FR. Employers say that article 33 is a specific case and
restricts article 22 (preventive detention and related rights) of people because of this being
necessary in the context of armed forces etc – it still does not mean govt servants have all possible
FRs.
The employers also argue that FRs to govt employees are not just subject to article 19, but also to
article 309 and 310 – thus, govt can restrict their FRs. State cites US to say that govt employees’
first amendment rights were curbed with the object to discipline the workforce – indiscipline will
be caused if absolute rights of speech and movement are given to the workers. BUT position in
US is different from India, in US there is police power of state and thus, the restrictions are flexible
– we have FRs and employees don’t cease to be citizens in India and restrictions are not as flexible
as the exceptions to the police power doctrine, these judgements of the US SC do not apply – and
thus, we cannot take the rationale of disciplining the workforce to restrict FRs.
Court refers to other judgements on public order and says that idea of public order is of a smaller
case, contrary to the large-scale national upheavals (like security of state etc.) which may happen,
thus, is it even possible for demonstrations to breach public order? Not all demonstrations are bad
– demonstrations can be good as well, and because that can exist and those will fall within article
19(1)(a) – Fundamental problem in all of this was that the ban by the state was a blanket ban – and
because restrictions on FRs are not as flexible as in the US, the Court refused to accept that the
object of this service rule which prevents indiscipline of workers is valid. If govt employees are
allowed to participate in demonstrations which fall within 19(1), I (the court) do not see how it can
cause public order issue. Thus, the rule providing for absolute ban was considered to be illegal on
the premise of it being a blanket ban and there is always a possibility of having demonstrations
which fall within the ambit of article 19(1)(a) and (1)(b) – the rule was struck down to this extent.
The question on fundamental right of strike still remained – and was discussed in the next case.

All India Banking Employees Association v National Industries Tribunal

This judgement categorically denies the existence of an FR of strike to workers – we may then ask
how to engage in collective bargaining without this FR. This was before Kameshwar case.
Question – Whether right to strike is a FR? (Court answered no)
Facts – Banking Companies Act (“BCA”) had a small exception to banks – Banks could choose
to NOT show/ disclose all of their assets and liabilities in the balance sheet – object was to (1)
allowing banks to use reserves in situations of economic distress because otherwise reserves won’t
remain for actual situations of economic distress and (2) to maintain the credibility of potentially
sick banks. Section 34 of BCA said that if there is a matter between employer and employee goes
to tribunal, bank can refuse to show assets which were not previously disclosed, and RBI will
decide whether the assets need to be disclosed or not, and RBI’s decision is final and cannot be
questioned in law.
If bank does not disclose its entire assets, liabilities which banks can bear (wages/ backward wages/
bonus/ overtime bonus etc.) will automatically fall as all these are calculated on the basis of
disclosed assets. Issue was of wages/bonus/overtime wages not being paid to the workers
Employees came up with this interesting formulation – employees say that we have a FR of
collective bargaining [using 19(1)(c) where the word “union” is right], there is the right to become
a member of the trade union, and also carry out the objectives of the trade union – then there has
a FR to strike though ofc subject to Reasonable restrictions (19(2)-(6)) – employees argued that
the fact that there is a “possibility of industrial adjudication under ID Act”, is by itself a reasonable
restriction on our right to collective bargaining (which is incomplete without the smaller right to
strike). Thus, there is ultimate responsibility on state to make sure that this restriction does not turn
unreasonable – and they argue that it was unreasonable because the power to indirectly affect
labour wages has been given to a government institution (i.e. RBI) with finality – the finality of
our dispute on non-payment of wages will “unreasonably” be settled by what RBI determines
(possibility of arbitrary decision of the RBI) to be the correct asset, and that is an unreasonable
restriction on the reasonable restriction of adjudication, hence an unreasonable restriction on our
FR to strike.
Judgement – The Court or National cannot allow a fundamental right of strike because that will
ruin the physics of the national economy.
Court says that you cannot take concomitant FRs out of context of the judgements that gave it
(Romesh Thapar and all) – Court says that if we accept the FR of employers (19(1)(g) – right of
profession) and employees and each has a circle of concomitant rights, they will at some point
collide with each other, which will be a larger public order problem – thus, unions having
concomitant FRs will lead to contradictory absurdities – for instance, if such a right is allowed
then the concomitant rights available with trade unions and associations will be a bigger circle than
the rights available to an individual, which should never be the case given that individual is the
source of all rights and rights of some other entity can never be more expansive than the source –
if constitution drafters really wanted to incorporate such a large circle of concomitant rights for all
including unions, they would have included a larger list of reasonable restrictions, given that they
haven’t, you can’t read such an expansive list of concomitant rights in the constitution – just
because you are as association, does not mean your rights can be restricted only on the two
grounds, you need to have larger restrictions because it is always a group of individuals and thus,
restrictions on individuals should also be applicable to the associations: for instance, you can have
restrictions emanating from 19(1)(g) which is right to profession – rights of employers and
employees have always been at crossroads with each other, if you interpret both very widely, then
it will just lead to absurdities and contradictions and the risks of infringement – thus, we cannot
uphold an inherent right to strike as FR and industrial adjudication as the reasonable restriction.
Court also does look into object of the legislation and which institution is more suitable to
determine which assets can be hidden (if not RBI, it would have been labour tribunal or something)
– holds that there is no such problem in RBI making this decision.
Court is not saying there is no legal right to strike – it is just saying there is no FR to strike which
is just subject to two restrictions of morality or public order.

Question – why couldn’t the court consider this section 34 of BCA as a reasonable restriction to a
fundamental right of strike – instead of going to why no fundamental right altogether on the basis
a small exception of Banking companies.
Sir’s response –
There is completely nothing preventing the recognition of Fundamental Right of Strike under
association & Union – but SC has categorically denied in multiple cases (eg. CBI v Bharat Kumar)
– debate becomes between right of individuals v collective – and how far are collective rights
individual in nature? when the source of right is individual, how far is it legitimate to restrict the
exercise of individuals because the right is in essence collective? [all philosophical debates on
theories of rights]
The court did not do so because the court never considered the FR to strike as a concomitant right
– while the question is justified from a liberal perspective (it is the essence of associations and
unions and thus, very important) – from a conservative economic perspective, we understand the
economy to be its own identity (for instance – we need to save the economy, types thinking) –
economy thus, has a dominant position. The moment you allow rights of workers (minority) against
the economy – which will essentially prevent progress of economy – it will enable ransom-holding
of individuals, and condemnification of workers. This leads to greater chances of disparity and
resentment
In CBI v Bharat Kumar – it was told by the Court that we just cannot agree with the right to strike.
All of this in italics was “normative” side of the story – court simply looked at concomitant rights
– workers claimed that we have a FR to strike because 19(2) includes the words unions and
associations. But court said whatever has already been written in notes about it being contradictory
absurdities to say no FR at all.

Common law courts had a predilection against trade unions as they were usually against collection
of wealth – they were recognized for the first time in the 19th century because TUs modernized
and courts saw personal benefit in recognizing them.

Gujarat Mazdoor Sabha v State of Gujarat (2020 SC)

Question – Whether the non-payment of wages results in forced labour in violation of article 23?
Facts – Gujarat state – accepts provisions of Factories Act regarding hours of work, break b/w
work etc. – but they have suffered due to covid-19 pandemic – labour law is looked at as
compliances and increased costs from the perspective of management. In a new circular by the
Gujarat government, it is stated that an employee is entitled to normal wages even for overtime
work – which is when article 23 and exploitation comes up. In Bandhua Mukti Morcha, it was
clear that if a laborer is paying less than minimum wages, it will be considered that there is forced
labour/ exploitation.
Govt says it is time of internal disturbances – covid-19 emergency caused real financial hardships;
circular is needed. Other side responds that covid-19 is an internal disturbance as that will take
color from war and external aggression and pandemic is not within internal disturbance.
How should court define what are internal disturbances – where all and how has this term been
used in the constitution – what has Sarkaria Commission said on this (which said that mere
financial exigencies cannot be termed to be causing internal disturbances – has covid 19 caused
an internal disturbance?
Judgement – Court looked into Sarkaria Commission – also looked at Stephen’s work on Criminal
law and said that all these different terms have a common element of disturbance of public
tranquility.
Court noticed other judgements also about ‘internal disturbances’ – and observed that this term
has been used and interpreted very widely – but often they are used with words like war and
external aggression, which leads to internal disturbance also being interpreted in the same color.
Section 5 of Factories Act requires 2 things: Subjective satisfaction of president vis-à-vis article
356 + Objective satisfaction of threat to the security of state originating from internal disturbances.
Court said that covid-19 did not lead to any threat of security of state – and thus, this notification
is problematic.
Critique –
- PG’s problem is that why are we replacing subjective satisfaction of president with
satisfaction of the court (DyC). Courts are now providing indignity to executive decisions
– how are judges the conscience bearers for everything even though executive decisions
are way more transparent.
- From right-wing perspective – free choice v real choice – are such judgements forcing the
employers not to employ? These things seem so just in theory that no one even sees if there
is enough evidence to see if the policy even helped (less salary v no work) – how can judges
– is it making people worse off or better off – the sense of cosmic justice?

Tomorrow’s class – international and political aspects of child labour – how instruments of
political justice give into the conceptions of child labour – contextualize the entire idea of child
labour – normative reasons of its existence.

9th Lecture: Labour Law II (6th August)

We had looked into labour laws through a very conservative and ultra-left perspective lens of how
social justice works. We had analyzed the constitution through this lens and saw how social justice
works in real life.

CLRA – we will first talk about the needs which mandated the CLRA and we look at cases through
which some important interpretations will help us better understand the Act.

Contract labour through the lens of a sociologist happens to be a problem. Contract labour through
the lens of law and economics happens to be a policy perspective. So, it has to be regulated. From
a sociological standpoint, contract labour is something that has to be abolished while law and
economics strives to regulate labour. When you try to regulate such phenomena like contract
labour, and look at the first and second NCL, there has been substantial portions dedicated to the
idea of contract labour. Most of them have said that contract labour is something that is not viable.

If you look at the word CLRA, you will find the words “regulation” and “abolition”. The obvious
question then comes is why are both of these words used? Why isn’t abolition given utmost
prominence. The idea of work is way too nuanced to be governed by law. So the idea behind using
both these words was simple: there are some cases where a work (the kind of work and the kind
of people doing it) is of perineal nature and there the Act mandates that the appropriate government
(through Section 10) will come in consultation with the state/central advisory committee and say
that i.e., cleaning in a factory, the law understood that it is important yet impossible to completely
abolish contract labour because there are far more economic consideration. This is similar to how
law realizes that it is important yet impossible to abolish labour.

If contract labour ought not be used, how do we go about it? By the procedure of regulation and
abolition. If an abolition notification is issued under Section 10 in that manufacturing process,
there are certain considerations under this section that has to be taken within the decision making
loop before issuing such notification. If the notification is issued, the Act is silent on what happens
to the workers and contract labour. A classical contractual employment has three parties:
1. Principal employer
2. Contractor
3. Contract Labour

It is the principal labour who gets in contract with the contractor and says that you have to give
me 10 labors for such kind of work. Then the principal employer employees these specific labour
in his establishment. The second form of labour is where the principal employer gets into contract
with the contractor and outlines the specific kind of work that needs to be done and you have to
get me the specific outcome. For that, the contractor can use labour. These are the kinds of contract
labour that has been thought of in the act. One of the foremost reasons why we look at the definition
of who a contract labour is because

The commission has categorically observed that principal has been to refuse status of these
contract labour on the ground that they did not know they were hired by the contractor. The kind
of liability that has been conceptualized by the Act is also unique. In the initial portion, there is a
definition, registration and licensing chapter. The licensing section specifically applies to
contractor. There are provisions of liabilities that are directly applied to such contractors. The
primary liability is thus imposed on the contractor. It is when the contractor fails to exercise any
such liability the principle employer becomes liable. The principle employer u/Section 20 can
recover the amount from the contractor as a form of debt.

The idea behind regulating this tri-partite employment relationship is to protect the contract
laborer. The work they were doing was of similar nature yet they were not being paid similar
wages. These are the problems that has cropped up since eternity. Contract labour has been an
eternal problem and there is a definite intersection of caste and class the moment you look into
who these labourers are.

The broader question of law and public policy in terms of understanding contractual labour is
(from a conservative standpoint) that contract labour enhances efficiency. The 2nd NCL has looked
down upon this reprehensible work culture. We need to be ready to accept non-permanency of
labour if we are to move towards this china market model. If you go to a government bank and
private bank, you will find the difference in service. To illustrate, in general the people who teach
you who are in contractual basis will teach you better. The idea of contractual labour in terms of
enhancing efficiency is one of the best defenses.

The idea of contract labour has increased over time? If you look at the economics behind contract
labour, the amount of wages is much lesser. The idea is to exploit workers beyond human means
by giving them lesser wages. There is also this idea of substitutability which enables you to give
lesser wages. Because this section of people can be hired in lesser amount of wages, there is always
a downward push on people who are hired on contractual basis. You can hire two people working
on contract than having a person on permanent basis.
If you look at the work of Martha Shen, you will see that she categorizes entire workforce as a
triangle. She also brings in the idea of gender. If you look at the top part, men are concentrated
than women. The more you go downwards in the triangle, you will find the idea of informal
employment. Contract Laborers are specifically found in a particular zone. The way the act
conceptualizes it, they are at the bottom most section of the formal economy. Why? They get
regular wages, the modality of wage is different. Generally, wages are paid in a lumpsum because
the idea of added social security benefits do not apply to contract labour and that is the purpose of
using them. The moment you transcend from the bottom of formal economy, the idea of wage also
gets abolished in the informal economy. So, they are located at the bottom of formal economy and
top of informal economy.

How do you identify contractual laborer? You look at the mode of payment of wages and the
nature of employment (terms of employment). A professor of law who has housing at NALSAR,
their conditions of works are good and hired on a regular basis. The moment you look at people
like sir who just get a lumpsum amount and a hostel room without any added benefits, you get to
know that they are contractual workers.

Institutions like NALSAR that mandates social justice get challenged internally. The claims that
they make in terms of economy and personal and social space, they do not apply it in their personal
space. The broader question is: can there by a law mandating equality of power in terms of CLRA?
The CLRA mandates that there is a liability on the contractor to see that these contractual labour
are paid equal benefits and have benefits of other welfare devices. The most important is however
the idea of wage. It is to ensure that they are not paid differently even though they are working in
similar forms of work. That is the outcome that the law wants to achieve.

But what ends up happening? Section 10 has a specific mandate. It grants the appropriate
government powers to issue a notification that abolishes contract labour and for all other work
processes where contract labour is being used, the Act mandates regulation. How do you regulate
it then? The idea of regulation happens that the principal employer has to be present when the
contractor is paying wage to the laborer. If the principal employer is not present in person, he has
to have his representative present.

Even after 10-20 years of service, the idea of seniority goes down the drain as they were not being
regularized. The tendency of using contract workers have other ulterior motives like efficiency and
economic considerations. So, even if the people gain years of experience and merit, the institution
shall not stop using stop using contract labour.

How does this affect the equality of outcome? What ends up happening is that your objective was
to grant these workmen engaged in contract labour equality of outcome and equality of status.
What ends up happening in reality is that the moment you issue an abolition notification, the
employer mandates that he is no longer using a contract worker but he ends up paying even less.
If suppose he is paying 100 each to 10 workers for a total cost of 100, he will just pay 250 to one
regular employer and again reduce is cost regardless. This is where the law mandated equality of
outcome comes. [Sir is not for equality of outcome through law as the law is not capable of doing
what it wants to do. It makes those people worse-off who it intended to make better off]
One of the initial cases in which contractual labour was taken into consideration was Standard
Vacuum Refining co. v. Their Workmen (1960 SC). There were contractual workers being used
and there was no sceufity of service and the nature of manufacturing process in this case was
‘cleaning’. Cleaning happens to be incidental but you cannot imagine a manufacturing process
working without cleaning. Looking into all of these, the broader questions raised was whether
regular workmen could raise an industrial dispute which entails contractor and contractual
workers. The court goes back to the case of Workmen of Dimakuchi v. Dhimakuchi Tea Estates,
and says the concept of industrial dispute uses the word “any person” under Section 2(k). Any
person cannot mean any person in the whole wild world. There has to be substantial interest of
people who are raising the dispute and whose matter has been taken up. Dr. Banerji was terminated
from service without notice and given wages in lieu of that. On his behalf, the workmen raised a
dispute to which the SC had said that there has to be substantial community of interest between
the people who are raising the dispute and the dispute itself and rejected the case.
In the present case, the SC holds that there is a substantial community of interest between
the regular workmen, the contract workmen and the principal employer. The principal employer
said that I cannot be involved in this dispute because there is no employment relationship and that
this relationship is between the contractor and the contract laborers. But the court looked into the
idea of community of interest and said that the fact that they are contractual does not make a
difference in the factum of the industrial dispute. Hence, there can be an industrial dispute. You
will find that there are contracts that are sham and they are genuine. The fact that it is either is not
a bar for the court to interfere in the contract. But the moment you find that the contract is genuine,
i.e, where they did not need regular workers, there are different consequences. The approach of
the court while dealing with contract labour should not be based on dogmatic principle. You need
to look into practical solution. While looking into practical solutions, the court rejected the claim
of contract laborers that they want to regularized. Because this was a genuine contract, we cannot
interfere in how an institution works. [Sir says that this is where we need to be practical instead of
sticking to dogmatic principles].

[Sham Contract is where under the guise of contract labour, the principal employer hires people
to do the same work in less amount of wages. The object is not to hire more people even when he
needed more people]

Labour Law II Class notes, August 6th 2021

[Notes of same lecture as the previous one cuz sajal madam made ulta lecture. But including
because it’s so good. Open her notes individually to see comments]

We have spoken about how labour law is very conservative and looked at it as portraying an ultra-
left perspective of how social justice works and analyzed the constitution through this lens. This
module will carry on this tradition and also attempt to balance out the multiple perspectives. From
this context we will talk about the CLRA2 – the needs which mandated it, the important case laws
and its interpretations which will help us better understand the modalities of the act – what kind of
liabilities, powers, rights are imposed through this legislation and how the new code on social
security attempts to extend its protection. [has the language changed, what it means]

Contract Labour through the lens of a sociologist happens to be a problem and should be abolished,
but through lens of law and economics, it is a policy issue and needs to be regulated.
If you look into the observations of the first royal commission on labour, the Gajendragadkar
commission and also the NCL II, you’ll find there has been substantial portions dedicated to
contract labour and there has been general consensus on one main thing – it is not viable, through
the lens of understanding society’s value to work, contract labour is something that should not be
employed. The idea behind this legislation was also the same.
Why have both the words ‘Regulation and Abolition’ used in the act, why is abolition not given
utmost prominence? – The idea of work is way too nuanced to be governed/regulated by law, the
idea behind using both was simple – in some cases, specific nature of the work and its contribution
to industry is of perennial, pertinent nature and there the act mandates that appropriate govt via

2
https://clc.gov.in/clc/acts-rules/contract-labour-regulation-abolition-act-1970
S.103 will come in consultation w State/central advisory committee and see that in that specific
process, for ex – cleaning; it is an associated work process with main manufacturing process, it is
of perennial nature, from that lens it is important yet impossible to completely abolish contract
labour because there are far more economic considerations similar to how the law realizes how it
is impossible to abolish child labour. – These are broader normative questions which we
understand through these legislations, that law realizes it has its limitations and even if it is
enforcing equality of outcome, that it will fail.
The general consensus was that contract labour should not be used, then how do we go about it? –
the procedure adopted under the act was to regulate and abolish. If an abolition notification is
issued under S.10 in that specific work process, there are specific considerations which have to be
undertaken before issuing this notification. If this notification is issued, the act is silent on what
then happens to contract labour/workers. A classic contractual employment agreement has three
parties – principal employer, contractor and contract labour; it is the contractor who gets into an
agreement with the principal employer [ either the pe says gives me x number of contract labours
or principal employer gets into contract with contractor for specific work output and you have to
get this outcome and for that you use whatever labour you want: direct or indirect] One of the
foremost reasons we find that principal employer having or not having the knowledge (knowledge
becomes irrelevant) whether he has directly or indirectly employed contract labour, because the
reports have categorically observed that the tendency of principal employers is to refuse the
workers the status of contract labour on the ground that they did not know they were hired. The
kind of liability conceptualized by the Act is also unique, the act lays a preliminary liability on the

3
10. Prohibition of employment of contract labour. -
(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 of contract labour in any
process, operation or other work in any establishment.
(2) Before issuing any notification under sub-section (1) in relation to an establishment, the appropriate Government shall have
regard to the conditions of work and benefits provided for the contract labour that establishment and other relevant factors, such
as-
(a) whether the process, operation or other work is incidental to, or necessary for the industry, trade, business, manufacture or
occupation that is carried on in the establishment ;
(b) whether it is of perennial nature, that is to say, it is so of sufficient duration having regard to the nature of industry, trade,
business, manufacture or occupation carried on in that establishment ;
(c) whether it is done ordinarily through regular workmen in that establishment or an establishment similar thereto;
(d) whether it is sufficient to employ considerable number of whole-time workmen.
Explanation. - If a question arises whether any process or operation or other work is of perennial nature, the decision of the
appropriate Government thereon shall be final.
contractor, the act in its initial portion has the definition clause, registration clause then it has a
licensing clause which specifically applies to contractors, after that we have provisions of liability
that are imposed directly on contractors. It is when the contractor fails to exercise any such liability
then the principal employer becomes liable and under S.204 can recover the same amount as debt.
The idea of tripartite agreement is to protect the contract laborer’s.
The broader questions of law and public policy relating to contract labour is definitely from a
conservative standpoint, the debates raging argue that contract labour enhance efficiency; he gives
the illustration of a subjective observation he made about how contract labour is more efficient not
only from institutional standpoint but also in terms of output, the NCL II has taken down upon this
depreciation of work culture by moving away from permanency in employment is something that
may be viable but that must come when the society and culture norms are ready to accept it as the
general norm. While NCL II categorically rejected moving towards the China model of
employment where contractual labour is norm and state provides social security; before that we
need to socially and culturally accept non permanence in employment. Permanency in employment
has led to tremendous questions of efficiency. (What about security v insecurity of services) In
general, the contract laborer is far better at their job than employed and its use has increased over
time – why? – the wages paid to them are lesser, the idea is to exploit people and the idea of
substitutability which enables them to exploit them more – There is always a downward push for
the people who are hired on regular wages.
If you look into the works of Martha Chen, she categorizes the entire workforce as a triangle and
brings in the idea of gender and says that privilege, caste, class, gender that forms the workforce
and the more you go downward the more you find the idea of informal employment (men are more
concentrated at the top of the triangle). Contract labourers are found very specific zone, near the
bottom most section of the formal economy; because the modality of their wage is different and

4
20. Liability of principal employer in certain cases. -
(1) If any amenity required to be provided under Section 16, Section 17, Section 18 or Section 19 for the benefit of the contract
labour employed in an establishment is not provided by the contractor within the time prescribed therefor, such amenity shall be
provided by the principal employer within such time as may be prescribed.
(2) All expenses incurred by the principal employer in providing the amenity may be recovered by the principal employer from
the contractor either by deduction from any amount payable to the contractor under any contract or as a debt payable by the
contractor.
this is one of their distinguishing characteristics. The moment you transcend from the bottom most
layer of formal economy to lower levels, you see the idea of wage also gets abolished. There is no
idea of ‘fixed’ wages in informal economy. They are located somewhere between the bottom of
formal and almost informal economy.
He has a problem with institutions that mandate social justice and “liberals”, for ex – NALSAR
has an ideology of social justice but this gets challenged when you question your internalization,
people make all these claims about economy and social space but don’t apply it to their personal
space. The broader question about can there be a law mandating equality of outcome, specifically
CLRA mandates a specific outcome – it mandates that there is a liability on the contractor and if
he fails, then on the principal employer to ensure that these contract labourers have similar wages
and get benefits etc; - As already mentioned S.10 has a specific mandate and grants the appropriate
govt to abolish contract labour where notification has been issued and for other process where
contract labour is used, the idea is to regulate. How do you regulate? The idea of regulation again
happens through the ideas such as the act mentions that the principal employer has to be present
(himself or through representative) when the contractor is paying the wages.
Chendhil asked one genuis doubt how when talking about distinction between contract and regular
labour, don’t we have to consider qualification, merit, seniority, regular workers were regularized
because they went to college “studied harder” – because of this they were regularized and since
distinction is based on ‘merit’ it is “valid”. – PG answers that if you look at legislations and its
implementation, including CLRA is that the purpose of using contract labour has other ulterior
motive/ misuse and thus, all the points above get thrown out of the window, because the institution
will not want to stop exploiting. Our very own humble classmate again countered saying that just
because they could be misused and are misused is not sufficient to do away with the system. PG
says act does not entirely abolish the system, the consequences of an abolition notification under
S.10, SC says that no one is severing the relationship b/w contractor and contract labourers, the
only severing is b/w principal employer and the contractor, there was never a direct employment
relationship b/w principal employer and contract labourers and therefore, the principal employer
is free to hire them in any other work process where abolition notification does not apply. He
repeats there is an idea of efficiency and he is the best illustration because as a contract professor
he works harder and puts in more effort than the others on tenure, although there may be
exceptions. It has its points and that’s why this system can never be abolished.
How does this affect the equality of outcome? Objective was to grant contract labour equality of
status to the other workers, what ends up happening irl wrt to who is appropriate govt/ who is it
applicable to etc; is quite different we will see in the cases that will be discussed later, but the main
point here - if you are trying to mandate equality of status b/w these two employers because
contract labourers are another species of the regular workmen, it can never happen “like this it has
to happen like this.” The conceptualization of equality of outcome is never the same as the actual
scenario; for ex- the employer hiring 10 contract workers in the specific work process in a process
where abolition notification is issued, he will mandate that he is not using contract labour; if he
was paying 100 to each worker and incurring 1000, he will just pay 250 to a regular worker and
get the work done for an even lower cost and this is where the problem with law mandated equality
comes. Law mandated equality of outcome is problematic because it is not capable enough to do
what it is trying to do and makes people worse off, specifically those who it intended to make
better off, this is a fundamental problem.
One of the initial cases where contract labour was taken up was the Standard Vaccum Refining co5
; the idea behind this case was simple - there were contract labours with no security of service who
were removed on the employer’s whims, because there was no security of service and the nature
specifically in this case was cleaning ( incidental but perennial), looking into all of this, the broader
questions raised was whether regular workmen could raise an industrial dispute which entails the
contract labourers and contractor, the court goes back to Dimakuchi Tea estate case6 and premises
its judgement on this idea of community of interest, the idea of parties who can be involved in the
industrial dispute – employers/employee/workmen; the criteria of parties also suffices, they are
workmen the fact that there are contractual does not matter in the factum of the industrial dispute
and as a result of this, the court agreed that the industrial dispute can involve them. The most
fundamental ratio in terms of defining the pillars of interpreting these cases, when you look into
the niceties of a case arising from hiring contract labour is that there are some contracts which are
a sham and other contract which are genuine, the fact that a contract is a sham or genuine is not a

5
The Standard Vaccum Refining Co v. it’s workmen 1960 AIR 948, 1960 SCR (3) 466
https://indiankanoon.org/doc/777307/#:~:text=The%20dispute%20in%20this%20case,not%20employed%20on%20contract%20l
abour.
6
Workmen Of Dimakuchi Tea Estate vs The Management Of Dimakuchitea 1958 AIR 353, 1958 SCR 1156
https://indiankanoon.org/doc/1198151/
bar on the power of industrial tribunal from interfering. The approach of the court by dealing with
contract labour should not be based on dogmatic, pedagogic and academic principles, you need to
look into practical solutions. Here, the court rejected the claim of contract labourers that they want
to be regularized from the date they were hired, since it was a genuine contract, they cannot
interfere and management can hire new people but prominence should be given to already contract
workers but didn’t interfere and give directions. In sham contracts, courts can interfere to a larger
extent.

Lecture 10 – Introduction to Contract Labour (Regulation and Abolition) Act

Act can be structured into couple of segments. Broader problem dealt with under the Act =
wages and different working conditions.
Contract labour is hired so they can be paid less wages. Plus, their working conditions are worse.
Section 20 – contractor is liable for certain things such as establishing canteens, washrooms etc.
Principle employer has to be present when the wages are being paid.
There is a hierarchy – 1. Principle employer; 2. Contractor; 3. Contract labour.
Law considers responsibility of principle employer to be parallel to that of the contractor. If the
contractor fails on any of its duties under the Act, the principle employer is liable to ensure that
these duties are enforced and the contract labour’s rights. He can recover the costs from the
contractor as debt.
How does the state come in?
Section 10 – READ
Section 10 – “Appropriate govt.” has the power to issue a prohibitionary notification saying that
contract labour will not be used in a particular process in a particular establishment.
Question – who is an appropriate govt.? What if central govt. comes up with a notification and
the state doesn’t? What if state govt. says that contract labour can be hired for cleaning work
where there is a need for expert cleaning, but central govt comes up with a notification that
contract labour cannot be hired for any cleaning activity at all? In this case, question arises –
which is the appropriate govt., hence which is the notification applicable on a particular
company? Hence, it is important to understand which govt is the appropriate govt in any case.
The appropriate govt’s notification determines where contract labour will be abolished and
where it is allowed.
**CLRA largely regulates contract labour and not abolish it, because Indian economy is quite
significantly based on contract labour. The general norm is regulation, and it is only in certain
cases, the appropriate govt issues notification abolishing contract labour in a particular process.
Definition of Appropriate govt = 1986 Amendment def., equated it to the definition in Industrial
Disputes Act. The def. after the 1986 amendment is that the determination of which is the
Appropriate govt is to be in accordance with the appropriate govt. def. in ID Act.
Air India Statutory Corp. v. United Labour Union 1996 SC
Facts – It was mandatory for an establishment to get itself registered after the Act came into
force in 1970 as a self-declaration that the establishment is using contract labour. Only once
registration is done could the company be allowed to continue to use contract labour.
In case of contractors, If there is a contractor with contract labour employed under him, he must
get a license to continue using contract labour.
Air India began as a statutory corpn, but eventually became a pvt company.
1971 – Air India applied for registration, but the registrar refused registration stating that for Air
India the appropriate govt. is the state govt., no need to register with the central govt.
1976 – central govt comes up with a notification vide section 10(1) that in all central govt
establishments, you cannot hire contract labourers in cleaning services.
1982 – ID Act amended, included central govt to be the appropriate govt for Air India.
1986 – CLRA amended – “Appropriate govt.” under CLRA shall be the same as under ID Act.
Question before the court – whether or not central govt was the appropriate govt for Air India
prior to the 1986 amendment as well (at the time of the 1976 central govt notification) (after the
1986 amendment, since the ID Act def. was imported into CLRA, central govt was for sure the
appropriate govt for Air India (in light of 1982 amendment to ID Act). The question is w.r.t the
position prior to the 1986 amendment). If it was, then the 1976 notification would apply to Air
India, it won’t be allowed to hire contract workers.
Air India (i.e., govt.) argued that the appropriate govt for the company was state govt., while
workers argued that it was central govt., hence the notification would apply.
Argument of the govt. [on behalf of Air India] – Central Govt. is not the appropriate govt. and
hence, the 1976 notification won’t apply to Air India. It relied on the interpretation of the pre-
1986 amendment def. of appropriate govt in the CLRA by the SC in Heavy Engineering case –
“carried on by and under the authority of central govt.” clause in the definition was interpreted to
be a principal-agent relationship. That is, only the establishments that are agents of central govt.
will have central govt as appropriate govt.
In Heavy Engineering, the company was running according to its AoA. Even though there was
control by the central company, it was an independent company. President held majority shares
and central govt gave majority shares. Still, court narrowly interpreted appropriate govt., held
that the company has to be an agent of the central govt for the latter to be the appropriate govt.
Here, even though the prez held majority shares and had central govt funding, since the company
was functioning according to its own AoA, it cannot be said to be in a principal -agent
relationship.
This was argued by govt here also – Air India operated according to its own AoA, hence no
principal-agent relationship.
Claims of workers – if there is a notification under section 10(1), workers have to be
automatically reinstated with the principal employer (not the contractor). Since the CLRA is
silent on this matter, the implied position would be to regularize the workers and not to terminate
them from the employment of the principal employer.
Counter by govt. – there is no such implied right of the worker to be regularized and that a
permanent relationship has been created b/w the principal employer and the contract labourer. As
a result, directing regularizing contract labour would amount to interference in the management
of the company.
Worker’s argument – Heavy Engineering’s ratio of principal-agent relationship necessary for
central govt to be the appropriate govt. They relied on Article 12 cases w.r.t def. of “other
authorities” to argue that while interpreting “any establishment carried on or under the authority
of central govt.” clause in the CLRA (pre-1986 amendment), we need to move away from the
narrow idea of principal-agent to the instrumentality test (Art. 12) (Art. 12 test to determine
whether or not a company is “state” must be used to determine whether or not the central govt is
the appropriate govt.). They stated that the 1982 amendment to ID Act and 1986 amendment to
CLRA had the combined effect of merely recognizing the position that already existed – that
central govt is the appropriate govt for Air India.
Court says – Govt is not free of its constitutional conscience in its commercial operations. Object
of the law – prevent the use of contract labour. This implied that when there is a notification
under section 10, there is a concomitant right of absorption by the principal employer. The court
stated that the appropriate govt. in this case was central govt. in 1976 (pre-amendment) was
central govt. only, holding that “carried on or under the authority of central govt” must be
interpreted widely (instrumentality test), and hence the workers need to be regularized, because
there is a concomitant right of being regularized under section 10.
Court overruled Heavy Engineering, stated that as per Heavy Engineering’s interpretation, only
where there is statutory delegation of power will central govt be the appropriate govt. But the
court noted that there are multiple occasions where state also performs commercial functions
which are not strictly statutory public in nature. What if there is a violation in course of state’s
commercial functions? Just because the state was not strictly or directly controlling or regulating
the commercial functions, should the state not be held liable? NO, that cannot be done. Hence,
the court held that even if there is no principal-agent relationship (i.e. there is no direct control of
the central govt.), the appropriate govt. can be central govt. (Court moved away from a strictly
principal-agent definition to a public law definition of state).

Module 3 - Appropriate Government – Part 2

United Labor Union Workers (Air India Judgment 1996) –

He says to not leave out the case laws in the recommended readings section
Air India Judgment –
The problem of defining AG came to the fore. The fundamental problem was that the moment you
see a judgment on matters of interpretation exceeds in terms of volume and content with regards
to the objects of the constitution – and making wide statements – is that it is nowhere there.
If you look at how the Court wanted to interpret AG in the CLRA – there was an extensive reliance
on other authorities under Article 12 (RD Shetty, Ajay Ha sia, etc.) court relied on a public law
definition of how appropriate government has to be interpreted.
CLRA object is – wishes to abolish contract labor in certain cases – it also states ‘for matters
connected therewith’
Court interpreted this phrase with the object of the act and stated that there is a real possibility that
even though the automatic regularization is not present but the act intends to create an implied
relation between the labor and the principal employer post the section 10 subsection 1 notification.
The Court suggested that this can be done.
Because there is a punishment on the principal employer and the contractor it has to mean that the
inference does not necessarily flow from the premise.
With regard to def. of AG – the Court said – we are ditching the def. of AG in terms of principle
agent and going towards a public law definition of AG.
Sham v Genuine Contract – If Sham that means the employer had the need to recruit regular
workers but he did not want to do so and under the guise of the contract the employer continued
to hire people so his cost would not increase by hiring regular people. If sham contract then right
of regularization of workers would be from the date the workers were employed. We refused\ to
interfere in the management of the company and if it is a genuine contract. then even when we are
abolishing, we can only recommend or request the employer that by rehiring people in the process
of claiming will be kicked out of service.
While defining AG
Problem 1 – (in this judgment itself) – The Court refused the agent principal definition of AG, that
we cannot stick to the principles of private law while defining the role of the State. so now with
the definition of other authorities – even in the field of commercial relations the State is bound by
constitutional principles.
Note – the 1986 amendment to the CLRA which equated the definition of AG with the ID Act was
a recognition that AG before and after the 1986 amendment was the central government according
to the definition.
SAIL v National Water Front
The appellants were the company of the central government. The West Bengal Govt. issued a
notification that you cannot be hiring contract labour in stockyards. This notification was kept in
abeyance. Consequently, many other appeals arose from ONGC, etc. in the context of the 1976
notification. Employers claimed that it is only post 1986 that the CG shall be the AG because the
1986 amendment equated the definition with ID Act however the contract labors contend that it
was post 1976 act and 1986 was mere recognition.
Therefore, the fate of the Air India Judgment was challenged which had ruled this in favor of the
contract labor.
The counter from the employees was that we do understand that reservation is a problem, but how
do we understand those companies who were converted, and otherwise never adhered to
reservation. they say that a relationship has been created with the principal employer and once the
subsection 1 section 10 has been issued.
Now the Court looks at the intention of the legislature – to abolish and regulate – Court states that
if the intention is such – we cannot be inferring something which is not in the act itself.
Probably read Page 6 of the Judgment
Court understands what is the commonality between the two definitions and brings up its own
definition. The words must be construed in their natural ordinary meaning. We cannot abandon
the principle of literal interpretation by being bound by the ambit of private law.
How do we define authority?
Court says that if there is a statutory delegation then there can be no second questions that for the
undertaking the AG is central govt. otherwise accordingly it will have to be determined with the
facts and circumstances of the case.

Labour Law Module 3 Lecture 4

The 1996 (Air India) judgment looked into the definition of appropriate government. The
definition had transformed from that in the Delhi engineering case. If you look into the preamble
of the act and the definitions it can be concluded that there can be a concomitant right of
absorption. Wrt the definition of the appropriate government the court stated that the same would
be based on a public law interpretation of the same and would be moving away from the
principal-agent based definition established in the Delhi engineering judgment.The principal
agent test was too narrow and allowed the state to get away with a lot of responsibilities.

In 2001 this proposition was challenged again. The central government had come out with a
notification in 1976 that barred the employment of cleaning workers on contract in the central
government establishments. The question that was before the court in the 2001 case (Steel
Authority of India v National waterfront Workers) was which establishments would this
notification apply to? This inevitably led to the court having to define what an appropriate
government meant. The fundamental premise on which this definition deviated from the previous
judgments was that the court specifically stated they were not trying to define what ‘other
authorities’ under article 12 of the Constitution, such an exercise would warrant the use of
constitutional tests such as instrumentality etc. The definition of the state authority under the
CLRA however was different. The court here therefore chose to move back to the test of
principal and agent test. This was done because there two amendments, ie.e the 1982 and 1986
amendments. The prior incorporated a lot go central government statutory bodies In the
definition of appropriate government in the ID act. The latter amended the CLRA to define
appropriate government on the same lines as they are defined in the ID act. The court then
looked into the pre 1986 and post 1986 definitions to look for similarities. The court comes up
with three fundamental limbs of definition -
1. Controlled Industries
2. Industries carried on by the central government
3. Enumerated industries that were included in the definition by the 1982 amendment
He cut out for like 10 mins, no idea what he Said.

This judgement settles almost all question of law except for the idea of sham contract and
genuine contract. The standard vacuum case in 1960 is the first judgment that dealt with the
labourers working under a sham contract and those working under a genuine contract. The court
stated it would not intervene in the matter of those working under a genuine contract as would
mean the court unwarrantedly interfering in the operations of the industry. In case of sham
contract however the court could intervene and could direct for them to be regularised. This
debate Conti need till 2009.

International Airport authority of India v International Cargo workers union -

1. What happens if a notification is issued under section 10(1)n and it is proved that is a sham
contract.
2. What happens if no such notification is issued and it is proved that it is a sham contract.
In the SAIL judgment it was stated that the law does not create any direct relationship between
the principal employer and the contract labourer. There can be no interference if the contract is
genuine.
Till 1986 IAAI had a contract of licence with airfreight companies wherein the latter would use
the land of the former in order to move and shift cargo. There was no relationship between the
IAAI and the labourers hired for the purpose of moving cargo. 1985 onward IAAI terminated
this contract and took on the workers directly on a contract basis. The workers approached the
HC and requested that they be incorporated as regularised workers with IAAI. The IAAI rejected
this and stated that there was a settlement between the workers and the IAAI. Technically
speaking the arrangement of employment in this agreement would not even qualify as a contract
based employment because the contract between the IAAI and the employees was not one of
supply of labour but of licence. The labour union had incorporated itself as a body that would
take up the licence agreement that was previously held by their past employers before the licence
was terminated. The new contract that there would be constant supervision by the IAAI.
Moreover there was a stipulation of penalisation for any mishandling of cargo by the cargo
workers. The writ petition was therefore rejected by the High court. The HC however stated that
this could be referred to an industrial tribunal as an industrial dispute. The appropriate
government looked into the facts and stated in a notice to the workers that there was no inherent
promise by the IAAI to regularise ant he only basis of them continuing to work was humanitarian
grounds and therefore it didn’t qualify to be referred to a tribunal. This notice of the government
was challenged in the HC on he premise that the appropriate government was not supposed to
apply its mind and look into the facts and principles of the case. This writ petition was accept by
the court and the matter was referred to a tribunal. While the matter was pending before the
tribunal the IAAI came out with a notification stating that it was recruiting contract labourers.
This was challenged before the HC and the notice of recruitment was dismissed on the grounds
that the IAAI was not registered under the CLRA and could not therefore issue a tender for
inviting contract labourers. In the meantime the Madras Industrial Tribunal comes out and it
topped down everything, the idea of the cooperative society as the licencee was a sham and the
IAAI exercised sufficient control over the workers. Single judge bench of the HC looks into this
and states that there was no initial appointment at all and therefore there was no right of
regularisation since there was no appointment of the workers by IAAI. The division bench now
overturns this again on a technicality. The decision tech holds that in exercising its jurisdiction
under Art.226 the court cannot go into a fact finding exercise and it must decide on principal.
Finally, the comes up before the SC. The SC carves out two fundamental questions.
1. Whether the contract was a sham
2. Whether IAAI had control and supervision over the cooperative of cargo workers.
These two tests are different and have different objectives. The court firstly overturns the
division bench holding and states that while the HC cannot go into the facts of the case under
226, the same is applicable only so far as the facts are true, where they aren’t true the court can
go into the fact-finding exercise and determine the issue on that basis. Further the SC notices that
it was never claimed by the workers cooperative that the contract was a sham because it was they
themselves who had engaged in the capacity of a contractor to be employed by the IAAI. The
award of the tribunal therefore which deemed the contract a sham and ordered the regularisation
of the workers was therefore completely baseless.

Labour law notes of 12th August

In this class he has looked at how Has looked into the 2009 judgment (it closes up the entire debate
about Appropriate Government and also ignites a new debate on what happens when there is a
notification and a sham contract and when there is a genuine contract. It also reintrenches the fact
that there are situations where there are no notifications issued but there is a sham contract and
when it’s not proved that there is a sham contract, then which judgment would apply? Because
2009 judgment never looked into what happens when there is no notification issues under section
10).

He has uploaded this format on the drive

When section 10 notification is issued and the contract is found to be sham – the industrial
Adjudicator has the power to apply certain tests to determine whether there is an actual employer
and employee relationship between the principle employer and contract employee and whether the
contractor is the agent or medium between both the parties and this as a matter of fact establishes
that the contract is sham. Now what happens, as the notification mandates a valid contract? Here,
the matter would go up to be an Industrial dispute, this is not a section 10 issue as there is no
genuine contract in place (because we cannot read into legislations the things that are not expressly
provided).
What happens when there is no 10(1) notification?

2009 judgment also spoke about that in 2001 judgment while observing so many things that court
also failed to observe what happens when there is no 10(1) notification and the employees prove
that the contact is a sham in front of the industrial adjudicator? (v imp) – because it is a sham
contract, the Industrial adjudicator has to apply certain tests to determine who was paying the
wages and to determine supervision and control. (essentially these are the broad 2 tests that have
been developed).

Remember: the moment these tests are applied and the answer is affirmative i.e., the principle
employer was paying the wages and supervision and control was in his hand THEN THE
INDUSTRIAL ADJUDICATOR CAN REGULARISE AND TREAT THEM (contract
labourers) AS DIRECT EMPLOYEES.

Remember – when there is a valid contract under 10(1) the industrial adjudicator may direct the
employees to raise an industrial dispute under the appropriate govt. in case there is any dispute
regarding conditions of work between the contractor and the contract labourer because the act does
not create a relation between the principle employer and the contract labourers. BUT when there
is no notification and the contract is proved to be a sham then the industrial adjudicator has more
power to intervene and apply the tests and pierce the veil (looking through the sham contract).
Here, he still has the right to make visible the hidden relationship between the principle employer
and the erstwhile sham contract labourers.

When no notification is issued and the contract is not proved to be a sham, what happens?
NOTHING, because the power to issue a notification which essentially abolishes contract labour
under section 10(1) is with the appropriate govt. Even in SAIL (sorry if I’m not getting the right
name of this judgement it was passed in 2001 afaik) and as reiterated in 2009 judgment, it was
exclusive to the appropriate govt and no one else can call for the abolition of contract labour
especially when the contract is genuine and it’s not proved to be a sham.

REMEMBER: WHEN THERE IS NO CONTRACT OR THE CONTRACT IS SHAM, THERE

IS NO SECTION 10 (1) OF CLRA IN PLAY. THESE 2 CASES OPERATE AS A MECHANISM
FOR PIERCING THE VEIL AND NOT CLRA MATTERS.
Only when there is a sham the application of clra is excluded. (please do go through the document
he has sent).

………..x………….x………………x…………….x………..

There were certain other observations made by 2009 judgment

4. It categorically mentions that, when we are determining a direct relationship between the
principle employer and the labourer, we apply tests (2 tests mentioned above), by doing
this essentially we are equating the tests to be similar with the tests that determine whether
the contract is a sham. The court said that this is problematic because the tests of
supervision and control does not necessarily imply that the contract was a sham contract.
In many cases the contractor is just a facilitator then there is a presumption that contract is
a sham contract but among this there are several other things to see such as who pays EPF,
PF etc. there is a genuine case of overlap between the 2 tests. Therefore, the court says that
the test that helps determining the relationship between Principle employer and labourer
does not necessarily say that the contract is a sham.

5. To prove that the contract is a sham there are multiple other ways that have to be looked at.
Supervision and control is just one part to see if the contract is a sham.
 Cases

Mahindra and Mahindra v. Presiding officer

3. Facts - M and M (tractor company) was operating from Bombay, the delivery of tractors
takes some time. The orders were not voluminous to establish In Haryana so it hired
intermediary MS Hari tractors. There is a need for an electrician or a tractor mechanic
to check the tractor before delivery. MS hari sent an employee to check the tractors
before delivery to Mahindra. Wages were to be paid by Ms Hari (atleast what came up
in the trail) but he was not paid any wages by Mahindra but was paid by MS hari.

4. Now, is this CLRA case? Even if there are 2 employees the act required min 20 workers
therefore, can’t apply the act.

5. Mahindra said that it is difficult to believe that such a low paid worker can survive without
any wages.

6. In 2002 Mahindra had terminated the services of the contract labourer.

7. On the premise of this fact that these 2 years Mahindra did not pay wages, the workers
claim that there is a clear case of exploitation and the object of CLRA is to prevent
exploitation.

8. Interestingly, the question of who pays wages was also a test to determine whether a
contract is a sham or not. Now, remember the burden of proof of proving who was
 paying the wages is on the contract labourer to prove that the Principle employer was
paying the wages and not the contractor

9. The tribunal reversed this and said that there was no evidence from the side of the principle
employer or the contractor to show that it was not the principle employer who was
paying the wages as a counter to this the labourer says that the Principle employer or
contractor did not bring up the evidence with their contract, there can be a presumption
that the principle employer is infact having a direct relationship with the labourer.

10. SC looks at both sides and realizes that there was a section 33 C (2) application. Therefore,
The question of direct relationship was disputed and the tribunal found out that it was
impossible to establish that whether there is a right under section 33 unless question of
employer and employee relationship is established.

11. SC = how do you define supervision and control? (here the question of who paid wages
was taken out of the picture as it was well established that MS hari paid). In 2009 SC
stated that there can be situations where the P.E requires employers from the contractor
and contractors in those certain situations supplies employees to the PE, the PE directs
how the work is to be done but the wages was being paid by the contractor. In such
cases the direct control and supervision still rests with the contractor even though the
PE is the one who is directing how to perform there will be no direct control, he has
secondary control only. And in cases of discrepancies, the labourers go to contractors
and therefore, Primary control.

12. Now when we looks at the two tests, we see that, the wages were being paid by MS hari,
and supervision and control was also under MS hari (he has immediate control even
though PE directed what to do). Therefore, MS Hari is the employer. BUT there is no
automatic absorption because the two tests are not proven to be true.

PLEASE READ THE JUDGMENTS – HE IS VERY DIFFICULT TO UNDERSTAND

Management of Ashoka hotel Judgment

3. Principle evolved: When you look into obligations put forth by sec 7 and 12, there are no
presumptions that the contract is a sham because of that fact that when there is a violation
of these sections the relief under the act is under sec 23 and 24.

4. About cleanings services, contractors were changed time and again, the employees were
consistently working though.

5. PE claimed that there is no direct relationship b/w him and the Labourers and the labourers
themselves do not claim that the contract is a sham and as a matter of fact wages were also
paid by the contractors.
6. He also says that the Industrial Tribunal has categorized cleaning as perennial service. It cannot
do so because determining whether a service is perennial or not is under sec 10(2) and the
power of which is laid in the hands of AG in consultation with state advisory body.
Therefore, the tribunal has no power. Even if industrial adjudicator was allowed to deal
with this question they are restricted by 23 and 24.

7. Workers claim that there is no material evidence to show that sec 7 and 12 has been complied
with. It can be concluded that there was a relationship b/w PE and Contract labourer. – they
are claiming this because the contractor was changes time and again

8. Remember 10(1) notification was not issued.

9. Court = 10(1) notification has not been issued and it is only when this notification is issued
there is a mandatory application of CLRA therefore, CLRA cannot be applied. It also
reiterates that the contract clearly says that the labourers are under the contractor and not
the PE.

10. PE did not want to prove that the contract was a sham because he did not want the court to
pierce the veil.

11. Here since there is no notification the industrial adjudicator was well within his power to order
regularization.

13th August 2021

THE CONTRACT LABOUR (REGULATION AND ABOLITION) ACT, 1970

Abolition and Regulation: The act broadly mandates contractual labour, which is something
between formal and informal sector. Cannot completely abolish it ever.
Section 20: Liability of principal employer in certain cases.—(1) If any amenity required to
be provided under section 16, section 17, section 18 or section 19 for the benefit of the contract
labour employed in an establishment is not provided by the contractor within the time prescribed
therefore, such amenity shall be provided by the principal employer within such time as may be
prescribed.
Tri Partite Relationship: The Law considers the liability of the Principal Employer to be
equal/parallel to the contractor. So if contractor fails to provide benefits under 20, the liability
arises on the PEmployer who is supposed to ensure that the benefits are provided.
If contractor feels that liability is on PE, and he can recover all the incurred expenses from the
contractor, as a form of a debt. – Section 20 of the erstwhile act.
Where does the state come in? – Under 10, power to issue prohibitionary notification, ssaying
contract labour shall not be used in a particular establishment,
10. Prohibition of employment of contract labour.—
(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 of contract labour in any process, operation or
other work in any establishment.
(2) Before issuing any notification under sub-section (1) in relation to an establishment, the
appropriate Government shall have regard to the conditions of work and benefits provided for the
contract labour in that establishment and other relevant factors, such as—
(a) whether the process, operation or other work is incidental to, or necessary for the
industry, trade, business, manufacture or occupation that is carried on in the establishment;
(b) whether it is of perennial nature, that is to say, it is of sufficient duration having
regard to the nature of industry, trade, business, manufacture or occupation carried on in
that establishment;
(c) whether it is done ordinarily through, regular workmen in that establishment or an
establishment similar thereto;
(d) whether it is sufficient to employ considerable number of whole time workmen.
Explanation.—If a question arises whether any process or operation or other work is of perennial
nature, the decision of the appropriate Government thereon shall be final.

Q. How to define an appropriate govt?

If there are 2 notifications, by centre and state gov each, which one applies to you, if you
are an HR?
2. Definitions.—(1) In this Act, unless the context otherwise requires,—
2 [(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 situate;]
For CLRA, the law says that the appropriate govt is the same as under the ID Act [central gov]. –
1986 Position
The important Years 1970, 1971, 1976, 1982 and 1986.
1970 [the act comes]: as an establishment, it is mandatory for you to get yourself registered.
Thru this, you self declare that you are using contractual labour. The contractor has to apply for
license, and only with it can he engage in hiring contract labour.
Air India Statutory Corpn. Vs. United Labor Union [1996 SC]: Air India, the statutory
corporation was turned into a private company.
In 1971, Air India got itself registered.
In 1976, centre gov comes up with notification stating that in all central gov establishments, from
‘76 onwards, you cannot hire contractual labour in cleaning services.
In 1982, ID Act amended, and it said the appropriate gov for Air India Stat Corp is the central.
1986, CLRA amendment, saying that the appropriate govt is the same for CLRA as under the ID
Act [central gov]. Earlier it was state gov.
So when in ’71 AIR India applied for registration, registrar refused and said for you, appropriate
gov is state gov. You don’t need to get yourself registered.
Union: citing the Heavy Engineering judgement, and the original def of an appropriate gov,
“under the authority of central gov” was interpreted as a “principal agent situation”. So only for
those industries, which are agents of the centre govt, the appropriate gov is the central gov for
them.
Heavy Engineering Judgement: a corporation running, president had maj shares, funding from
gov, company was independent, control from gov, court narrow interpretation and said a
principal agent relationship needs to be there. Here since prez had maj shares, and funding
from gov, company was run as per Articles of Association, so it was not agent. So held that
heavy engg does not have centre as appropriate gov. – this was reiterated in Air India
If Air India could prove appropriate gov was not centre, then 1976 notification would not apply,
CLRA would not apply and they could continue to have contractual labourers. [atleast until 1986
amendment, when appropriate gov definition under CLRA Changed].
Primary claim of workers: if notification prohibiting contract labour, they have to be
automatically reinstated with the PE, not the contractor. Basically, to regularize them and not
terminate them from employment under PE.
Employer argued that the labourers have no such right to be regularized.
Article 12: defines state, uses the term “other authorities”. It has been subjected to debate, what
exactly is that? [As FRights can be enforced against state].
Workers’ advocates argued that principal agent theory is too narrow. The advocates used various
judgements that defined “other authorities”. The primary basis of workers was reg 1986
amendment. Advocates argues that move away from narrow def, and look towards broader def of
instrumentality and agency.
5-6 different Categorical Tests by SC in various judgements [name and details not imp]. As
a result of these tests, advocates of workers argued to look at “public law interpretation” by
bringing under itself a much broader range of institutions under ambit of state, under “other
authorities”.
The lawyers argued that the appropriate gov was always the centre, 1986 amendment was a mere
recognition of this fact formally. The def prior to 1986 looked at narrow princi-agent
relationship.
The court made a false claim, saying that DPSPs [wages, working conditions] are different from
FR, as the former are non justiciable. We need to look at what the object of law [CLRA] is,
which is to prevent the use of contract labour.
Preamble of the Act: An Act to regulate the employment of contract labour in certain
establishments and to provide for its abolition in certain circumstances and for matters
connected therewith.
Act says, if notification is issued under 10[1] for removal of contractual workers, it is an
concomitant right of absorption with the principal employer. [PE].
From 1970, the app gov was centre and 1976 notification will apply, so by 1986, on the
amendment, they need to be regularized.
Since we are moving to the broader definition, central gov is the app gov for these kinda
establishments.
Primary premise of court to say this: heavy engg was narrow def, [a statutory responsibility
delegated by central gov, and test of princi and agent is applied], there are multiple other
commercial activities that the government does. If def is narrow, what about these commercial
functions?
If you look at narrow def, there will be situations where state will be allowed to perform some
commercial function under 19[1]g, and what about these functions? Are they gonna be included
or no? They are not strictly statutory and public in nature. But if a violation arises in one of the
commercial functions of the state, what about it? Just cause state not primarily, day to day
involved, will they not the appropriate gov? They will be. We are moving to public law
interpretation of what state is, which is definition of instrumentality and agency.

Reading Aid for CLRA in the next page

 1. Introduction to the Act (the Royal Commission, the Gajendragadkar Commission and the II
NCL)
2. Issues of Law and Public Policy
I. Why is CL used - the ef ciency debate
II. Economics of CL - the downward pressure on wages.
III. Where are they located? The triangle.
IV. How do we distinguish between CL and regular workmen
V. Kinds of CL
3. How does the equality of outcome mandated by law affect those speci cally for whom the
equality of outcome has been mandated by law?
4. Standard Vacuum Re ning Co vs. Their Workmen 1960 SC
I. The nature of work (insecurity of service)
II. The nature of the manufacturing process (cleaning)
III. Could the regular workers raise ID
IV. Abolition of CL and continued service from date of recruitment.
V. Ratio: Upheld Workmen of Deemakuchi, the general rule is that CL should not be hired.
VI. Wherever a question of CL is raised, prominence to dogmatic theory ought to given less
signi cance than prominence to practical logic.
VII. Sham vs. Genuine Contract.
5. What is the scheme of the Act? Section 10.
I. Abolish
II. Regulation.

Appropriateness of Government: Part 1.

1. Why is de ning AG necessary? Section 10.

2. Air India Statutory Corpn. Vs. United Labor Union 1996 SC.
3. The important Years 1970, 1971, 1976, 1982 and 1986.
4. The claims of the Union:
I. The AG claim.
II. The principal agent argument (Heavy Engineering Case
III. The 1986 Amendment/the 1976 noti cation
IV. Automatic Reinstatement and conditions post abolition.
V. Regulation of internal business matters.
5. The claims of the Workers
I. Principal Agent argument too narrow -> Move to instrumentality and agency test
II. Automatic Reinstatement and Conditions post abolition.
III. The Right of absorption as a concomitant right.
IV. Whether a direct relationship is created
V. The 1986 Amendment.

6. The De nition of Appropriate Government prior to the 1986 Amendment to the CLRA
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 I. Any establishment pertaining to the industry carried by or under the authority of the Central
Government.. Is the central government.
II. Post the 1986 amendment.

7. The problem with the Heavy Engineering Case: ‘..under the authority..’ would mean that there is a
principal and an agent. The CG was not held to be AG (Shares held..AOA).

8. The Court begins: The broader purpose of the constitution, the basic rule for interpreting welfare
provisions speci cally when it is unclear, the interpretation of other authorities in SC judgements,
implications of narrow interpretation of the Heavy Engineering Judgment on Article 19(1)(g), the
implications of private action of the state vs. private action of individuals or other body corporates.

9. ‘DPSP are justiciable in themselves and economic democracy is the foundation for a stable political
democracy
I. What does the Act provide for
II. The importance of the language in the Preamble.
III. So what happens when the CL is abolished under section 10(1).
IV. The Penal consequence and the inference drawn

10. What have we discussed till now

a. The Standard Vacuum Manufacturing Judgment
b. The Air India Judgment.
c. Conclusions drawn
I. That contract labour wherever possible should not be used.
II. Which interpretation while de ning under the control (by or under the authority of the CG)?
III. How many de nitions of AG under the CLRA Act?
IV. The fate of the 1976 noti cation?
V. The most fundamental problem with the judgment - The Logic.

11. Steel Authority of India vs. National Union WaterFront Workers 2001 SC
I. Who are the appellants?
II. 1989 Noti cation issued by the SG of WB and kept in abeyance
III. Some more observations: Appeals arose from ONGC and FCI in context of 1976 noti cation.
a. The employers/CL post and pre/post
b. The fate of the Air India Judgement?
IV. Questions for consideration:
a. What is the correct interpretation of AG
b. Whether 1976 noti cation is valid and applicable to all CG companies?
c. Whether there is a right of automatic absorption post 10(1) noti cation
I. Policy of Reservation.
II. What kind of relation is created between the parties?
III. What about the intention of the legislature?
IV. Principle of Interpretation.
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 V. The Fate of the Curious.

IV. Rules of Interpretation for AG?

V. What is the point of commonality between pre 1986 de nition and post 1986 de nition
a. Two limbs?
b. What is clear and what is not clear?
c. What is the key word in the two de nitions?
d. What would industry under the authority mean?
e. What is required for the purpose of the Act - instrumentality or agency or determining
who the AG is?
f. Importance of the de nition of establishment.
g. Which test is applicable and which test is not applicable?
h. How do we de ne authority?
VI. The Heavy Engineering Judgement and the ULU reversal of the same - State in the eld of contract
is bound by the principle of constitutional conscience.
VII. Conclusions:
1. As claimed in the Air India judgement, will the CG be the AG for CG companies since the
beginning of CLRA
2. The 1976 noti cation and the 1986 amendment.
3. How to de ne ‘by or under the control’ of the CG and Why?

11. International Airport Authority of India vs. International Air Cargo Workers Union 2009 SC

I. The relation between IAAI and Airfreight?

II. Phase 1: a. 1985 b. Accommodation on grounds of distress without regularisation settlement/
offer? C. Casual labour
III. Phase 2: a. The Worker’s Co-op society b. Agreement entered between the IAAI and Co-op.
IV. Phase 3: a. 1987 Contract b. 1989: Communication and Claim c. Consequences.
V. Principle Evolved (1
VI. Pendency of ID and new tender notice. Notice challenged. Consequence of Challenge
VII. Principle Evolved (2).
VIII. The IT Madras decision
IX. The SJB (HC) to the DB (HC)
X. In front of the SC
a. Course Correction in SAIL
b. When 10.1 noti cation is issued what is the role of the IA?
c. When 10.1 noti cation is not issued?

XI. Questions: a. Whether the agreement between the society and IAAI a sham?
> Grounds on which the Tribunal decided vs. on which relief was claimed
> The Fact Finding interference under 226.
> On what grounds did the tribunal award relief?

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 b. Whether contract sham

> Can we apply similar tests for determining control & supervision with that of sham contract?
> The problem with the evidence on record.
> Constant supervision?
> Conclusion?

Final Principle Evolved:

1. ABOLITION NOTIFICATION IS ISSUED. The workers claim that contract is

SHAM GENUINE.
THE IA has to see Then he has to refer the Employee t
and apply the tests to the AG for the same. The IA has n
determine the employer and power here to grant relief and may refer
employee relation. the workers to the AG (to raise ID?

This is an ID and not In SAIL** it was observed that in such case

dispute u/s 10 CLRA because there is the contract shall stand extinguished
no contract to begin with. The employer shall give preference while
hiring people in this. This is under 10.1. Not I

2. WHAT ABOUT SITUATION WHEN NO ABOLITION NOTIFICATION IS ISSUED? The

workers come and claim that the contract is:

(proved)SHAM Not PROVED SHAM (Genuine)

x. Remedy under the ID Act: The question of regularisation does not arise
The IA has the power to apply tests This is within the domain of the AG and IT has no
and determine power. The IA may refer the WM to the AG to
whether there is supervision raise ID and keep it pending.
And control.

Can the IT regularise workers here?

1. It is a sham contract.
2. It is not within the domain of CLRA
3. If the CLRA does not create any legal relation and presumes a contract and this case is under the
ID Act, the IT ought to be perfectly within its domain of power to regularise people but the power to
issue a noti cation is under the AG. It can never be within the domain of power of the HC or
the IA to ask the AG to issue such noti cation.

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 LECTURE 1:

There were certain other observations made in 2009 judgement:

1. “The test for determining whether a contract is a sham is different from the test of supervision and
control”
2. Can 'supervision and control’ infer direct employment through a sham contract?

STAGES OF EVOLUTION: SHAM (The wage diary, the what & how, the mediator etc.)

Apply two fold test

3. The problem of overlap and test for determining sham contract?

4. Mahindra & Mahindra vs. Presiding Of cer 2011 PnH
i. The facts
ii. Counters: 1. Applicability claim and the Exploitation counter 2. The BOP/On record 3. The non-
payment of wages and eventual termination in 2002.
iii. 5. The Sup. Ct. observes
i. The 33C(2) application.
ii. The two-fold test when a contract is found to be a sham
iii. How not to de ne supervision and control?
6. Decision in the case
7. The Management of Ashoka Hotel vs. Their Workmen 2013
i. Principle Evolved: The 7/12 redressal (SAIL judgement
ii. The tribunal’s ndings vs. The Employer’s claim: i. The question of Sham ii. The question of wages
and S/C iii. The perennial question.
iii. The main claim: IA has no jurisdiction at all (even if he did it would be under Section 23 and 25.
iv. The Worker’s Claim: i. Change vs. Consistence ii. Principle Evolved. iii. Facilitator vs. Principle
Employer - who held?
v. The Court observes: a. The Gujarat Electricity Board Decision. b. The no noti cation/sham proven
situation.
vi. ‘The scheme of the Act clearly provides for the CL as the employee of the contractor and not
the PE’
a. “But when the contract was found to be a sham it does not refer to the abolition of contract at
all but the court piercing the veil of a sham setup”
b. The Contractor nor the PE has shown that the contractor was registered/licensed.
c. The PE claimed that no claim for sham was made (Why?
d. Why did the court go into establishing a direct relation through the double test?
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 e. Principle Evolved: When is there a need to pierce the veil?

v. Was the tribunal right?

Lecture 2

12. Gammon India vs. Union of India 1974 SC: Interpretational Issues and Constitutionality of the
Act:
I. What is the dominant idea of section 10? (Determine Constitutionality)
II. De nition of establishment [Section 2(e)] ‘any place where any industry..’
III. De nition of workman [Section 2(i)] ‘any person employed in or in connection with the work of
any establishment’
IV. Questions of concern:
a. Whether the CL would have to be hired with the work of the establishment?
b. Whether they have to be hired at the places where such industry or trade is carried out
V. Absurdity of reasoning?
VI. The difference between ‘other work in any establishment’ under section 10(1) and Section 2(i) - the
Contextual Argument
VII. Grounds of constitutionality - nality of the decision of the AG on recommendation of the C/SAB.

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