The Relation between Principle Employer, Contractor and

Contract Workmen is regulated by Contract Labour

Principle
(Regulation and Abolition Act,) 1970 Employer
Important Provisions of the Contract Labor (R & A) Act, 1970

Principle Employer Should have Certificate of

Registration for engaging Contract Labour
Contractor
The Contractor Shall have Labor License if he engages
more than 20 workmen

The Contractor shall pay wages and provide welfare Contract

facilities to Contract Workmen
Workmen
.
Important Provisions of the Contract Labor (R & A) Act, 1970

‘(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;]

The Appropriate Government has power to abolish engaging contract labour in any job or establishment under
section 10 (1) of C.L.(R & A) Act after considering

(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;
Air India Judgment:
Air India engaged contract labor for cleaning, sweeping and dusting Jobs.

The Central Government having consulted the Central Advisory Board issued notification dated
9.12.1976 prohibiting engaging of Contract Labour in sweeping, cleaning, dusting and watching of
the buildings owned or occupied by the establishment in respect of which the appropriate
Government under the said Act is the Central Government.

RLC, Bombay opined that the State Government was the appropriate Government under the CLRA
Act for Air India and notification dated 9.12.1976 is not applicable accordingly

Contract Workmen Union filed writ petition seeking writ of mandamus to RLC & Air India to enforce
the said notification prohibiting employment of contract labour and for a direction to absorb all the
contract labour

The matte went up to supreme court and supreme court held that:
(1) Central Government is appropriate government for Air India
(2) There is automatic absorption of Contract Labour if they are engaged in the jobs
prohibited by Government under Contract Labour Act, 1970
 West Bengal government
prohibited engaging Contract In 1994 , the Notification The Union representing the
Labor in Stock Yards of SAIL in became Operational. Around contract workmen filed a writ
1 Calcutta vide notification dated
2 353 Contract workmen were 3 petition in Calcutta High Court
July 15, 1989 which was kept working in the Stock Yard of for Absorption of Contract
under abeyance up to 1994 on SAIL at that time Workmen
SAILs representation

Calcutta High Court Division

Calcutta High Court Single Bench Management challenged the Bench
Award of Single Bench in Calcutta High Court
Calcutta High Court ordered Division Bench Division Bench
5
SAIL to Absorb 353 workmen Dismissed both writ
and quashed the abeyance appeals and writ
ordered dated August 1994 Management challenged the petitions 7
Notification dated July 15,
4 1989 before Single Bench
6 SAIL Went to
Supreme Court
8 challenging
Division Bench
Order
(i) what is the true and correct import of the expression
appropriate government as defined in clause (a) of sub-section
(1) of Section 2 of the CLRA Act?

(ii) whether the notification dated December 9, 1976 issued by the

Central Government under Section 10(1) of the CLRA Act is valid
and applies to all Central Government companies; and

(iii) whether automatic absorption of contract labour, working in

the establishment of the principal employer as regular employees,
follows on issuance of a valid notification under Section 10(1) of
the CLRA Act, prohibiting the contract labour in the concerned
establishment.
 Air India Judgment SAIL Judgment

 The Court laid down 7  The appropriate

principles to determine government for Central
appropriate government
. Undertaking would be as
 It should be per section 2 (a) of
instrumentality or Contract Labour Act.
agency under Article 12
of constitution of India
for the purpose of  It is suffice if the Industry
Central government to is carried by or under the
be appropriate authority of Central
government Government.
whether the notification dated December 9, 1976 issued by the
Central Government under Section 10(1) of the CLRA Act is valid and
applies to all Central Government companies

 Supreme Court opined that the Omnibus

Notification dated 1976 was issued without
following procedure as per section 10 (1) of
CLR Act. Accordingly, it is struck down
whether contract labour are required to be absorbed automatically by the
principal employer if the workmen are working in the prohibited areas of
Notification
There is no automatic absorption of Contract Labour if they are engaged in a prohibited
areas of Notification.

Judgment in the Case of Air India is overruled by this Judgment

If the contract labour are working in prohibited areas of notification and the Contract is
found to be not genuine but a mere camouflage, the so-called contract labour will have to be
treated as employees of the principle employer who shall be directed to regularize the
services of the contract labour in the concerned establishment

If the contract labour are working in prohibited areas of notification and the contract is
found to be genuine and prohibition notification issued by the Government, prohibiting
employment of contract labour in any process, operation and the principal employer intends
to employ regular employees in such process/operation, he shall give preference to the
erstwhile contract labour by relaxing the condition as to maximum age etc.
 Section 46(1) in The Factories Act, 1948
 (1) The State Government may make rules
requiring that in any specified factory
wherein more than two hundred and fifty
workers are ordinarily employed, a canteen
or canteens shall be provided and maintained
by the occupier for the use of the workers.
 • IOCL-Haldia Refinery engaged Contract workmen thru contractor for
running the canteen as stipulated in section 46 (1) of Factories Act 1948
1 • The Contract workmen filed a writ petetion claiming permanency in
IOCL.

• The Single bench of Calcutta High Court passed an award in favour of

the workmen and directed IOCL to absorb Contract workmen
2 • IOCL challenged the award in division bench. The Division Bench set
aside the Order of the Single Bench and held that the Contract Labour
are not required to be absorbed

3 • Hence the Contract Labour filed SLP before the Supreme Court
Submission By Contract Labor Submission by IOCL
Work carried on is perennial in nature and the The workmen are appointed by Contractor
canteen is incidental to and is connected with and hence they are not workmen of IOCL
the establishment of the management
Haldia Refinery is governed by the provisions The statutory canteen is not required to be run
of Indian Factories Act, 1948 and the canteen by regular employees as per provisions of
where the said workman are employed is a Factories Act, 1948.
statutory canteen established under the
provisions of the Act.
Contractor though shown as a contractor has IOCL being a PSU has to follow strict norms
no control over the management, while recruiting such as job qualifications,
administration and functioning of the canteen employment norms, reservation of posts etc.
and the canteen is a part of the establishment Therefore, it can’t appoint any person in
of the management and the workers in the contravention of its policies.
canteen are the employees of the
management
 The Judgment was given in favour of IOCL and held that the workmen
will be workmen of IOCL for the purpose of Factories Act only and IOCL is
not required to absorb them.
 The basis of judgment is as follows:
A free hand has been given to the contractor with regard to the engagement
of the employees working in the canteen.

There is no clause in the agreement stipulating that the canteen contractor to

retain and engage compulsorily the employees who were already working in
the canteen under the previous contractor

A duty has been cast on the contractor to keep proper records pertaining to
payment of wages etc. and also for depositing the provident fund
contributions etc.

The workmen of the canteen entered in to settlement with the Contractor

before ALC