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The Contract Labour (Regulation and Abolition) Act, 1970

The Contract Labour (Regulation and Abolition) Act, 1970. Objectives. To regulate employment of contract Labour and their terms and conditions Where it is found necessary, to abolish contract labour. Case Law 1. Standard Vacuum Refining Company V/s its Workmen 1960 II LLJ 233

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The Contract Labour (Regulation and Abolition) Act, 1970

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  1. The Contract Labour (Regulation and Abolition) Act, 1970

  2. Objectives • To regulate employment of contract Labour and their terms and conditions • Where it is found necessary, to abolish contract labour

  3. Case Law 1 Standard Vacuum Refining Company V/s its Workmen 1960 II LLJ 233 (Supreme Court)

  4. Facts • A dispute was raised by the workmen of the company (hereinafter called the respondents) with respect to contract labour employed by the company for cleaning maintenance of the refinery, (plant and premises) belonging to the company. • On April 27, 1957, the respondents made a demand for abolition of the contract system that prevailed in the company and for absorbing the workmen employed through the contractors into the regular service of the company with retrospective effect from the date of their employment in the company through the contractors….

  5. Facts… The case of the respondents was that the contractor used to change sometimes from year to year with the result that the workmen employed by the previous contractor were thrown out of employment. As an instance, it was said that previous to October 1, 1957, the contract was with Gowri Construction Company. That company employed 67 workmen to do the work. But when the contract was given to Ramji Gordhan and Company, all these 67 workmen were thrown out of employment, though 40 of them were subsequently re-employed as fresh employees by Ramji Gordhan and Company.

  6. Facts… The result of the system therefore was that there was no security of service to the workmen who were in effect doing the work of the company. Besides the contractors were paying much less to the workmen that the amount paid by the company to its unskilled regular workmen. Further, the workmen of the contractors were not entitled to other benefits and amenities such as provident fund, gratuity, bonus, privilege leave, medical facilities and subsidized food and housing to which the regular workmen of the company were entitled. The work was of a permanent nature, but the contract system was introduced to deny the workmen the rights and benefits which the company gave to its own workmen.

  7. Facts… • The tribunal held that the reference was competent. On the merits it was of opinion that the work which was being done through the contractor was necessary for the company and had to be done daily, though it was not a part of the manufacturing process. It further held that doing of this work through annual contracts resulted in the deprivation of security of service and other benefits, privileges, leave, etc., for the workmen of the contractor. Therefore considering the nature of the case it was of opinion that this was a proper case where a direction should be given to the company to abolish the contract system with respect to this work.

  8. Facts… In the result the company was directed with effect from November 1, 1958, to discontinue the practice of getting this work done through contractors and to have it done through workmen engaged by itself. • The company was further directed to engage regular workmen for this work and in so doing it was to give preference to the workmen employed by Ramji Gordhan and Company.

  9. Facts… • The reference is confined to one only, viz., cleaning maintenance work at the refinery including premises and plant and we shall deal with that only. So far as this work is concerned, it is incidental to the manufacturing process and is necessary for it and of a perennial nature which must be done every day. Such work is generally done by workmen in the regular employ of the employer and there should be no difficulty in having regular workmen for this kind of work.

  10. Facts… The matter would be different if the work was of intermittent or temporary nature or was so little that it would not be possible to employ full-time workmen for the purpose. Under the circumstances the order of the tribunal appears to be just and there are no good reasons for interfering with it.

  11. Ratio “If the work for which Contract Labour is employed is incidental to and closely connected with the main activity of the industry and is of a perennial and permanent nature, the abolition of Contract Labour would be justified”.

  12. Prohibition of employment of contract labour Section 10 of the Contract Labour Act :- • 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. • 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 –

  13. Prohibition of employment of contract labour …. • 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. • 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.

  14. Prohibition of employment of contract labour …. • Whether it is done ordinarily through regular workmen in that establishment or an establishment similar thereto; • Whether it is sufficient to employ considerable number of whole-time workmen.

  15. Case Law 2 The Supreme Court inVegoils V/s The Workmen (1971 2 SCC 724 )

  16. Ratio 1. The feeding of hoopers in the solvent extraction plant is an activity closely and intimately connected with the main activity of the appellant, namely, crushing oilcakes and oilseeds for extraction of oil and other chemical production. Excepting a few days, this work has to go on continuously almost throughout the year. It is not as if the work of an intermittent or temporary nature or so little that it would not be possible for the appellant to employ full-time workmen for this purpose. The fact that this work is done by departmental workmen in other concerns shows that it is an essential part of the industry.

  17. Ratio….. 2. If the work for which contract labour is employed is incidental to and closely connected with the main activity of the industry and is of a perennial and permanent nature, the abolition of Contract Labour would be justified. These principles are also incorporated in the Contract Labour Act.

  18. Ratio…….. 3. In view of the facts of the present case, therefore, there should be no difficulty in having regular workmen in the employment of the appellant to do this type of work. 4. In the present case the work of loading and unloading is not done on all the working days and on some days a number of wagons and trucks suddenly arrive necessitating employment of large number of workers and they are to be ……..

  19. Ratio….. ….cleared from the railway wagons within a limited time to avoid demurrage. The fact that in other units also, the work is done by contract labour shows that it is not profitable to employ full time workers for this purpose and no directions can, therefore, be given for abolition of contract labour.

  20. Ratio……. • The following points emerge from s. 10. (1) of the Contract Labour (Regulation and Abolition) Act, 1970 (37 of 1970) (1) The appropriate Government has power to prohibit the employment of contract labour in any process, operation or other work in any establishment; (2) before issuing a notification prohibiting contract labour, the appropriate Government has to consult the Central or State Board, as the case may be, comprises of the representatives of the workmen, contractor and the industry;

  21. Ratio…… (3) before issuing any notification under sub-s. (1) of S. 10, prohibiting the employment of contract labour the appropriate Government is bound to have regard, not only to the conditions of work and benefits provided for the contract labour in a particular establishment, but also other relevant factors enumerated in clauses. (a) to (d) of sub-s. (2) of S. 10 and (4) under the explanation which really relates to clause (b), the decision of the appropriate Government, on the question whether any process, operation or other work is of perennial nature, shall be final.

  22. Ratio….. 6. Under the Act (37 of 1970), the appropriate Government when taking action under S. 10 will have an overall picture of the industries carrying on similar activities and decide whether contract labour is to be abolished in respect of any of the activities of that industry. Therefore, it is reasonable to conclude that the jurisdiction to decide about the abolition of contract labour, or to put it differently, to prohibit the employment of contract labour, is now to be done in accordance with S. 10. Therefore, it is proper that the question whether the contract labour in the appellant’s industry is to be abolished or not, is left to be dealt with by the appropriate Government under the Act, if it becomes necessary..

  23. Ratio….. • On this ground, the directions of the Industrial Tribunal to the Company to abolish the contract system, etc. cannot be maintained.

  24. Case Law 3 The Supreme Court in: Catering Cleaners of S. Rly. V/s Union of India (1987 1 SCC 700)

  25. Facts 1. The petitioners are catering cleaners working in the catering establishments in various railway junctions of the Southern Railway and in the pantry cars of long distance trains running under the control of the Southern Railway. Since a long time they have been agitating for the abolition of the contract system and for their absorption as regular employees of the principal employer, namely, the Southern Railway. They complain that they are not even paid minimum wages. They are paid a pittance averaging from Rs. 2.00/- to Rs. 2.50/- per day. Although the contract system has been abolished in almost all the other railways, the Southern Railway persists in employing contract labour for cleaning its catering establishments and pantry cars. ……

  26. Facts… • ….So they filed petition under Art. 32 for abolition of contract labour system and regularisation of their services. 2. Against that the Railway Administration contended that it has not been found to be possible to abolish the contract labour system because the nature of the cleaning work in the catering units of the Southern Railway was fluctuating and intermittent. The contract labour system is followed not only in the Southern Railway but also in the South Central Railway and the South Eastern Railway..….

  27. Facts… They claim that any departmental unit not working profitably could be handed over to a private licensee and this was the alternative that was adopted by the Southern Railway in the case of catering cleaners. Experience showed that it was difficult to extract work from catering cleaners if they were engaged on a regular basis by the railway and it was not possible to supervise their work effectively. To ensure satisfactory service to the public the work had to be entrusted to a private agency……

  28. Held “(a) The Railway Administration has only made vague and general statements for which no facts or figures in support thereof have been placed before the Court. In fact their contentions stand contradicted by the Report of Parliamentary Committee of Petitions which went into this question.”

  29. Held…. “(b) On facts, all the relevant factors stated in clauses (a) to (d) of S. 10 (2) are satisfied. That catering establishments make profit is also established. The history and object of the Act support abolition of contract labour in this case. However, in the circumstances, instead of issuing a mandamus to the Central Government, the Central Government is being directed to take appropriate action under S.10 within six months.”

  30. Held... “(c) The work of cleaning catering establishments and pantry cars will be done departmentally by employing those workmen who were previously employed by the contractor on the same wages and conditions of work as are applicable to those engaged in similar work by the Western Railway.”

  31. Section 7 of the CLRA provides for registration in respect of a principal employer. Section 12 of the CLRA provides for the Contractor to obtain license.

  32. Case Law 4 The Supreme Court in Dena Nath V/s National Fertilisers Ltd., (1992 1 SCC 695)

  33. Held “In proceedings under Art. 226 of the Constitution merely because contractor or the employer had violated any provision of the Act or the rules, the Court could not issue any mandamus for deeming the contract labour as having become the employees of the principal employer.”

  34. Case Law 5 The Supreme Court in Gujarat Electricity Board, Thermal Power Station V/s Hind Mazdoor Sabha (1995 5 SCC 27)

  35. Held “After the coming into operation of the Contract Labour (Regulation and Abolition) Act,(for short the Act), the authority to abolish the contract labour is vested exclusively in the appropriate Government which has to take its decision in the matter in accordance with the provisions of Section 10 of the Act. No Court including the industrial adjudicator has jurisdiction to do so. However, the authority to abolish the contract labour under Section 10 of the Act comes into play only where there exists a genuine contract.

  36. Held… In other words, if there is no genuine contract and the so-called contract is a sham or a camouflage to hide the reality, the said provisions are inapplicable. When, in such circumstances, the workmen concerned raise an industrial dispute for relief that they should be deemed to be the employees of the principal employer, the court or the industrial adjudicator will have jurisdiction to entertain the dispute and grant the necessary relief.”

  37. Case Law 6 The Supreme Court in Air India Statutory Corpn. V/s United Labour Union (1997 9 SCC 377)

  38. Facts 1. The Central Government, exercising the power under Section 10 of the Act, on the basis of recommendation and in consultation with the Central Advisory Board constituted under Section 10(1) of the Act, issued a notification on 9-12-1976 prohibiting "employment of contract labour on and from 9-12-1976 for sweeping, cleaning, dusting and watching of the buildings owned or occupied by the establishments in respect of which the appropriate government under the said Act is the Central Government".

  39. Facts…. 2. Since the appellant did not abolish the contract system and failed to enforce the notification of the Government of India dated 9-12-1976, the respondents filed writ petitions for direction to the appellant to enforce forthwith the aforesaid notification abolishing the contract labour system in the aforesaid services and to direct the appellant to absorb all the employees doing cleaning, sweeping, dusting, washing and watching of the buildings owned or occupied by the appellant-establishment, with effect from the respective dates of their joining as contract labour in the appellant's establishment with all consequential rights/benefits, monetary or otherwise.

  40. Held “(a) The contractor is an intermediary between the workmen and the principal employer. The moment the contract labour system stands prohibited under Section 10(1), the embargo to continue as a contract labour is put an end to and direct relationship has been provided between the workmen and the principal employer. Thereby, the principal employer directly becomes responsible for taking the services of the workmen hitherto regulated through the contractor. The object of the penal provisions was to prevent the employer from committing breach of the provisions of the Act and to put an end to exploitation of the labour.

  41. Held…. and to deter him from acting in violation of the constitutional right of the workmen to attain decent standard of life, living wages, right to health etc. When the appropriate Government finds that the employment is of a perennial nature etc. contract system stand abolished, thereby, it intended that if the workmen were performing the duties of the post which were found to be of perennial nature on par with regular service, they also require to be regularised. The Act did not intend to denude them of their source of livelihood and means of development, throwing them out from employment.

  42. Held…. The Act is a socio-economic welfare legislation. Right to socio-economic justice and empowerment are constitutional rights. Right to means of livelihood is also a constitutional right. Right to facilities and opportunities are only part of and means to right to development. Without employment or appointment, the workmen will be denuded of their means of livelihood and resultant right to life, leaving them in the lurch since prior to abolition, they had the work and thereby earned livelihood.”

  43. Held…. “(b) The award proceedings as suggested in Gujarat Electricity Board case ((1995) 5 SCC 27 : 1995 SCC (L&S) 1166) are beset with several incongruities and obstacles in the way of the contract labour for immediate absorption. Since, the contract labour gets into the service of the principal employer, the Union of the existing employees may not espouse their cause for reference under Section 10 of the ID Act. The workmen, on abolition of contract labour system have no right to seek reference under Section 10 of the ID Act.

  44. Held… Moreover, the workmen immediately are kept out of job to endlessly keep waiting for award and thereafter resulting in further litigation and delay in enforcement. The management would always keep them at bay for absorption. It would be difficult for them to work out their right. Moreover, it is a tardy and time-consuming process and years would roll by. Without wages, they cannot keep fighting the litigation endlessly. The right and remedy would be a teasing illusion and would be rendered otiose and practically compel the workmen to remain at the mercy of the principal employer.”

  45. Held…. “(c) When these contract workers carry out the work of the principal employer which is of a perennial nature and if provisions of Section 10 get attracted and such contract labour system in the establishment gets abolished on fulfillment of the conditions requisite for that purpose, it is obvious that the intermediary contractor vanishes and along with him vanishes the term "principal employer". Unless there is a contractor agent there is no principal. Once the contractor intermediary goes the term "principal" also goes with it. ……….

  46. Held…. Then remain out of this tripartite contractual scenario only two parties - the beneficiaries of the abolition of the erstwhile contract labour system i.e. the workmen on the one hand and the employer on the other who is no longer their principal employer but necessarily becomes a direct employer for these erstwhile contract labourers. Implicit in the provision of Section 10 is the legislative intent that on abolition of contract labour system, the erstwhile contract-workmen would become direct employees of the employer on whose establishment they were earlier working and were enjoying all the regulatory facilities ….. 

  47. Held…. that very establishment under Chapter V prior to the abolition of such contract labour system.” “(d) engagement of contract labour has been found to be unjustified by a catena of decisions of this Court. When the work is of perennial nature and instead of engaging regular workmen, the system of contract labour is resorted to, it would only be for fulfilling the basic purpose of securing monetary advantage to the principal employer by reducing expenditure on work….

  48. Held…. force. It would obviously be an unfair labour practice and is also an economically short-sighted and unsound policy, both from the point of view of the undertaking concerned and the country as a whole. Such a system was tried to be put to an end by the legislature by enacting the Act but when it found there are certain activities of establishment where the work is not of perennial nature then the contract labour may not be abolished but still it would be required to be regulated so that the lot of the workmen is not rendered miserable. The real scope and ambit of the Act is to abolish contract labour system as far as possible from every establishment.

  49. Held…. Consequently, on abolition which is the ultimate goal, the erstwhile regulated contract labour cannot be thrown out of establishment as tried to be submitted on behalf of the management taking resort to the express language of Section 10 of the Act. Such a conclusion reached by the two member Bench in Dena Nath case, flies in the face of the very scope and ambit of the Act and frustrates the very scheme of abolition of contract labour envisaged by the Act. Such a conclusion, with respect, cannot be countenanced, as it results in a situation where relatives of the patient are told by the operating surgeon that operation is successful but patient has died. "

  50. Ratio “1. On Prohibition of Contract Labour, intermediary goes away. Contract Labourers are direct employees of Principal employers”. “2. Abolition means automatic absorption of Contract Labour”

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