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Including the excluded : A study of the impact of contract labour


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Including the excluded : A study of the impact of contract labour

  1. 1. Including the Excluded
  2. 2. Members of the Study Team Adv. Shrikant Dharap Senior Advocate, Bombay High Court, Senior functionary of Bharatiya Mazdoor Sangh (BMS) for the last over three decades Tel. 91 22 26478754 Mobile 9821471767 Adv. Vinay Menon Advocate, Bombay High Court Yashwant ThakarAdvisor, RMP’s Centre for Development, Planning and Research Suryakant Paranjape Senior Functionary, BMS and Bharatiya Shramshodh Mandal Documentation Consultants Pulind Samant, Mumbai Niranjan Welankar, Vasai Project Coordination Mrudul Bapat, Project Officer, Rambhau Mhalgi Prabodhini, Mumbai
  3. 3. Including the Excluded A Study of the Impact of Contract Labour (Regulation and Abolition) Act, 1970 S M Dharap Advocate, Bombay High Court Mumbai Office: 17, Chanchal Smurti, G.D. Ambekar Road, Opp. Shriram Industrial Estate, Wadala, Mumbai - 400 031. Tel: 022 - 2416 6966 / 2418 5502, Fax: 022 - 2415 6725. RMP - KEC:Keshav Srushti, Essel World Road, Uttan Village, Bhayander (West), Thane - 401 106. Tel: 022 - 2845 0101, Fax: 022 - 2845 0106 Website: Including the Excluded
  4. 4. Including the ExcludedA study of the Impact of Contract Labour(Regulation and Abolition) Act, 1970© Rambhau Mhalgi PrabodhiniAll Rights reserved.By: S. M. Dharap, Advocate, Bombay High CourtPrice : Rs. 150/-Publication No.: Gen./ B / Eng. /71 / 2012-13(1)ISBN 978-81-903837-5-2Date of Publication: April 30, 2012Publisher:Anand ShidhayeRambhau Mhalgi Prabodhini17, Chanchal Smruti, G. D. Ambekar Marg,Opp. Shriram Industrial Estate, Wadala, Mumbai- 400031Tel. + 91 22 2413 6966, 2418 5502 Fax: + 91 22 2415 6725E-mail: publications@rmponweb.orgWebsite: http://www.rmponweb.orgPrinted at:Rachana MudranDadar, Mumbai.Tel. +91 22 24124410Designed by:Reflections,Mumbai.Tel. 9820130094 Including the Excluded
  5. 5. ContentsS. No. Topic Page No. 1. List of Tables 4 2. Preface 5 3. Background 7 4. Chapter I: Research Design 9 5. Chapter II: Literature Review 12 6. Chapter III: Case Law and the Role of Judiciary 23 7. Chapter IV: Data Analysis 34 8. Chapter V: Views of Trade Unions 62 Chapter VI: Views of Law Practitioners, Consultants 9. 70 Educationists 10. Chapter VII: Conclusions 73 11. Chapter VIII: Recommendations 76 Annexure I: Contract Labour 12. 78 (Regulation and Abolition) Act, 1970 Annexure II: Conclusions of Workers Symposium 13. on Policies and Regulations to Combat Precarious 91 Employment (Geneva, 4 – 7 October 2011) 14. Annexure III: Interview Schedules 96 Including the Excluded
  6. 6. List of Tables Sr. No. Title 1. City- wise distribution of respondents 2. Type of Units 3. Types of Management or Ownership 4. Age Wise Distribution of contract workers 5. Education of Contract Workers 6. Number of Dependents 7. Ownership Pattern of Residence 8. Number of Migrants. 9. Periods of Work Distribution of contract workers According to Companies 10. Where They Have Worked 11. Number of Years Working with the current Contractor 12. Nature of Work 13. Engagement in Any Productive/ Main Work 14. Average Wages 15. Wages According to Type of Unit 16. Place Wise Wages 17. Salary Received in Last 3 Years 18. Facilities. (Only Positive Responses) 19. Awareness About the Act 20. Available Staff in the Offices of the Assistant Labour Commissioners 21. Details of Licenses Issued and Number of contract workers 22. Details of Inspections Carried Out 23. Enforcement of Contract Labour (R and A) Act, 1970 (96-00) No. Of Cases Received / Disposed of During the Last Five Years under Rule 25 (2) (v) (a) and (b) 24. of the Contract Labour (R and A) Central Rules, 1971 Relating to Payment of Wages (96-00) 25. Enforcement of Contract Labour (R and A) Act, 1970 (04- 08) No. Of Cases Received / Disposed of During the Last Five Years under Rule 25 (2) (v) (a) and (b) 26. of the Contract Labour (R and A) Central Rules, 1971 Relating to Payment of Wages (03-06) 27. National figures about cases Including the Excluded
  7. 7. PrefaceThe Contract Labour (Regulation and Abolition) Act 1970 (hereinafter referred toas the Act) has been in force for last 42 years. During these 42 long years severalchanges have occurred in the industrial sector. Especially after opening the economyin the early nineties and globalisation, the industrial picture of India has changedcompletely. Adoption of high-tech methods for the production and the quality of theproducts has assumed an exceptional importance, primarily because of the marketoriented business and industrial policies adopted by the Government as well as by thepractices of industrialists/businessmen. It has also extremely affected the employer- employee relations. Output and profitability have assumed greater importance,encouraging some employers to bypass or find loopholes, in the laws enacted forprotection of the interests of the workers, with the sole objective of achieving higherproductivity, which in turn has affected this relationship. One of such laws whichwas passed for the protection of the contract labour was the Act, Contract Labour(Regulation and Abolition) (CLRA) 1970. The decisions by the Courts, in respect ofthis law, are now being used for the purposes contrary to the purpose for which theAct was enacted.Our Constitution, enjoins the responsibility on each of the four factors of production,which should consider each other’s interest in this era of cooperation. However thisshared responsibility has been largely ignored.We met several Trade unionists, lawyers and such other persons who have workedin the field for long time. We tried to analyse and find out as to what is the reason forthis Act becoming impracticable and redundant and whether it should be repealedor amended and if amendment is to be carried out, what can be the basis on whichwe can arrive at relevant conclusions for suggesting amendments or whether afresh legislation should be enacted by incorporating such provisions which can beexpected to fulfil the objects of the Act and also remove its shortcomings.It was thus necessary to approach some leaders of the labour unions, employers’associations, and lawyers appearing on both sides, contractors and contract workersto gather impartial and unbiased information to arrive at relevant conclusions.An approach under Right To Information Act was required to be made whereverinformation from the Government machinery was not readily available.The project was conceived by Adv. Shrikant M. Dharap, a senior lawyer specialising inlabour law, practising in Bombay High Court. He is also one of the senior national levelfunctionaries of the Bharatiya Mazdoor Sangh (B.M.S.), a leading labour organisationin India for the last over three decades. He was duly assisted by a team comprisingAdv. Vinay Menon, Yashwant Thakar and Suryakant Paranjape.We must say that our endeavour was not easy one as we found a lot of psychologicalresistance on the part of employers and surprisingly even some unions, in furnishing Including the Excluded
  8. 8. the information sought. Certain employers went to the extent of prohibiting the entryof the researchers of Rambhau Mhalagi Prabodhini.The work was carried out in spite of all such difficulties. Accordingly, a report wasprepared and the conclusions drawn, which are being presented in this report. Wealso would like to make certain recommendations, which are stated separately.The exercise was not undertaken with an objective of finding fault or assigning blame,but only with an earnest desire to ascertain, as to whether, the present Act, with theinterpretations placed by the Hon’ble Supreme Court and High Courts have helpedin achieving the objectives of the Act for which it was enacted and if it is so, what arethe other factors responsible for that. While researching the topic from various angles,we did come across a few other similar studies undertaken in the past by differentinstitutions and organisations, which we have taken due cognisance of in the body ofthe report, wherever appropriate.We hope this report serves the cause of the most under previliged and highly neglectedclass of unorganised labour in our country. To that end this report very clearly tries topoint out the gaping inadequacies in the whole system including the Act itself and itspresent day administration.Last but not the least, it is only necessary to thank some people and appreciatetheir effort in making this project a meaningful one. As aforesaid, Adv. Dharap hasbeen the initiator and the leading light throughout. He successfully solicited strongcontributions to the body of the project, through all his team members. Adv. Dharapwas so very keen about the success of this project that he voluntarily took painsto organise some financial support through his personal friends. Some valuableassistance was rendered by some other of his such as members of Labour LawPractitioners’ Association, Mumbai, Thane, Nashik and Pune trade unionists andrepresentatives of employers’ associations and that too at their own costs. We aregrateful to all of them.Vinay SahasrabuddheDirector GeneralRambhau Mhalgi Prabodhini April 30, 2012 Including the Excluded
  9. 9. BackgroundThe triggering point of this project was the judgment of the Supreme Court in SteelAuthority of India Case which caused us to refer back to the history, the purpose andthe object of the legislation known as Contract Labour (Regulation and Abolition) Act.1970. When we refer to the background of the legislation, which is almost fully coveredin the case of Standard Vacuum Company Vs. Its workmen, 1960 (Supreme Court),which emphasised on the condition then prevailing that in absence of any legislationor rules dealing with the conditions of service of the contract labour, the workers werebeing exploited by the Industrialists.We presume that the Hon’ble Supreme Court, in the said judgment, had rightlygiven the guideline to the Government and as a matter of necessity, the Bill cameto be placed in July 1967 before the parliament, which resulted the Contract Labour(Regulation and Abolition) Act of 1970. All the judgments delivered by the SupremeCourt thereafter, right up to the 2001 Case of Steel Authority of India Ltd., werestudied and pondered over, resulting in a disturbed state of mind about not so positiveresults of the decisions reached in respect of this Act. The 1st Case of the SupremeCourt, in 1971, separated the cases under this Act from the coverage of IndustrialDisputes Act 1947, on the ground that the new legislation was a special legislationdealing with the subject matter under the Act and therefore, ousted the jurisdiction ofthe forum under the I. D. Act 1947.Alternative to this machinery was the creation and the formation of the State andCentral Advisory boards which was in the nature of an administrative body which wasmade the sole alternative to the I.D. Act expecting that the machinery of the boardswould resolve all the issues. Strangely, these boards were not given any judicialpowers with a binding effect. This resulted in taking away the rights of the concernedworkmen to approach the Court under any law and who could not knock the doorsof any judicial forum having powers to deal with various aspects arising out of thedispute. The Act more relies on the Government machinery functioning under theDepartment of the Labour which in fact, as our experience goes, is totally inefficient,inadequate and in some cases corrupt.Another case in point and that too of recent origin is that of Jupiter Life Line Hospital,Thane (Arbiter, Jan.’11) had engaged over 500 contract labour in various jobs, 77of whom were engaged through one agency viz. ‘Rare Hospitality Services’ forhousekeeping work, which they had been doing continuously for 5 years, ever since thesaid hospital was established. In March 2009, the said contract labour was transferredarbitrarily to distant places in and around Mumbai. As they were earning betweenRs. 3000 and Rs. 4000 a month, they couldn’t manage the conveyance expenses,consequent to said transfers. They complained to the State Labour Ministry, whoafter going through the facts of the case, abolished the said contract work, but thecomplainant workers lost their jobs, as there was no provision in law, for prohibiting Including the Excluded
  10. 10. the practice as an interim relief on receipt of the complaint or/and for regularisation oftheir services post abolition and. Thus it was a victory in principle for them, but whichbrought along the ‘gift’ of job-loss.All these and such other shortcomings resulted in denial of justice to the workers, uponthe abolition of contract and the regularisation of their employment with the principalemployer and in fact prolonged the dispute where approach was only to the High Court.In the intervening period several judgments show that technicalities crept in, as a resultof which, instead of dealing with the main issue, the Courts got involved in dealingwith the technical issues. This resulted, unfortunately, in keeping aside the main issueof abolition of the employment of contract labour and regularisation with the principalemployer or regulating their conditions of service to a possible extent, whereversuch regularisation was not possible. The classic example is of the judgement of theSteel Authority of India Ltd., where the main issue was as to the definition of theterm “Appropriate Government”. All these exercises undertaken by the SC resultedin the continuance of Contract labour in the same status in which they were placedand denying all hopes of contract workers in getting the status of permanency withthe principal employer. The study of cases also shows that the Courts have deviatedthemselves from the earlier principles laid down by them while interpreting theprovisions of law. The glaring example is of statutory and non-statutory canteens. Thevariation in various pronouncements and the approach of the Courts has, accordingto us, resulted in making the Act redundant or inapplicable. We also thought that theinterpretations made by the Hon’ble Courts, have deviated from the philosophy oflabour jurisprudence, as espoused by the earlier decisions of the Hon’ble SupremeCourt. Including the Excluded
  11. 11. Chapter I Research Design1. Objectives of the StudyIn this study efforts are made to find out whether any improvement or changes haveoccurred in the conditions of the contract labour by the implementation of the Actand whether the purposes for which this law was enacted have been fulfilled. Keepingin mind this main objective, following points were proposed to be studied in details,during this survey: 1.1 To find out the present conditions of the contract workers in the context of the Act by visiting and interviewing them and to find out the conveniences and facilities available at their work places. 1.2 To understand the mechanism and methodology of the implementation of the Act. 1.3 To carry out comparative study of the various cases and decisions of the courts thereon in respect of the implementation of the provisions of the Act. 1.4 To examine the roles of the various players in the effective implementation of the Act. 1.5 To study and discuss the deficiencies and shortcomings in the provisions of the Act. 1.6 To consider the utility of the Act and also suggest the improvements required to be made in the Act.2. Scope of the StudyIt covers a limited industrial zone of the Maharashtra state. Industrial areas viz.Mumbai, Pune, Thane, Nashik and Aurangabad were selected for this study.Some Government establishments have been included in this study because there isa good proportion of the contract labour in such Government establishments. Thusthis survey is restricted to the workers appointed as contract workers and for whomthe Act is applicable.3. Research Questions and Items of InformationA questionnaire was prepared for interviewing them and was tested prior to actualstart of the survey. The questionnaire was finalised on the basis of the findings of thepre-testing. These contract workers were contacted at the following places: Including the Excluded
  12. 12.  Their actual places of work.  In or out of the premises of work, but at the time of their lunch break or after their work hours were over.  Offices of the trade unions.  Offices of the Assistant Labour Commissioners.  Their residences.The work of contacting these labourers and eliciting information from them was the mostdifficult task of this study. These labourers were afraid that if they provide the informationasked for, they may lose their jobs. They were afraid of the intimidation by the contractors.Hence they were required to be contacted in a number of ways. The method of directinterviews was adopted for collecting necessary information for this survey. The workersfrom large, medium and small scale private industries as well as those from Governmentor Semi-Government establishments were selected for this study. The other constituents related to the Act were also contacted and interviewed withthe help of different FGD checklists designed for the purpose and the data wascollected from them. These constituents include:  Contractors supplying labour.  Industrialists or owners of the businesses.  Officer in charge of administration and welfare in industry / business.  Labour advisors / consultants.  Trade union officials.  Association of employers.In addition, the officials of the Labour Commissioner who are entrusted with the taskof implementation of the Act were also contacted. Discussions were held with theAssistant Commissioners, Government Labour Officers and the Inspectors workingunder them.It was also necessary to obtain authentic information in this context from theGovernment authorities. Offices of the Assistant Labour Commissioners were visiteda number of times and efforts were made to obtain the necessary information. Butwe could not get any response from them. The required information was thereforeobtained by resorting to the Right To Information Act (RTI).In this entire study, the Library Research was also equally important. The literatureavailable in respect of the Act was carefully gone through. Similarly the reports ofthe discussions in the Loksabha in this regard, were also studied. This pilot studybeing related to the Maharashtra State, Labour Policy of the state was also studied.As a part of this study, members of the study team also participated in seminars,symposia, and workshops pertaining to the topic under study.10 Including the Excluded
  13. 13. Efforts were also made to collect information about the case studies related to thissubject. For this purpose the offices of the trade unions as well as the AssistantLabour Commissioners and other such authorities were contacted. But except forone case of Pune Municipal Corporation (PMC) establishment, in no other case-information could be collected for the detailed study. The detailed information of thatcase (PMC) has however been collected.Information about the movements organised by various trade unions in this contextof laws concerning contract labour, the resolutions passed, efforts made for theregulations and various cases raised by them has also been collected for this study.This is because the role of the trade unions was very important for the successfulimplementation of the Act and as such it was obligatory to take a note of the samefor this study.It was also absolutely essential to obtain the details of the decisions of the variouscourts in this regard, for this study. Effort is made for carrying out comparative studyof the main judicial decisions in this matter, during this survey.Besides the above a number of focussed group discussions were also arrangedindependently, with the concerned players.4. Sampling UniverseSampling universe for this study was the contract labours in industrial areas of Thane,Pune, Nashik and Aurangabad cities in Maharashtra.5. Sample Size and MethodIt included views of 571 contract labours from industrial areas of the cities along witha few FGDs of contractors and other key- persons related to labours. For this projectrandom sampling method was used.6. Tools and sources of Data CollectionMajor tool of data collection was the interview schedules for the contract labourrespondents. Mostly primary sources of data were used. Also, to complement theinterview schedules, Focused Group Discussions (FGDs) were conducted with somecontractors and key persons in order to understand their perspectives.7. Data AnalysisTabular and descriptive analysis of data was conducted. Including the Excluded 11
  14. 14. Chapter II Literature Review In order to have a comprehensive approach towards the subject of research areview of the past work in this regard is essential. The past work majorly consists ofwork done at the government level and initiatives of non-government agencies.Firstly let us review the documents produced by the government and alliedorganisations.I. Review of Government DocumentsIt is seen that there are 17 different forms required to be filled in as per the Act. Detailsof the same are given in the Annexure I. It is difficult to scrutinise these large numberof duly filled in forms. The facilities of computerisation available in the offices of thelabour commissioners are greatly insufficient. This is a matter of grave concern.These inadequacies are visible even to any casual visitor to the offices of the labourcommissioners, who are entrusted with the task of implementation of the Act. Thecases for regulation and abolition under this Act are received by the offices of theState and Central Advisory Boards. But owing to the delay in these cases being sentto these boards the contract workers whose cases are referred do not get justice asthey are no longer in the employment of the same contractor. When asked about thenumbers of meetings held by these boards, it was stated that only 74 meetings ofthe Central Advisory Board are held so far. The information about the State Boardmeetings was not available.A special group was appointed in accordance with the recommendations of theIndian Labour Conference (ILC) held on 20-21 February 2009 for the protection of theinterests of the contract workers under the Act. So far 4 meetings of this group havebeen held. The report of this group was expected to be received by 31st December2009. However the report is not readily available.Similarly a Central Industrial Relations Machinery (CIRM) has also been appointedunder the chairmanship of the Chief Central Labour Commissioner. The work ofimplementation of the provisions of the Act has been entrusted to this machinery.But all these arrangements are found to be severely wanting in protection of theinterests of the contract workers.There are a number of provisions in the Act, from registration to issuance of thelicense, after issuance of the license inspection of the industries, to take cognizanceof the complaints when received and cancellation of licenses etc. But becauseof the insufficiency of the implementing machinery, and basically because of the12 Including the Excluded
  15. 15. unwillingness on the part of the existing machinery, enforcement of the provisions ofthe Act is not effective, and now that the provision for approaching the courts of lawfor removing the injustice done to the contract workers has not been for in this Act,this machinery has become absolutely toothless.Standing Labour Committee SessionIn the 44 th session of the Standing Labour Committee (2011), the following wasmentioned:As far as the issue of amendments in the Act and its Rules are concerned, a proposalfor the amendments was prepared. However, it was found desirable to have an impactstudy of the proposal on the economy and financial implications for the Central andthe State Governments, including different sectors of production and employmentwhich depend on labour as one of the important input. The V.V. Giri National LabourInstitute, NOIDA was entrusted with the task and they have submitted their studyreport. The report is now being examined by the GovernmentApart from the above, the following resolutions were passed unanimously in the saidsession: i) All efforts should be made to ensure that the existing provisions of the Act and the Rules made there under are implemente in letter and spirit. ii) The labour enforcement machinery in the Centre and the State should be strengthened by providing requisite manpower and other logistic facilities so as to ensure effective implementation of labour related legislations. iii) States are mandated to constitute Tripartite State Advisory Boards under the Act. However, it was pointed out that a number of states do not have such Boards constituted. It was unanimously resolved that such states should be asked to constitute such Boards at the earliest. iv) Payments should be made to the contract workers through banks. Necessary amendments should be made in the Act/Rules.It would be pertinent to take a quick stock of the happenings at the Government levelas regards the subject.Government of Maharashtra Labour PolicyGovernment of Maharashtra came out for the first time, with a proposal (draft) ofits labour policy on 06/11/10. It invited suggestions and objections on the same,from interested parties, whom they addressed as ‘social partners’. The said exercisewas preceded by State level conferences involving all interested parties, under the Including the Excluded 13
  16. 16. Chairmanship of Mr. Arun Maira, Member – Planning Commission, Government ofIndia, on 26/08/10 and 27/10/10.It would be interesting to go through some excerpts from the background noteprepared by the Government of Maharashtra, for the purpose of the conference dated27/10/10, which are as below:  Employers favour contract labour as a means to give them flexibility they require in that they do not have to commit to permanent employees and the associated higher non-wage costs, for efficiency, competitiveness, lower wage cost, lack of employer-employee relations. It is argued that lack of any relation between productivity and wages, higher labour cost due to job security, pressure of trade unions to adjust workforce discouraged organised sector to expand employment. These factors are responsible for modernisation, substitution of capital for labour and tendency to employ contract labour to achieve productivity. It is also argued that due to rigid provisions in the Industrial Disputes Act, employers are unable to reduce workforce and hence reluctant to increase strength of permanent employees. Contract labour is one of the principal methods used by employers to gain flexibility in the labour market.  Currently contract labour are being liberally employed to perform even task which are regular, perennial and permanent in nature though the law prohibits employment of contract labour in such activities.A few relevant salient features of the 1st draft policy of the Government of Maharashtra,in the context of contract labour are as follows:  It has acknowledged contract labour as one of the vulnerable groups (page 6) as, “there is a need for targeted protection and assistance to some of the State’s most vulnerable groups including contract workers in both organised and unorganised sectors”.  It has also acknowledged the need for ‘capacity building for dept. of labour’ (page 36) as, “this will require the dept. to be strengthened, revitalised and probably restructured to give full effect to policy intentions and ensure adherence to the principles of good governance”.  It further acknowledges “the need to improve the overall efficiency and effectiveness of the labour inspection services”. (page 37)Based on the suggestions / objections that may have been received in the meantime,the Government came out with the revised draft in 2011, which is yet to be made apolicy. Its salient features in the context, are as follows:  Paragraph 4.1.2 talks about its intention to enforce effectively its earlier mandate under various labour laws about payments to labour through cheque/ bank account only, both in organised and unorganised sectors.14 Including the Excluded
  17. 17.  Paragraph 5.1 acknowledges the need for protection to contract labour as, “with more than 93% o Maharashtra’s workers engaged in the unorganised sector and a substantial number working as contract workers, extending protection to these workers poses a major challenge for the Labour Dept. since such workers would be numbering more than 40 million. For these workers, protection is virtually non-existent and the workers are caught in the low wage, low productivity trap where they have no voice, their safety an health considerations are largely ignored and other social security is non- existent”. Paragraph 5.2.1 acknowledges specifically the inadequacy of the Act as, “due to lacuna in the Act, which does not mandate regularising contract workers in case of abolition of contract, the abolition may not necessarily go in favour of the contract workers”. Paragraph 5.2.3 promises to address the issue as, “the Dept. of Labour will facilitate discussions with the social partners with a view to deciding on a model/s that ensure/s both fairness and productivity. It would also work on amendments or legislations that will enable the implementation of the said model/s after being found suitable”. The same paragraph, while discussing the proposed issue of incentivising flexibility by providing a loading factor to compensate contract workers against their loss of certain benefits, also doubts the fundamentals that may have formed the basis of said ‘flexibility’ as, “it is nonetheless necessary to re-examine whether flexibility necessarily results in enhanced productivity and competitiveness. This is because the employers are not incentivised to provide skill-upgrading, training and adequate safety and health provisions to contract workers, which may result in their lower productivity levels”. The same paragraph also comments on the issue of the nature of contract work (under section 10 of the Act) as, “the State would also examine whether it would be appropriate to demarcate activities into core and non-core and limit contract. If however the core and non-core activity demarcation is worked upon, the State shall define the core activity and would prepare a list of no-core activities. Generally, contract labour would not be permitted to be engaged in core activities. However, for sporadic seasonal demand, such employment would be permitted. The non-core services like sanitation, housekeeping, canteen and eatery services, courier services, transport services etc. which are in the nature of support services like running of hospitals, clubs, educational or training institutions, guest houses etc. to be provided by other agencies would be permitted on the following conditions.....”. The same paragraph also proposes as, “the Act should be amended to place the responsibility of payment of all non-wage benefits like bonus, gratuity, provident fund, earned leave encashment benefit, maternity benefit and all other such legal benefits, on the principal employer”. Including the Excluded 15
  18. 18.  Paragraph 5.4.2 mentions that the Government is considering amendment to chapter VB of the Industrial Disputes Act, changing its applicability to establishments employing 300 workmen, in place of current 100.  Paragraph 5.4.5 talks about a proposed amendment to Trade Unions Act, by introducing provisions to enable unorganised sector workers to form trade unions, where “the employer-employee relationship does not exist or is difficult to establish”.  Paragraph 5.13.2 acknowledges “the need to prepare a staffing plan (for Labour Dept.) with reference to numbers, levels and deployment to ensure the fullest possible implementation of the labour policy”.  The same paragraph also acknowledges “the need to adopt a systematic and co-ordinated approach to staff training and development, to cater for induction, refresher and upgrading training and preparation of training material for labour officials as well as for the benefit of employers and workers, including establishment of a dedicated training cell within the dept.”.  Paragraph 6.2 comments on the dept.’s proposed computerised Labour Management System viz. ‘Mahashramm’ as, “it would have significant impact on inspections, considerably reducing the requirement of inspections since it will be possible to monitor compliance on on-line basis. Only in case that compliance does not happen, inspection would be required”.Planning Commission Directives The planning Commission also constituted a pan-India working group fordeliberating on future policy directives on the subject of ‘Labour Laws and OtherLabour Regulations, consisting of representatives of all interest groups, in April 2011.The points as regards the topic of contract labour, that figured in the agenda for themeeting of the said working group on 20/05/11, were as under:  Point no. 10 consisted of the matters that can be considered for suitable amendments in concerned statutes. The 3rd bullet point under the same mentioned, “Contract labour shouldn’t be engaged for core production/service activities”.  Point no. 28 mentions, “Regular workers are getting substituted by contract labour, in the on-going process of liberalisation/ privatisation/globalisation. Various studies show differences in wage rates, work hours, holidays, social security applicable to permanent and contract workers. There is a need to have a law to prevent exploitation of contract labour.  Point no. 31 enumerates the matters proposed to be considered for amendment to the Act as, “give effect of same wage rate, working hours, holidays and social security to the contract labour (to be mentioned in the agreement between principal employer and contractor), as available to the16 Including the Excluded
  19. 19. regular workers, if the work performed is same or similar. The Act may be made applicable to establishments where the number of contract labour is 10 or more”.Moreover, a private member’s bill (no. XI of 2002) was moved by one Shri RamchandraKhuntia (MP) in the Rajya Sabha where inter alia several proposals for amendmentswere made. It was proposed that the section 10 of the Act should be amended so asto ensure regularisation of the contract workers’ services in a particular establishmentwhere they were found to have been engaged in the tasks/processes/operations thatcould be termed as of perennial nature. Although the said proposal was importantand so much necessary, it has yet to see the light of the day. It appears that this billnow lapsed.CommentsThe readers, after going through the whole quoted text above, can easily noticepractical acceptance by the Central as well as State Governments of the failure oftheir policies as incorporated in the Act and enforcement thereof for last over 40years, with an expression of their intentions to handle things appropriately in future.II. Review of Studies through private initiatives and Other PublicationsWe believed that a study of this volume would attain the state of comprehensivecoverage, by going through similar studies or research papers, articles and otherpublications on the subject, that may have taken place in the past, and acknowledgenotable contributions from there. The relevant excerpts from among the same, arepresented below: i. Study Report by Bharatiya Sharmshodh Mandal, Pune (1996):  It was a peripheral study of contract workers and their socio-economic conditions. It was taken up in Jan-Feb.,’96 in four districts of western Maharashtra viz. Pune, Ahmednagar, Sangli and Solapur. Their observations are reproduced in the following bullet points.  Contract labour which accounts for a significant proportion of the total labour force in the large scale industries, is also the most disgruntled and depressed as well as exploited segment of the workforce.  After independence, the Central as well as State Governments Enacted different legislations and consequent rules and regulations, to safeguard welfare and interests of the labour class. However, the machinery to implement the said legislations and rules thereunder was neither adequate nor vigilant enough to do the same. Including the Excluded 17
  20. 20.  Earlier, the operators (permanent workers) used to do the work of cleaning and repairs on their own, but now they refuse to do the same, under the plea of extra effort needed to be put in for increased productivity. Sometimes such jobs involve difficult or extremely unhealthy conditions and grave danger. In order to avoid confrontation with such organised permanent workers, the management, instead of improving the working conditions, resort to engagement of insecure contract labour.  One can understand employers’ interest in creating a rift between the permanent and contract workers or discouraging unionisation of the latter; but it is difficult to understand the reluctance on the part of trade unions to enrol the contract workers in their fold and make a common cause with them.  Under the new economic policy of liberalisation, the employers’ lobby always insists on reduction of costs of their production and services, because they have to sustain themselves in internal/external competition. An employer of a paper manufacturing factory located on the border of Maharashtra and Andhra Pradesh, has been engaging contract labour in the regular production process. He says that if the contract labour system is abolished in Maharashtra and they are made permanent, his costs will increase and then he will not be able to compete with his competitors having their factories across the border, in A.P. Many industries even threaten the respective State Governments to close down their operations if the Act is enforced diligently and go to neighbouring States. Under such circumstances, many State Governments are reluctant to strictly implement the Act. ii. Study Report by Tata Institute of Social Sciences and Navjeevan Samiti on ‘Wages and Work Conditions of Contractual Conservancy Workers’ (April, 2008):  Conducted in two phases. Phase 1 – Pimpri Chinchwad Municipal Corporation., Navi Mumbai Mun. Corp. (both Maharashtra); Hubli Dharwad Mun. Corp., Mysore Mun. Corp., Bangalore Mun. Corp., Tumkur, Mandya (all Karnataka); Chennai, Chandigarh, Surat, Udaipur AND Phase 2 – Workers in solid waste management, situation at a glance in 27 urban centres in Maharashtra. Their observations are reproduced in the following bullet points.  Conservancy work is statutory and perennial in nature; contract labour should not be employed for performing the same.  Conservancy work has been taken out of the purview of the Act, in Tamilnadu through an amendment.  Except in Chandigarh, the contract workers are nowhere paid minimum wages. They do not get a single day of leave with pay. In some cases, there is deduction in wages for provident fund, but the proof of the same is not given to them.18 Including the Excluded
  21. 21.  In all the urban centres, contract workers are engaged alongside the permanent workers in the same tasks, where the issue of ‘Equal Pay for Equal Work’ emerges as significant and needs to be addressed. Working conditions are very difficult and compounded by the fact that work with waste is itself hazardous to heath and increases proneness to skin and respiratory infections. Contract workers are not provided any safety gear. There are different patterns of employment. For instance, in one of the corporations, each worker has been treated as a contractor and has to sign an independent contract, evidently in order to circumvent the Act.iii. Contract Labour Act in India – A Pragmatic View, (research paper) by Meenakshi Rajeev (Faculty, Institute of Social and Economic Change, Bengaluru): (2009) A primary survey carried out in Karnataka, an industrially developed state, reveals that many of the stipulations made in the Act to safeguard contract labour are not followed in practice. It has been felt by the workers that collusive agreement between the Labour Inspector, the protector of law, and the principal employer and the contractor has aided the violation of law. Among different kinds of employment that have been created in various economies to circumvent labour laws, contract labour is becoming one of the prominent forms. It is revealed through survey that some of the companies maintain more than one register, one for the scrutiny of the labour inspector and other contains the actual figures. Collection of data regarding contract labour is extremely difficult and managements of the firms were often secretive about the number of contract workers employed and the benefits provided to them. Knowledge of high level of corruption in connection with violation of the Act has been reported by 90% of the agencies. It has been reported that government officers have been neglecting their duties towards compliance of the Act for extraneous reasons. There are number of unregistered contract agencies that deduct P.F. contribution from the workers but never deposit the same in P.F. office and after few years change the location and start the same business with different name. There are obvious advantages of being unregistered to its owner as it enables agency to evade taxes, paying P.F., E.S.I. benefits etc. to a worker and thereby increase one’s profit margin. It is the overtime payment through which contractors usually try to generate additional income for themselves by taking advantage of the vulnerability of contract employees. The contract workers interviewed were not very sure of the wage rate for the overtime work. Including the Excluded 19
  22. 22.  In Indian case, blame is on the fact that for a contract worker it is not only hard to prove his/her identity as worker under the relevant labour law, but employer- employee relationship is also not easy to establish. iv. Contract Labour in South Asia, (book) by D.P.A. Naidu, International Labour Organisation (ILO) Geneva: (1999)  Employment of contract labour is a long established practice in virtually the entire public sector. Now it is becoming more extensive. Due to the ban on new recruitment by Government, large number of regular posts lie vacant and establishments are rather forced to engage contract labour. Low labour costs, flexibility in the size of labour force and ease of maintaining discipline and extracting work are strong incentives for them to engage contract labour.  In almost all units work done through contract labour includes essential and perennial jobs in the unit. Though law clearly prohibits it, the practice persists and even grows. In majority organizations proportion of contract labour is up to 40% of the work force.  In the name of introducing greater flexibility in the labour market, Government has for the past five years tilted in favour of non-regular modes of employment rather than job security for workers which earlier used to be public policy.  Industrial society has undergone a drastic change over the years in terms of technology, work organization, and human resources. These developments during recent past have posed serious challenge to trade unions. Trade unions are faced with threats of survival in the new economic environment. In this situation, non-governmental and unorganized sector including industries and services engaging large proportion of contract labour need to be focussed upon and their needs to be identified. Where contract labour are unionised, they have been able to make significant gains in respect of prohibiting the contract labour system on essential and perennial jobs, improving wages and securing fringe benefits and a modicum of job security. The gap between wages of contract employees and regular employees is also narrowed to some extent. v. Contract Labour and Judicial Interventions, (book) by Sanjay Upadhyaya, V.V. Giri National Labour Institute, New Delhi. (2009)  Process of globalization, liberalization has resulted in the increase in the trend towards substitution of regular employment by contract employment and this trend is going to continue and grow in future.  One of the major factors responsible for preferring contract labour against the regular employees is the temptation to lower overall wage cost for similar quality and quantity of work.20 Including the Excluded
  23. 23.  Poor conditions of work; excessively long hours and very low wages as compared to workers with permanent status doing similar work. Many of the benefits, even the statutory ones, like provident fund, sickness insurance, gratuity, and privilege leave with pay and so on are usually not available to contract workers. Indian state has made different enactments for labour at different points of time to cover various categories of workers including contract labour. However the limitations and constraints of most of these enactments are that majority of these enactments put one kind of ceiling or the other either in terms of number of workers engaged or wages or duration of employment for the purpose of coverage under these enactments. As a result large section of vulnerable group of workers including those working as contract labour is left out of the legislative coverage and protection. Another limitation of these legislative measures is that the various kinds of penalties provided under most of these enactments are quite meagre in nature and the procedures prescribed under most of these enactments for realising various kinds of dues and benefits are quite cumbersome which defeats the very purpose of making elaborate legislative Contract Labour in India, (book) by Dr. D.C. Mathur: (1989) It is opined that the factors like uncertainly of work-orders, difficulty in ensuring closer supervision by employer, higher output by workers cost effectiveness, flexibility in manpower deployment, concentration in core competencies etc/., justify the system of contract labour. In the name of employment through contractors many employers have tried to evade their responsibilities towards a section of labour which is connected with the manufacturing process and resultant overall development of the industry as well as of the country but the contract worker is an exploited section of Indian working class.vii. Indian Industry Dependent on a Forgotten Workforce by Dibyendu Maiti, Institute of Economic Growth, New Delhi: (20/07/2009) In India we observe an increasing use of casual, contract or other such non- regular labour over a time-period. In India’s manufacturing sector surprisingly high levels of contract workers are being used, in some cases, as many as three times the regular workers. The official estimate however, states that, some of India’s key industries such as cement, iron and steel, cotton textile and jute, rely on contract labour. As many as four out of every five workers are contract workers. The official record of industrial statistics puts the share of Including the Excluded 21
  24. 24. contract labour in organised manufacturing sector at 15% to 26% across West Bengal and Gujarat states; but research found the share to be much higher, up to 60% to 70% across these states.  But, India’s economic success is not improving the lives of contract and informal workers who form the largest section of the economy and make a major contribution to the country’s global success. viii. No End in Sight to Contract Labour Debate, by Maitreyee Handique (Mon. 3, August 2009;  At Indian labour conference, employers pointed out that in order to remain competitive firms must be allowed greater flexibility to outsource workers. Employers also said that in changing environment of business a separation of core and non-core activities in not possible and pointed out that China’s contract law does not make such distinction.  In Bharat Aluminium Co. Ltd. (a public sector unit), contract labour has increased from 1500 to 15000 and regular employment decreased from 7000 to 5400. However, the wages of contract labour were Rs. 3000/- to Rs. 5000/- p.m. and regular workers Rs. 12000/- to Rs. 19000/- p.m. Contract workers are also often deprived of benefits such as medical facilities. ix. Impact of Liberalisation on Employment in India, by R.K. Shastry, Ravindra Tripathi and Anushree Singh (International Journal of Technical and Vocational Education, Vol. 2(3) pp33-35: (July 2010)  In Urban India, contract and sub-contract as well as migratory agricultural labours make up the most of the unorganised labour force 90% of this labour force do not have social security and other benefits of employment as in the organized sector.  Harmonisation of labour welfare with the privatisation process is really desirable in the present scheme of things, so as to strike the right balance between economic exigencies and social justice.22 Including the Excluded
  25. 25. Chapter III Case Law and the Role of JudiciaryStatement of Object and Reasons of the Contract Labour (RA) Act 1970.“The system of employment of contract labour lends itself to various abuses, Thequestion of its abolition has been under the consideration of Government for along time. In the Second Five Year Plan, the Planning Commission made certainrecommendations, namely, undertaking of studies to ascertain progressive abolitionof system and improvement of service conditions of contract labour where theabolition was not possible. The matter was discussed at various meetings of TripartiteCommittees at which the State Government were also represented and the generalconsensus of opinion was that the system should be abolished wherever possible orpracticable and that in cases where this system could not be abolished altogether, theworking conditions of contract labour should be regulated so as to ensure payment ofwages and provision of essential amenities.The bill aims at abolition of contract labour in respect of such categories as may benotified by appropriate Government in the light of certain criteria that have been laiddown, and at regulating the service conditions of contract labour where abolition isnot possible. The Bill provides for the setting up of Advisory Boards of a tripartitecharacter, representing various interests, to advise Central and State Governmentsin administering the legislation and registration of establishments and contractors.Under the Scheme of the Bill, the provision and maintenance of certain basic welfareamenities for contract labour, like drinking water and first- aid facilities, and in certaincases rest room and canteens, have been made obligatory. Provisions have beenmade to guard against delays in the matter of wage payment.”Preamble:An act to regulate the employment of contract labour in certain establishments and toprovide for its abolition in certain circumstances and for matter connected therewith.Though the preamble of the Act speaks of abolition in certain cases, the whole of theAct is silent about any reference to abolition, but talks of prohibition of contract labourin certain cases on issuance of notification under S. 10 of the Act. The legal punditsinfer that following the principles of statutory interpretation, the act does not spell outany provision of abolition and absorption of workers but of regulation. This and suchother interpretation makes the whole or major part of the Act redundant and nugatoryin nature. Though the interpretative law says that the statement of object and reasonsas well as the preamble of the Act are not binding while deciding the object of theAct which can be inferred from the actual provisions of the Act, it is suggested that Including the Excluded 23
  26. 26. the Courts should also give importance to the history of legislation and the purposefor which the Act is enacted; if not done, the legislation will make the act redundant,useless and  the utility of the rest of the provisions of the Act will be only restrictedto implementation of the Act, which will be entirely in the hands of administrativemachinery.It is clear that the mischief sought to be corrected by the act was that the systemof employment of contract labour lends itself to various abuses and hence workingconditions of contract labour should be regulated so as to ensure payment of wagesand provision of essential amenities, ultimately aiming at, ascertaining progressiveabolition of system of contract labour.If we apply the principles of mischief rule, purposive interpretation and interpretationof a beneficent piece of legislation are applied, the act should be interpreted in sucha manner which will be beneficial to the weaker section which in the present case iscontract labour.Article. 38, 39, 40 and 43(a) Constitution of India, may be useful for interpretation ofthe provisions of the act in favour of contract labour.For the sake of convenience we quote herein below some of the observations on theconstruction of Statue with reference to purpose and object of the Act, reproducedfrom the Book “Principles of Statutory interpretation’ 1“The duty of judicature is to act upon the true intention of the legislature – Mens orsententia legis” 2“If a statutory provision is open to more than one interpretation the court has tochoose that interpretation which represents the true intention of the legislature” 3“Legislation in the modern state is actuated with some policy to curb some public evilor to effectuate some public benefits” 4“The legislation is primarily directed to the problems before the legislature based oninformation derived from past and present experience. It may also be designed by useof general words to cover similar problems arising in future” 5“The intention of the legislature thus assimilates two aspects; in one aspect it carriesthe concept of ‘meaning’ i.e. what the word means and in another aspect it conveysthe concept of purpose and object or reason and spirit prevailing in the statute. Theprocess of construction therefore combines both literal and purposive approach.”1. by Justice G.P. Singh, (Former Chief Justice Madhya Pradesh High Court) (11th Edition 2008)2. J. P. Bansal vs. State of Rajasthan, (A.I.R. 2003 SC 1405)3. Bhatia International vs. Bulk Trading S.A. (A.I.R. 2002 SC. 1432)4. United Bank of India Calcutta vs. Abhijit Tea Company Pvt. Ltd. (A.I.R. 2000 SC. 29575. American Cynamid Co. vs. Upjohn Co. (1970 ) 3 All. E. R. pg 7856. Land acquisition officer and Mandal Revenue Officer vs. Narsaiah (A.I.R. 2001 SC, pg. 1117)24 Including the Excluded
  27. 27. “Court should adopt an object oriented approach keeping in mind the principal thatlegislative futility is to be ruled out so long as interpretative possibilities permit” 7Foundation of the Act The judicial world woke up to the plight of such workmen in the case of StandardVacuum Refinery Company Private Limited Versus Their Workmen Standard VacuumRefinery Company Private Limited Versus Their Workmen(1960 LLJ II 233, SC)‘It was concerned with an Award of the Industrial Tribunal, which considered thedemand made by the Union for abolition of contract system of work, where the natureof work was of cleaning and maintenance of machinery. The award was in favour ofworkmen. The said award was challenged by the employer in special leave petitionbefore the Apex Court wherein two issues were raised as to whether such disputeconstitutes an Industrial Dispute under (Sec.2-K) of the Industrial Disputes Act andjustifiability of the tribunal in interfering with the Managements right.The Supreme Court observed that “there was a community of interest betweenthe concerned workers and the workers of employer, who had a substantialinterest in the contractors’ labour. In this Judgment, Supreme Court referred to theobservation of the Royal Commission of the Labour and observed that the complexresponsibility lay down upon it by law and by equity, that the manager should have fullcontrol over the selection, hours of work, and payment of workers”.The Supreme Court observed the system to be primitive and baneful. A reference wasalso made to a discussion of Indian Labour Conference. The other issue regardingjustifiability of the tribunal in interfering with the Managements right was also negatedby the Supreme Court.The Supreme Court observed “so far as this work is concerned it is incidental to themanufacturing process and is necessary for it and of a nature which must be doneevery day. Such work is generally done by workmen in the regular employee of theemployer and there should be no difficulty in having regular workmen for this kind ofwork”.Thus it is clear that the Supreme Court has simply upheld the order of the IndustrialCourt which directed the company to discontinue the practice of getting workdone through contractor’s and to have it done through workmen engaged by itself.Surprisingly there was no justification given by the Industrial Court in holding that theworkman of the contractor could not claim any relief in respect of their past services7. Nathdevi vs. Radha Devi (2005, 2SCC pg. 271) Including the Excluded 25
  28. 28. rendered to the company. All that was said was that the company was free to givepreference to the workmen engaged by the contractor.Pursuant thereto a Bill was introduced in the Lok Sabha on 31.7.1967 for regulation andabolition of employment of contact labour. The said bill aimed at abolition of contractlabour in respect of such categories as may be notified by the appropriate governmentin the light of certain criteria that had to be laid down and at regulating the serviceconditions of contract labour where abolition is not possible. The Bill also provided forvarious other things such as establishment of Central and State Advisory boards, onthe basis of whose report, the appropriate government may take a decision of abolitionor regulation of contract labour. The Bill provided for coverage of establishments,employing 20 or more persons. It provided for registration of the principal employerand license for the contractor and also for certain welfare measures.Since then there have been a cartload of Judgements which have reiterated the needof abolishing contract labour but has however not granted any practical relief to thecontract workers. As such, despite the passing of 40 years, after the implementationof the act the plight of the workers continues to be the same. While analysing thecase law, we have referred only to the Supreme Court judgements and not HighCourt judgements, though the latter have also dealt with the issue appropriately, asthe finality rests with the Hon’ble Supreme Court. We also make it clear that in thisanalysis, we have not intended to show any disrespect to it nor is there an intentionto criticise its hon’ble judges or the judiciary in general. This exercise is intended tofind out the reasons for ineffectiveness of the Act in doing justice to the subject viz.Contract labour.Analysis of the Supreme Court Judgements: Post Enactment of the Law:Supreme Court Judgments on the provisions of the Act especially withreference to Section 10 (2) of the Act:1) Vegoils Pvt. Ltd. vs. Its workmen,1971 II LLJ 567. AIR Supreme Court 1972, pg. 1942In this case a reference was made under Section 10 of the I.D. Act for adjudication todecide whether contract labour system should be abolished and whether the workmenengaged by the contractor should be treated as principal employer’s regular employees.The Industrial Tribunal, Maharashtra delivered an award directing the employer, not toengage any labour through a contractor. The claim for abolition was rejected by theTribunal in respect of Canteen Section and directed not to engage contract labour forwork of loading and unloading.The Hon’ble Supreme Court held that “the abolition of contract labour in respect offeeding the hoppers, for the requirements of the solvent extraction plant, is quitecorrect in accordance with the various decisions.26 Including the Excluded
  29. 29. The issue whether the Act, which is the Central legislation or the State legislation viz.Maharashtra Mathadi, Hamal and Other Manual Workers (Regulation of Employmentand Welfare) Act would prevail and also the one about the jurisdiction of the Tribunalfor its direction not to engage contract labour, was set aside.Under Section 10 of the Act, the jurisdiction to decide matters connected withprohibition of contract labour is now vested in Appropriate Government.On facts of the case, the Supreme Court directed the enquiry about the regularisation.At that time the Act had received assent on 05/09/1970, which eventually came intoforce from 10/02/1971 and the Mathadi Act was in force from 13/06/1969 at the timeof passing award, by the Industrial Tribunal. The said award by thus set aside bythe Apex Court, in view of the later day development of the Act coming into being(paragraph 44).2) Denanath vs. National Fertilizers(1992 1 CLR 1, 1992 LIC 75, 1992 I LLJ 289)This is a case of non-compliance of section 7 and section 12 by the principalemployer and contractor and the issue involved was whether due to non- compliance,the employees of the contractor are deemed to be the employees of the principalemployer.Paragraph 22 of the Judgment states “it is not for the High Court to enquire into thequestion and decide whether the employment of the contract labour in any process,operation or any other work should be abolished or not. It is entirely in the hands ofthe Government. Therefore under Article 226 of the Constitution the Court cannotissue a writ of mandamus or any writ for deeming the contract as having become theemployees of the principal employer.”In view of the difference of opinion of the various High Courts, after consideration ofthose judgments, the Supreme Court upheld the view that Non Compliance of Section7 of the Act would result only in prosecution.3) Gujarat Electricity Board vs. Hind Mazdoor Sabha and others 1995 1 CLR967.In spite of there being an agreement between the company and the contract labourers’union as regards the service conditions of the members of the latter under section2P read with section 18 of the ID Act and award being declared the Supreme Courtconsidered to give importance to the point of jurisdiction and held that the issue ofjurisdiction of court under ID Act is ousted and a reading section 10 of the Act, it isonly the appropriate Government to decide whether the system of contract labourshould be abolished. Including the Excluded 27
  30. 30. The Apex Court for the first time however, observed that the Act was silent on thequestion of status of the workmen of the erstwhile contractor once the contract isabolished by the appropriate government. It also expressed its dismay over the factthat even the public sector undertakings were indulging in unfair labour contractsby engaging contract labour when the workmen can be employed directly. It furtherobserved that economic growth is not to be in terms of production and profits alonebut to be gauged primarily in terms of employment and earnings of the people.4) Air India Statutory Corporation vs. United Labour Union 1997 I CLR 292,1997 I LLJ 113, 1997 (1) LLN 75, 1997 LLR 305It is held that the notification dated 9/12/1976 prohibiting employment of contractlabour was valid in law.Here, the Supreme Court provided clear and specific relief, holding that on abolitionof contract labour system, by necessary implication, the principal employer is understatutory obligation to absorb the contract labour. The linkage between the contractorand the employer stood snapped and direct relationship stood restored betweenprincipal employer and the contract labour as its employees.The Supreme Court further upheld that the High Court under Article 226 of theConstitution can direct the principal employer to absorb the contract labour after itsabolition.There are instances where statutes provide for some welfare measures such ascanteen, etc. Section 46 of the Factories Act, provides that in case where the factoryengages 100 or more workers, the principal employer must make a provision forcanteen. Provisions of Section 46 of the Factories Act came to be considered invarious judgments and ultimately it was held that though the factories Act providesfor a canteen in the factory engaging more than 100 workers it cannot be said to bea regular activity of the principal employer. The employer therefore can give contractof the canteen to the contractor and make a provision of canteen as provided forunder section 46 of the Factories Act. There are cases where contractor continues tobe same for years together but workers are changed or where the workers continuedto be same for years together but the contractors are changed and the third case isthat the contractor and workers continued to be same for years together. The issuewhether the activity is of perennial nature came to be considered for various courts andit was held that since it’s a statutory liability therefore the nature of work is perennial.As regards the status of workmen of contractor it is held that the workmen of thecontractor do not automatically become direct employees of the principal employereven where the registration/licence is cancelled or the contract is abolished.5) In Steel Authority of India Ltd. vs. National Union Waterfront Workers,2001 III CLR 349, 2001 II LLJ 108728 Including the Excluded
  31. 31. Though the main issue for consideration was whether for Steel Authority of India,whether the Appropriate Government is the State or the Central Government and eventhough the issue of interpretation of section 10 of the Act was not there, the SupremeCourt while holding that for Steel Authority Of India the Appropriate Government wasthe State Government went ahead and thought of deciding the issue of section 10 ofthe Act.In this case though the issue in respect of contract labour did not directly arise,as there was no specific prayer, the Hon’ble Supreme Court took a stock of variousjudgments on the Act, and in paragraphgraph l04 and 105 considered the previousdecisions. The Supreme Court summarised the decision in various cases in the saidparagraphgraphs. In paragraph 122 of the said Judgment the Supreme Court dealt withthe powers of the appropriate Government u/s 10 of the Act. By this paragraphgraphthe Supreme Court overruled the judgment in Air India’s case prospectively holdingthat there cannot be absorption of the workmen of the contractor even if the contractis abolished or it is held to be sham and/or bogus.Though the said issue was incidental one, the Supreme Court went on to decide it asa main issue.The net result of the above mentioned judgement is that the door which was open forthe workers to ventilate their grievance before the adjudicating authority is closed butthe same is available only in the cases of sham, bogus contract or a contract whichwas not genuine. The issue of contract being bogus, sham or not genuine mainlydepends upon facts, the knowledge of which is with the employer and the contractorand therefore, in fact, the door for adjudication was completely closed. Indirectly italso resulted in denial of opportunity to the workers to ventilate their grievances asthe power of deciding the issue is exclusively in the hands of the Government whoseorder is an administrative order and the issue is not decided there by any judicial orquasi-judicial process.6) Cipla Ltd. Vs. Maharashtra General KamgarUnion and others (2001 CLR I 754, SC)The case put forth by the workers was that they had been directly employed bythe company and the contract was a camouflage. Their union considered the saidmatter as one of unfair labour practice (ULP) by the company and approached theCourt under the concerned law viz. Maharashtra Recognition of Trade Unions andPrevention of Unfair Labour Practices Act. When the matter reached the SupremeCourt, it observed that for any practice to be considered as an ULP, there had be aclear employer-employee relationship between the parties to the case. Since such arelationship didn’t exist between the appellant and the respondents, the Court underMRTU and PULP Act can’t adjudicate the said case. Including the Excluded 29
  32. 32. Thus, although the company had truly been committing an unfair practice, (thoughnot defined so under the concerned law as an ULP), the Apex Court dismissed thecase by taking a very technical view as regards the employer-employee relationship,which was actually the bone of contention.7) Vividh Kamgar Sabha vs. Kalyani Steels Ltd. and Anr. (2001 I CLR 532,SC)The context of this case was exactly the same, only the parties to the case beingdifferent. The Supreme Court held exactly the same view as, “The provisions of MRTUand PULP Act can only be enforced by persons who admittedly are workmen. If thereis a dispute whether the employees are employees of the company, then that disputemust first be got resolved by raising a dispute before the appropriate forum. It is onlyafter the status as a workman is established at the said forum, that a complaint couldbe made under the provisions of MRTU and PULP Act”.After considering these judgments, one can see that instead of providing solutions,these judgments have multiplied the problems of the contract labours.Prior to the enactment of the Act, the remedy of adjudication was available to theaggrieved workers. Considering the history prior to the said enactment, the intentionwas to give powers to the Government to abolish the contract labour, whereverthe nature of work was found to be permanent or incidental thereto. Due to theinterpretations of the highest Court of the land, the available remedy at times is takenaway and the fate of the aggrieved workers is placed entirely in the hands of theGovernment. The interpretative process may be within four corners of the law, butthe results do not afford any substantive relief to the contract labours. The Act hasnot provided for any separate adjudicating machinery to resolve the grievances ofthe aggrieved workers resulting into denial of fundamental rights of the workers toventilate their grievances before the adjudicating authority.The advisory board can only recommend and final decision remains in the hands ofthe appropriate Government, which is only on the basis of the material collected bythe Government machinery.Comparing this Act with other statutes, viz. I.D. Act, BIR Act, MRTU and PULP Act, itdoes not provide for any judicial or quasi-judicial forum for determination of disputes.This has resulted either in perpetuation or prolongation of the issue of the contractlabour and their employment.Today we are placed in a situation that grievance of contract labour continues to existin spite of perennial nature of work and there is no machinery for redressing thesegrievances. Unfortunately therefore, we come to the conclusion that this act has notserved the object and purpose for which it was enacted.30 Including the Excluded
  33. 33. A ray of hope is created by the recent Supreme Court judgment reported by anobservations in paragraph 23 in the judgement of the Hon’ble Supreme Court in thecase of Harjinder Singh versus Punjab State Warehousing Corporation, reportedin Manu /SC/0060/2010, without any further commentQuote: - Of late, there has been a visible shift in the court’s approach in dealing withthe cases involving the interpretation of social welfare legislations. The attractivemantras of globalization and liberalization are fast becoming the Raison D’ etre ofjudicial process and an impression has been created that the constitutional courts areno longer sympathetic towards the plight of industrial and unorganized workers”.Quote:- “The courts have readily accepted such plea unmindful of the accountability ofthe wrong doer and indirectly punished the tiny beneficiary of the wrong ignoring thefact that he may have continued in the employment for years together and that microwages earned by him may be the only source of his livelihood. It needs no emphasisthat if a man is deprived of his livelihood, he is deprived of all his fundamental andconstitutional rights and for him the goal of social and economic justice equality ofstatus and of opportunity the freedom enshrined in the constitution remained illusory.Therefore the approach of the courts must be compatible with the constitutionalphilosophy of which the directive principles of state policy constitute an integral partof justice due to the workmen should not be denied by entertaining the spacious anduntenable grounds put forward by the employer/ public or private”.Similarly, in the past too, there were a few such Court verdicts, though more asexception, but nevertheless provided the much needed ray of hope. They are asfollows:National Federation of Railway Porters, Vendors and bearers vs. Union ofIndia (1995 II CLR 214, SC)In this case the Supreme Court granted regularisation to the railway parcel porters,provided by societies or private contractors as contract labour, at the backdrop ofthose porters having worked so continuously for a number of years and also that thework of parcel-handling was perennial in nature.Indian Airports Employees’ Union vs. International Airports Authority ofIndia (1996(1) Mah. LJ, SC)The Central Government had issued a notification dated 09/12/1976, prohibitingengagement of contract labour in sweeping, cleaning, dusting work with effect from01/03/77 in respect of establishments for which the appropriate Government was theCentral Government The respondent company fitted squarely under the purview ofthe said notification. Despite the same, it continued its practice of engaging contractlabour in the said work. The supreme Court in this case, provided the expected reliefof absorption of the concerned contract labour. Including the Excluded 31
  34. 34. Secretary, Haryana State Electricity Board vs. Suresh and Ors. etc. etc.(1999 I CLR 959, SC)Safai karmacharis were engaged as contract labour for cleaning/sweeping work. Aftertheir services were terminated, they claimed permanency. The Supreme Court in thiscase called the said contract system a mere camouflage, smokescreen and disguisedin a veil, which could easily be pierced and the real relationship between the Board onone hand and the employees on the other hand, could clearly be visualised. The factsof the case that supported the said conclusion of the Court was notably the absenceof due registration of the Board as well as that of a licence, as required under the Act,in the hands of the person who posed as contractor.Hindalco Industries Ltd. Vs. Association of Engineering Workers (2008 ICLR 1023, SC)Here, the contract labour working in the canteen of the company had continuedworking so despite a change in the contractor in the meantime. Secondly, evidenceon record established the ultimate control of the company management on the saidworkers. The respondent union had approached the Industrial Court by filing a caseof ULP under the Industrial Disputes Act, who in view of the facts and circumstancesof the case, that the canteen contract was merely a paper agreement. In the appeal,the High Court had endorsed the view of the Industrial Court. In the subsequentappeal, the Supreme Court also upheld the same.Sarva Shramik Sangh vs. Indian Oil Corporation Ltd. and Ors. (AIR 20092355, SC)Here, relief was sought under the Act, for abolition of contract labour system inthe canteen of the marketing establishment of the principal employer. The StateGovernment examined the merits of the dispute and refused to make reference onthe ground that the workers were not the employees of the company, where the verydispute that required reference was whether the workers should be considered asthe employees of the company. In this case, the Supreme Court directed the CentralGovernment to reconsider the matter and take an appropriate decision on the requestfor reference of the dispute to the industrial adjudicator (paragraphs13, 15).Bhilwara Dugdh Utpadak Sahakari Sangh Ltd. V. Vinod Kumar Sharma Deadby LRS and Ors. (SC, Sept., 2011)The Labour Court had held that the workmen were the employees of the appellantand not the employees of the contractor. The High Court too had upheld the saidposition. In the appeal to the Supreme Court, it not only upheld the said finding butalso observed, “This appeal reveals the unfortunate state of affairs prevailing in the32 Including the Excluded
  35. 35. field of labour relations in our country. In order to avoid their liabilities under variouslabour statutes, employers are very often resorting to subterfuge, by trying to showthat their employees are in fact the employees of their contractors. It’s high time thatsuch subterfuge must come to an end. Globalisation / liberalisation in the name ofgrowth, can not be at the cost of exploitation of workers”.Ironically, every judgment stated above has very broadly reiterated the principlesand foundations on which the Act was based, that are to prevent the exploitation ofcontract labour and also to introduce better conditions of work.We feel that the Hon’ble Supreme Court did not give due importance to the object ofproviding for job security for such of those employees who have been engaged ascontract labour and bring them at par with the permanent employees. Except for a fewJudgements passed by the very same Supreme Court that have boldly pointed outthat there is a gross lacuna in the Act itself which required a very strong amendment,none of the Judgements have in fact, set out any path nor shown the way to helpthese contract employees. Including the Excluded 33
  36. 36. Chapter IV Data AnalysisField research was carried out as mentioned earlier. Relevant data was gatheredduring the same, the analysis of which has been presented with the help of thefollowing tables. Table No. 1 A. Type of Contact Pune % Nasik % Thane % % Mumbai % Total % bad Contract Labour 120 21 60 10.5 200 35 40 7.01 151 26.4 571 100 Contractor 8 33.3 3 12.5 4 16.7 2 8.33 7 29.2 24 100 Trade Union 6 25 4 16.7 5 20.8 3 12.5 6 25 24 100 Official Government 4 22.2 3 16.7 0 0 3 16.7 8 44.4 18 100 Officials Employers 8 23.5 3 8.82 5 14.7 2 5.88 16 47.1 34 100 Legal Advisors/ Labour 10 41.7 2 8.33 5 20.8 2 8.33 5 20.8 24 100 Consultants Employers 1 25 2 50 0 0 0 0 1 25 4 100 Association Coverage of the Pilot Study.The detailed observations pertaining to the field survey that covered people rangingfrom contract labour to the representatives of trade unions as well as employers andalso independent professionals, have been narrated.2.1 Survey of the contract workers: 2.1.1. The Number of the contract workers Selected for the Survey, according to the Categories of the Industries: During this study total 571 contract workers were interviewed . Among them 200 labourers i.e. about 35%, were from Thane Belapur Industrial area, while 26% are from Mumbai, industrial area, where as 21% from Pune industrial area and remaining 100 (18%) are from Nashik and Aurangabad industrial areas. While selecting the contract workers for the survey, all the three categories of industries viz. the large, medium and small scale inclusive of Government and semi Government establishments were taken into consideration.34 Including the Excluded
  37. 37. Break up of these labourers selected for the survey is as under: Table No. 2 Break-up According to Type of Units Type of Contact Pune % Nashik % Thane % A. bad % Mumbai % Total % Small Scale 12 30. 4 26.7 30 32.3 5 31.3 8 20.0 59 28.9 Medium Scale 8 20. 3 20.0 34 36.6 6 37.5 11 27.5 62 30.4 Large Scale 14 35. 8 53.3 29 31.2 5 31.3 8 20.0 64 31.4 Gov. and Semi 2 5. 0 0.0 0 0.0 0 0.0 5 12.5 7 3.4 Government Service Sector 4 10. 0 0.0 0 0.0 0 0.0 8 20.0 12 5.9 Total 40 100 15 100 93 100 16 100 40 100 204 100 Thus this pilot study has surveyed 571 contract workers from 204 units of different types of industries.Break-up of the units according to type of management is shown in the table below. Table No. 3 Break-up of Units According to Types of Management or Ownership Type of Pune % Nashik % Thane % A. bad % Mumbai % Total % Contact Government 1 2.5 1 6.7 0 0.0 0 0.0 1 2.5 3 1.5 Semi- 2 5.0 0 0.0 0 0.0 0 0.0 4 10.0 6 2.9 Government Private 37 92.5 14 93.3 93 100.0 16 100.0 32 80.0 192 94.1 Others 0 0.0 0 0.0 0 0.0 0 0.0 3 7.5 3 1.5 Total 40 100 15 100 93 100 16 100 40 100 204 100It will be evident from the above data that 94 % of the units were from the privatesector. As explained in the methodology, stress in this pilot study was laid mainlyon the contract workers from the industrial sector. Efforts were also made to contactthe semi-government agencies like, MMRDA, MSEDL and Municipal Corporationsetc., where there is a higher proportion of work being carried out through contractworkers, for this study. Comparatively, it was easier to contact the contractors or theirlabourers and collect the data for this survey from Government and Semi- Governmentestablishments than from Private agencies. Before contacting these units, the lists ofindustries from the office of the Chamber of Commerce and Industries or from theIndustrial Directories were obtained for collection of the information. However, actualselection of the units was made on the basis of availability of the concerned personsin these units. Including the Excluded 35
  38. 38. Personal Information of the contract workers Selected for the Survey:The detailed information of the contract workers selected for the survey viz. their agegroup, level of education, marital status and family background. has been collectedduring this survey for understanding their background. The information collected inrespect of each of these aspects is presented in the following paragraphgraphs:1. Age Group:Out of 571 contract workers surveyed, more than half i.e. 51.8% were found to be inthe age group of 26 to 35 years, while 26% were of the age less than 25 years of age.In short, more than three fourth of them belong to a young age group. The youthhave greater physical strength and therefore those establishments gave preferencefor employing this category of the workers. Their proportion is higher in small andmedium scale establishments as shown in the the following Table Table No. 4 Age Wise Distribution of contract workers. Age A. Pune % Nashik % Thane % % Mumbai % Total % Group bad 18 - 25 42 35 21 35 30 15 21 52.5 35 23.2 149 26.1 26 - 35 54 45 32 53.3 115 57.5 13 32.5 82 54.3 296 51.8 36 - 50 14 11.7 7 11.7 53 26.5 6 15 31 20.5 111 19.4 51 - 60 10 8.3 0 0 2 1 0 0 3 2 15 2.6 Total 120 100 60 100 200 100 40 100 151 100 571 10036 Including the Excluded
  39. 39. 2. Educational Level:There were only four illiterate contract workers among those surveyed. About 25% ofthem had however, completed only Primary Level education i.e. up to 7th standard,while 44% contract workers had studied up to 10 th standard. Thus about 70% havehowever completed only mid-level education i.e. up to 10 th standard. Percentage ofthe contract workers who have studied up to 12 th standard works out to 23%. A few ofthem were observed to have been trained in technical subjects/crafts in the IndustrialTraining Institutes (ITIs). They appeared to be more interested in securing jobs fortheir livelihoods rather than those matching their education and training. Table No. 5 Educational Level of Contract Workers A. Education Pune % Nashik % Thane % % Mumbai % Total % bad Illiterate 0 0 0 0 0 0 0 0 4 2.6 4 0.7Primary (Up to 7th) 26 21.7 1 1.67 70 35 13 32.5 34 22.5 144 25.2 Up to 10th 69 57.5 33 55 80 40 14 35 56 37.1 252 44.1 Up to 12th 20 16.7 18 30 40 20 10 25 42 27.8 130 22.8 Under Graduate 0 0 0 0 0 0 0 0 3 2 3 0.5 Graduate 5 4.2 0 0 5 2.5 3 7.5 7 4.6 20 3.5 ITI Trained 0 0 7 11.7 5 2.5 0 0 5 3.3 17 3 Engineering 0 0 1 1.7 0 0 0 0 0 0 1 0.2 Diploma Engineering 0 0 0 0 0 0 0 0 0 0 0 0 Graduate Total 120 100 60 100 200 100 40 100 151 100 571 100 Including the Excluded 37
  40. 40. 3. Marital Status:As per the survey it was found that about 76.2% of the workers were married.4. Number of Dependents:Average number of dependents on 58.7% of those contract workers was found to be4 to 6, while that in case of 24% of them was 3, which indicates the significant numberdependents on the contract workers. The Chart below gives the relevant details. Table No. 6 Number of Dependents No. of A. Pune % Nashik % Thane % % Mumbai % Total %Dependents bad Nil 0 0 2 3.3 0 0 0 0 20 13.2 22 3.9 One 0 0 2 3.3 0 0 0 0 17 11.3 19 3.3 Two 4 3.3 8 13.3 12 6 2 5 23 15.2 49 8.6 Three 12 10 26 43.3 50 25 11 27.5 38 25.2 137 24 4 to 6 104 86.7 22 36.7 138 69 24 60 47 31.1 335 58.7 7 and Above 0 0 0 0 0 0 3 7.5 6 4 9 1.6 Total 120 100 60 100 200 100 40 100 151 100 571 10038 Including the Excluded
  41. 41. Ownership of ResidencesThe data in respect of the ownership of the residences indicates their economicstatus. It is revealed from the survey that 45% of them have their own houses. The restof them are staying in the rented accommodations. It is also observed that out of thecontract workers surveyed, the number of those commuting daily from their residencesto the places of work, in the industrial estates is significant. Generally it is seen that,in the areas surrounding the industrial estates, chawl type structures are built on alarge scale which enables the workers to hire the accommodations in these chawls. Itis also observed that in some cases labour contractors do provide accommodationsto the workmen at their own cost. However barring a few cases, more often than not;this provision of accommodation benefits the contractor more as he thereby ensuresthat the labourers are available to him beyond the legally permissible hours. Besidesthereby these labourers are kept under obligations.Further it is seen that most of the workers who migrate for the employment, do sosingly. Rest of their family members stay back at their original places. It thereforebecomes possible to provide accommodations to these individual labourers easily. Table No. 7 Ownership Pattern of Residence A. Ownership Pune % Nashik % Thane % % Mumbai % Total % bad Own 65 54.2 25 41.7 94 47 18 45 54 35.8 256 44.8 Rented 55 45.8 35 58.3 106 53 22 55 97 64.2 315 55.2 Total 120 100 60 100 200 100 40 100 151 100 571 1005. Places of Origin:It is noted that out of 571 contract workers surveyed, about 46% of them have migratedfrom their native place to the places of work. This factor is very important. Since thereare no means of earning livelihoods at their places of origin, they have migrated insearch of jobs after studying up to 10 th or 12 th standards out of sheer necessity andnot by their own choice, as stated by these labourers surveyed.The above personal information of the contract labour has been collected by adoptingmethodology of direct interviews. Some of the workers were required to be interviewedat their residences. This provided an opportunity for us for observing the livingconditions of these labourers. The conditions of the workers staying in the MIDC areasare found to be worse. The contract workers staying at Kurkumbh (Baramati), Waluj– Pandharpur (Aurangabad), Rajangaon (Pune) and Satpur (Nashik) are places wherethese contract workers have migrated solely for the purpose of earning livelihood andsending money back home for helping their family members. Their only aim in their Including the Excluded 39