1.               Can the employees engaged by the contractor make a demand upon the employer to take them on the muster roll? Whether the appropriate government, on a dispute raised by such employees, can make a reference to the labour court or the industrial tribunal for adjudication to this effect?

After the Supreme Court decision in Veg oils(P)Ltd., (AIR 1972 SC 1942), statutory recognition has been given to section 10 of the Contract Labour (Regulation and Abolition) Act, 1970. By virtue of the provisions of section 10, the jurisdiction lies either with Central or State Government, as the case may be. Wherein an establishment, more than 20 employees are engaged by a contractor for maintenance of gardens raised a dispute that they should be taken on the muster'roll of'the principal employer, the government declined to make a reference for adjudication to the labour court.

When challenged by the employees through their union before the high court , it was held that the government was right in declining the reference since the jurisdiction lies with the appropriate government.


1.     Philips Workers' union, thane vs. state of maharashtra and other, 1986-II lln 124(Bom.HC)


2.               Whether workmen engaged by a contractor not holding a valid licence under the Contract Labour (Regulation and Abolition) Act, 1970, can be treated as workmen of principal employer?

Earlier the Division Bench of Madras High Court has held that the definition of 'workman' in section 2(2) (b) of the Contract Labour (Regulation and Abolition) Act, 1970, implies that if the workman is not hired through a contractor holding a valid licence under the Act he would be a workman employed by the management itself 1 However, the Division Bench of Delhi High Court has dissented from the judgment of the Madras High Court in holding that the Contract Labour (R&A) Act does not prohibit employment of contract labour altogether. It only regulates the employment of contract labour in certain establishments and provides its abolition in certain circumstances, which would appear to be the ultimate object. Furthermore contravention of sections 7 and 12 is an offence. If the employees of a contractor who is not holding a valid licence could become the employees of the principal employer, the legislator could have provided for it and said in very simple words contravention of provisions of sections 7 and 12 or any other of these provisions would make the casuaI workers of the contractor ipso facto the employees of the principal em ployer. If the Court says so, it will amount to legislation for which the Court has no power. Further, if the contention of the petitioner is accepted that they have become the employees of the principal employer as the provisions of sections 7 and 12 have been contravened, it may amount to their entry into service through back door in contraven­tion of service rules and other provisions for employment.2 The Supreme Court has also approved the decision of the Delhi High Court 3 In another case, the Bombay High Court has also dealt with the similar matter and held that the employees working in a canteen run by a contractor cannot become the employees of the principal employer because the contractor failed to register his contract under section 12 of the Act.


1.     Workmen of Best & Crompton Industries Ltd. VS. Best & Crompton Engineering Ltd., Madras and ors. 1985-II LLN 169 (Mad. HIgh Court).

2.     New Delhi General Mazdoor Union and Delhi Offices and Establishments Employees Un'ion vs. Standing Conference of Public Enterprises and another (SCOPE) 1991 LLR516.

3.     Dena Nath & Others vs. National Fertilisers & others, 1992 LLR 46.

4.     General Labour Union (Red Flag) vs. K M. Desai & others, 1992 LLR 166 (Bombay High Court).

Contractor's Employees and EPF:

3.               Are the employees engaged/employed through the contractor coverable under the Employees Provident Fund and Miscellaneous Provisions Act?

By amendments to the scheme in 1958 and 1960, the persons employed by or through ,contractor or in connection with an establishment to which the Act applied were brought within the purview of the scheme and principal employer was made responsi­ble for compliance with the provisions, of the Act and the scheme in respect of such employees. However, the amendments to the scheme were struck down as unconstitutional by the Supreme Court. The Supreme Court held insofar as no provision had been made in the scheme for the recovery by the employer of the contribution to be made by him on behalf of contractor's employees, the amend­ments operated harshly and unfairly on the persons who employed contract labour, and it resulted in discrimination against those who were employed as direct labour. The defect pointed out by the Supreme Court has now been removed by the Amending Act 28 of 1963. Accordingly, contractor's employees have become eligible for the provident fund benefits w.e.f. 30th November, 1963.


1.     Orissa Cement Ltd. vs. Union of India. AIR 1962 SC 1902; 1962-1 LLJ 400.


4.               Whether employees engaged by a contractor will be covered by ESI?

The employees as engaged by a contractor in an establishment covered under ESI will have to be enrolled as members of ESI. The definition of an 'employee' under the ESI Act expressly provides that an employee will mean any person employed for wages in or in connection with the work of a factory or an establishment to which this Act applies and who is employed by or through an immediate employer on the premises of the factory or establishment or under the supervision of the principal employer or his agent. Therefore,· the persons employed in supervision work in the godowns would be employees. If the labourers are employed by or through an immediate employer on the premises of the factory against payment of wages in or in connection with the work of the factory and as such answer the description of' employee' as defined under the ESI Act.1 However, the Supreme Court in its majority judgment has held that the employees engaged by the immediate employer (contractor) will not be liable to be covered under ESI Act. In this case, the emphasis was held, on the expression supervi­sion.2 The ESI authorities have their reservation so far as small contractors are concerned.


1.     P.D. Vidavatak and others 'vs. ESIC, 1971 Lab. IC 874.

2.     C.E.S.E. Limited Etc. 'vs. Subhash Chander Bose and others, 1992 LLR 81.


5.               Can the court impose a condition upon the principal employer to direct the contractor to employ particular employees?

The court cannot direct the principal employer to im­pose conditions on successive contractors to employ particular workmen. In one case, it was held that neither the Contract Labour (Regulation and Abolition) Act nor the Rules made there under provide that upon the abolition of the contract labour in any establishment, the said labour should be directly absorbed by the principal employer of that establishment. Nor is there any provision that pending decision upon an application under section 10 by workers, the said workers should continue to be engaged, at the instance of the principal employer, by the contractor engaged by such principal employer. When the Act does not provide for such measure but contents itself by mere regulation of the conditions of service of employees under the contractor and abolition of contract labour, it is not permissible for the High Court under Art. 226 to direct the appellant federation to impose a condition on the success­ive contractors engaged by it to employ the employees who had moved the government under section 10 of the Act, till a final order is passed under section 10 by the State Government.


1.     A.P, Dairy Development Co-op. Federation vs. K. Ramulu, 1989 –I CLR 407 (A.R.).

6.                Will the principal employer be liable to pay gratuity and bonus to the employees employed by the contractor?

No doubt a principal employer is liable to pay wages to the employees of the contractor if the latter fails to make payment of wages to his employees. However, it has been held in one case that the gratuity and bonus will not be payable by the principal employer since these do not come within the definition of 'wages'.


1.     Cominco Binani Zinc Ltd. VS. Pappachan, 1989 LLR 123 (Ker. HC).


7.               What are the guidelines for the continuation of Contract Labour?

The requirements for determining whether contract labour should be continued or not are:

(i) The nature of work operated upon contract labour must be a permanent nature, that is to say it must be of sufficiently long duration.

(ii) The operation carried on by contract labour must be incidental to or necessary for the industry.


8.                What would be the consequences if an employer engages the workers through a contractor, who should have been registered under the Contract Labour Act?

Such workers can be treated as employees of the principal employer since the definition of 'workman' in section 2(3)(b) of the Contract Labour (Regulation and Abolition) Act, 1970, implies that if the workman is not hired through contractor holding a valid licence under the Act, he would be a workman employed by the management itself.


1.     Workmen of Best & Crompton Industries Ltd., General Secretary, Socialist Workers' Union Madras vs. Best & Crompton 'Engineering Ltd. Madras and others, 1985-II LLN 169 (Madras HC).


9.                Does the registration and renewal fee for contractor's licence not amount to levy of tax?

The fee prescribed for registration, licence and renewal of licences does not amount to a levy of tax, and thererefore not beyond the rule making power of the Government


1.     Gammon India Lld. Etc. VS. Union of India and others, 1974 Lab,'IC 707; AIR 1974 SC 960; 28 FLR 106; 1974·I LLJ 189; 46 FJR 60.


10.          Can the workmen engaged by the contractor recover their unpaid wages from the principal employer, if the contractor fails to make the payment ? Whether it will make any difference, if the contractor and the principal employer are registered under the Contract Labour (Regulation and Abolition) Act?

In this connection, a reference is made to a decided case where a dispute has arisen between the employees engaged by a contractor who did not pay their wages and the employees flied their claim for their unpaid wages against the management of Indian Airlines. The management contended that the Central Government has refused to make a reference for adjudication under section 10(1) of the Industrial Disputes Act and as such their application under section 33C(2) of the Act was not maintainable. However, the Labour Court accepted and allowed the application of the workers of the contractor and held that the application was maintainable. The High Court also upheld the contentions of the employees hold­ing that there is no specific provision under the Contract Labour (Regulation and Abolition) Act to ensure the payment of wages to the workmen employed by the contractor and as such the workmen had rightly claimed their wages due to them by moving an applica­tion under section 33C(2) of the Industrial Disputes Act. It was further provided that section 21 (4) of the Contract Labour (Regula­tion and Abolition) Act also provides that in case the contractor fails to pay the wages, the principal employer is responsible to make the payment of wages and also the contract labour employed by the contractor can claim wages either from the contractor or from the principal employer to pay wages to the employees, engaged by the contractor is recognized in section 21(4) of, the Contract Labour (Regulation and Abolition) Act, 1970. Thus if the contractor fails to pay wages to his employees engaged by him the principal employer will be liable to pay the same.


1.     Indian Airlines v.s. Presiding Officer, labour Court & others, 1988 Lab. IC 818 (Delhi HC). - Cominco Binant Zinc Ltd. vs. Pappachan, 1989 LLR 123 (Ker.HC).


11.          Whether the persons recruited from an outside State. Directly will be 'migrant workmen' and entitled to the benefits?

Yes. The persons who are recruited from outside State by or through old workers already working would be 'interstate migr­ant workmen'. Even when thekedar or jamadar recruits or employs workmen for the employer by sending word through the 'old hands' the workmen so recruited or employed would he 'inter-state migrant workmen,' because the 'old hands' would be really acting as agents of the thekedar or jamadar for the purpose of recruiting or employing workmen. Such an 'inter-state migrant workman' would, in addition to the rights and benefits conferred upon him under the Inter-State Migrant Workmen Act and the Rules, be also entitled to the benefit of the provisions contained in Workmen's Compensation Act, 1923, Payment of Wages Act, 1936, Employees' State Insurance Act, 1948, Employees' Provident Fund and Miscellaneous' Provisions Act, 1952 and Maternity Benefits Act, 1961 by reason of section 2I, of the Act.


1.     Bandhu Mukti Morcha vs. UOI and Ors., 1984(3) SCC(L&S) 389


12.           What is the object of Contract Labour (Regulation and Abolition) Act? Is it really a legislation for social cause?

The Contract Labour (Regulation and Abolition) Act is an important piece of social legislation and seeks to regulate the employment of contract labour and where necessary to abolish the same. It is thus a legislation for the welfare of labourers whose conditions of service are not at all satisfactory. It has been held by Calcutta High Court that this Act being a piece of social legislation for the welfare of the labourers, should be literally construed.

1.     Lionel Edward Ltd. vs. Labour-Enforcement Officer, 1977 Lab.lC 1037 (Cal. HC); 51 FJR 199; 1978-II Cal. LJ 333.

13.           When and under what circumstances a principal employer is obligated to seek registration under the Act?

Principal employer means owner or occupier or the person who exercise ultimate control and supervision and manages the affairs of the establishment.

The Bombay High Court has held that when a company got a contract from an Electricity Board for work relating to erection of a new power station, the company could not be registered as principal employer under the Contract Labour (Regulation & Abolition) Act, 1970. In fact the Board was principal employer and the company was a contractor who might have engaged sub­contractors.! In another case the Gujarat High Court has held that when firm 'A' was dealing in large transactions with many firms besides the firm 'B' for which they were doing stitching work in their own premises. The firm 'A' could not be treated as a contractor employing contract labour for doing the job of firm 'B' as principal employer under the Contract Labour (Regulation and Abolition) Act2

1.     M/s Gammon India Ltd., Bombay vs. Asslt. Commissioner of Labour, Nagpur and
another 1976 Lab. IC 745 (Bom.HC).

2.     State of Gujarat vs. Vogue Garments and Ors., !985 LLJ (1) 255 (Gujarat HC).


14.           Whether there can be a principal employer in the absence of an establishment or a site?

The word 'site' or the 'place' may or may not belong to the principal employer, but this will not stand in the way of the application of the Contract Labour (Regulation and Abolition) Act or in holding that a particular place or work site where industry, trade, business, manufacture or occupation is carried on is not an establishment within the meaning of the Act. For instance,  a ship or the vessel in which the work of repairs is carried on is a place and is also an establishment under section 2(1) (e) (ii) of Contract Labour (Regulation & Abolition) Act, 1970.


1.     Lionel Edward Ltd. Vs. Labour Enforcement Officer, 1977 Lab. IC 1937 (CaI.HC); (1978) 2 Cal.LJ 333;51 FJR 199.


15.             What are the formalities in prohibiting contract labour by the appropriate government?

The Orissa High Court has held that the appropriate Government is bound to consult Advisory Board before issuing notification under Section 10 of the Contract Labour (Regulation and Abolition) Act, prohibiting the employment of contract labour in any process, operation or other work. The decision regarding the prohibition of employment of contract labour is no doubt with the appropriate Government but this decision is subject to judicial review. It was further held that when the appropriate Government failed to place material before the Court to indicate the nature of the condition, the appropriate Government had with the Advis­ory Board and the relevant factors that weighed with the appropriate Government in issuing the notification abolishing the contract labour, the notification is liable to be quashed.1 The Supreme Court has also held that only the appropriate Government can abolish the contract labour system under section 10 of the Act2


1.     M/s Zenith Industrial Service and two Ors. VS. Union of India and two Ors., 1990 LLJ (I) 38 (0rissa HC).

2.     Gujarat Electricity Board and Thermal Power Station vs. Hind Mazdoor Sabha 1995 LLR552 (Supreme Court).


16.         Who is empowered to prohibit the employment of contract labour in an industry or trade?

As stipulated by section 10 of the Contract Labour (Regulation and Abolition) Act, it is the discretion of the appropri­ate government to issue or not to issue the prohibition of contract labour in an industry. In a case it has been held that even the Supreme Court is not empowered to issue orders for prohibition of contract labour but it can issue directions to the appropriate govern­ment to consider whether the employment of contract labour should not be prohibited under section 10 of the Act. In another case, the Supreme Court has issued a writ of Mandamus to State Government for appointing committees under section 5 of the Act within three months to enquire into whether the contract labour in the corporation should be abolished. In a recent case, while direct­ing the Central Government to take appropriate action within six weeks, the Supreme Court restrained the Southern Railway from employing contract labour until the decision of the Central Govern­ment. In a case of Air France v. Industrial Tribunal Delhi, the Delhi High Court has held that it is only the appropriate government can prohibit the contract labour. The High Court set aside the findings of the Tribunal that abolition of the post by way of reorganization of business was contrary to the provisions of the Contract Labour (R&A) Act.


1.     Adhir Kumar Chaudhary & others, 1)S. State of West Bengal, 1987 Lab. Ie 1262~ (1986) 2 Cal. EN 207; 1987(81) Cal.WN 212; 1987 Cur, LR 418.

2.     B.H.E.L. Workers Association, Hardware & others vs. Union of India & others, AIR 1985 SC409; 1985(66) FJR229; (1985) I LLJ 428; 1985(65) FLR205; 1985·1 LLN 596; 1985.1 Cir.165.

3.     Catering Cleaners of Southern Railway vs. Union of India and others, AIR 1987 SC 777;1987 Lab. IC 619, 1987 Cur. CC 591.

4.     Food Corporation of India Workers Union VS. Food Corporation of India and others, 1985 Lab, 732; AIR 1985 SC 588; 1985 (2) SCC 294;1985 (66) FJR444;1985 Serv. LR615; 1985 (2) LLN30; 1985 FLR 501.


17.           Will the principal employer be liable to absorb the contract labour which has been abolished by the appropriate Government?

Though there is no express provision in the Act for absorp­tion of workers whose contract labour system stood abolished by the publication of the Notification under Section 10(1) of the Act, in a proper case, the Court as sentinel in the quivive is required to direct the appropriate authority to act in accordance with law and submit a report to the Court and based thereon proper relief should be granted

The Delhi High Court while following the Supreme Court ruling of Air India Statutory Corporation has held that on abolition of the contract labour system, the principal employer will absorb such workers provided they are above the minimum age and below the maximum age and also they are medically fit.'


1.     Air India Statutory Corporation vs. United Labour Union and Others, 1987 LLR 228 (SC).

2.     Delhi Multi Storeyed Building Employees Congress VS. Union of India & Ors., 1998 LLR 12 (Del HC).


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