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PROVISIONS OF THE
CONTRACT LABOUR (REGULATION & ABOLITION) ACT, 1970
~ KM Naik Advocate High Court & Chief Labour & Industrial Laws Advisor to Tata
Group of Companies, Mumbai
PRELUDE
With the opening of world economy, it has become expedient to engage Contract
Labour in any industry in our country. One of the ways of remaining in
competition effectively is to engage Contract Labour, which is cheaper than the
regular labour. Even prior to the Act of 1970, employers were invariably
engaging Contract Labour. With the passage of time, the system led to rampant
exploitation of Contract Labour by contractors as well as by principal employers.
Therefore the said Act, namely the Contract Labour (Regulation & Abolition) Act
1970 was passed by the Parliament in the year 1970.
The object of the said Act is mainly to regulate the employment of Contract
Labour and their service conditions and to abolish the Contract Labour wherever
it is found necessary.
SAILENT FEATURES:
5 The dominant object of the Act in the first instance is to regulate the
service conditions of contract labour and in the second instance in a given
case to abolish the contract labour.
6 Under Section 10 of the Act, the Govt. has got power to abolish the
contract labour by applying the criteria laid down in the said Section.
11 The Hon’ble Apex Court has handed down a landmark judgement in the
case of Steel Authority of India Ltd. vs. National Union Water Front
Workers & Ors. (2001 III CLR 349 SC = 2001 II LLJ 1087 SC) on the
issue of abolition of Contract Labour u/s. 10 of the said Act. The highlights
of the said judgement are as follows :
iv. The said issue of automatic absorption was also pending before the
Supreme Court in various other cases, including the case of Steel
Authority of India Ltd. (SAIL).
vi. The Constitution Bench of 5 Judges has now in the said case of
SAIL by its judgement dated 30.8.2001 set the said controversy at
rest by holding that upon abolition of contract labour by the
government in exercise of the powers u/s. 10 of the said Act, there
cannot be automatic absorption of such contract labour into the
direct employment of the principal employer. By this judgement,
the contrary view of the Supreme Court in the said case of Air India
has been specifically overruled.
vii. The Constitution Bench of 5 Judges has also held that the
judgement in the case of SAIL has no retrospective effect, but has
only prospective effect. This means, if any company like Air India
had already absorbed the contract labour into their direct
employment upon abolition, those cases cannot be reopened
based on the said judgement of SAIL.
ix. The said judgement in the case of SAIL, apart from being a
landmark judgement, is also in the nature of trend-setting in the
matter of employment of contract labour, because many employers
were apprehensive that upon abolition of contract labour, they
would automatically become the direct employees of the principal
employer based on the judgement of the Supreme Court in the said
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case of Air India. The judgement in the case of SAIL has now
allayed the fears of employers and they are now free to engage
contract labour through a contractor without any such
apprehension.
xi. Therefore, the Companies are advised that they should not in any
way interfere with the working of a contractor vis-à-vis his workmen.
They should also ensure that their personnel, such as
officers/supervisors do not exercise direct control or supervision
over the day to day working of the workmen of the contractor.
xiv. The Constitution Bench of the Supreme Court in the said case of
SAIL has also dealt with other related issues, which are not
germane for the purpose of this note.
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xv. In a way, the Supreme Court by its judgement in the SAIL case has
substantially achieved by its judicial activism what the Central Govt.
has been struggling to achieve by way of legislation, which got
stalled for political reasons.
The Courts are flooded with cases throughout the country where the
workmen of contractors have claimed to be the workmen of principal
employers. Several cases have been decided in favour of contract labour,
holding them as workmen of principal employer, because the arrangement
between the contractors and principal employers have been found to be
sham/bogus and that the contractors have been merely name lenders and
not real employers of the workmen. Therefore, while engaging the
services of a contractor, some factors that should be borne in mind are :