1. 3/8/2019 A Study of Contract Labour Regulation and Abolition Act, 1970
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In the present day world globalization is increasing at a very high pace and it is resulting in
profit oriented economies which in turn leads to the promotion of contract labour. The
concept of contract labour can be understood from the following example, suppose A is an
industrialist and he wants to build a factory and for this he hires a person B to get the job
done. This person B hires other people X, Y and Z to build the factory. Now it is not
necessary that X, Y and Z should be hired by B with the permission of A. A may not even
know about this contract but B acting as a mediator has got into a contract with other
people to get A’s work done. These people X, Y and Z who have no direct contact or
relationship with A are the contract labourers.
Reasons for the enactment of Contract Labour (Regulation and Abolition)
Act, 1970
Contract labourers also suffer from inferior labour status, casual nature of employment,
lack of job security and poor economic conditions. It was also observed that in some cases
the contract labourers did the same work as the workers directly employed by the
industrialist but were no paid the same wages and the same working conditions. This
practice of contract labour has also lead to the exploitation of these labourers as they are
not employed directly under the employer. This practice of exploitation was and still is very
much prevalent in India, therefore to encounter such problem and also to regulate the
conditions of these labourers the Govt. passed an Act called the Contract Labour
(Regulation and Abolition) Act, 1970. The Act was also passed to provide legislative
protection to these workers who had no rights to claim what they deserved like basic
amenities, urinals, drinking water facilty etc. Furthermore these contract labourers before
the enactment could not avail the rights and benefits which were availed by the permanent
workers under different labour and industrial provisions.
Objectives of the Act:
The main objective of the Act was to stop the exploitation of these labouresrs and to
abolish the practice of contract labour where:
(a) The work is of perennial nature.
(b) The work is incidental to and necessary for the work of the factory i.e. the principal
activity of the industry e.g. work related to production.
(c) The work is of the nature that it can employ considerable number of whole time
workmen; and
(d) Th k b d b di l k
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2. 3/8/2019 A Study of Contract Labour Regulation and Abolition Act, 1970
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(d) The work can be done by ordinary or regular workmen.
Application of the Act:
The Act applies to all the establishments where the number of the workmen employed as
Contract Labour are 20 or more (S. 1 (4)) on any day of the preceding twelve months. It
includes all the contracts of Govts. and local authorities as well.
The Act does not apply to the establishments where the work done is of intermittent or
seasonal nature (S.1(5)(a)). It will come under the Act only when the work is performed for
more than 120 days in a year and more than 60 days in a year when the work is of a
seasonal nature.
How judiciary has interpreted the Statute:
Before the enactment of this Act there was no specific legislation which dealt in detail with
the problem of the contract labour. Although there were legislations like Industrial Disputes
Act, 1947 , Payment of Wages Act, 1936 etc. but none of them was specifically designed to
regulate contract labour. This restricted the Courts from forming the basic guidelines as to
abolish or restrict the contract labour. Therefore they required an Act which completely
dealt with the regulations of the contract labour.
After the enactment of the Act, which took place on the 5th September, 1970 but came in
force on the 10th February, 1971, the courts did not have to face much difficulties as
regarding the facilities which should be provided to these contract labour (S. 16,17,18 and
19). The definition of employer, contractor (S.2(c)) and workmen (S.2(b)) were also provided
by this Act which helped the court to interpret the meaning of these words. The courts also
construe as to when the labourers would be considered as contract labourers or not.
Main issue regarding contract labour which the judiciary dealt with:
Whether the Act itself provides the workers of an industry, the right to get absorbed by the
industry after contract labour is abolished there?
The above issue had to be dealt by the court in almost every case relating to the contract
labour because in the establishments where contract labour was abolished owing to the
application of the Act, these labourers wanted to get absorbed in the establishment
directly. On the above issue there has been a varying opinion of the courts. The reason for
a varying opinion of the courts is that the Act has no provision regarding the same as the
Act does not completely abolish contract labour.
In the case of R.K. Panda v. Steel Authority of India where the same issue was in question
the Supreme Court held that the Act regulates contract labour but has never proposed to
abolish it entirely. The primary object of the Act can be taken as to save the contract
labourers from exploitation. But the right to be absorbed by the employer directly is
neither proposed nor mentioned in the Act. The Supreme Court also said that insertion of
certain clauses in the contract with the contract labourers by the industry does not give
them a right to escape from the duty of providing the contract labourers rights.
On these basis the Supreme Court gave the following decision –
# The labourers who were continuing in the employment for the last 10 years, in spite of
change of contractors and have not crossed the age of superannuation and were medically
fit, should be absorbed as regular employees in the order of seniority.
# Regular wages will be payable only for the period subsequent to absorbtion and not prior
to that.
The Court interpreted the Act in a correct way i.e. the Act strives for regulation of Contract
Labour and not for its abolishment in entirety and accepted that the Act does not expressly
provides the right to get absorbed to the labourers. But it did not end the case right there.
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Here the Supreme Court rightly performed the function of judiciary to impart justice. It
realized that courts should achieve that which the legislations are not able to achieve and
which keeps up the faith of people in judiciary. The judges here used the freedom which
the common law system confers upon them that is to look into the objective of a matter
and device new principles which could suit justice. They devised the principle that a
contract labourer who is working for a company in a work of perennial nature has to be
absorbed by the industry. This principle was clearly in the interests of those who worked
same as the regular employees but were exploited by the unfair practices of the
industrialists.
In an another case Air India Statutory Corp. v. United Labour Union where again the same
question was in issue the Supreme Court said that the Act works in direction for the
betterment of these contract labourers as it talks about the utilities which should be
provided by the principal employer to them like drinking water facility, urinals, storage
rooms etc. therefore it could be easily inferred that the Act has no intention of making
these workers jobless after the abolishment of contract labour. The Act also does not
intend to deny the workmen to continue their work or to devoid them from benefits of
permanent employment because earning livelihood is a fundamental right. The Court
ordered to absorb these workers on a seniority basis.
Here again in this case the Court understood the conditions under which the contract
labourers are made to work and used the freedom provided by the common law system.
Here the judges did not give the decision just on the basis of what is written in statutes but
understood the objectives of the act and tried to implement the same i.e. to provide better
working conditions to these contract labourers and to protect them from exploitation. In
this case the workers were working as contract labourers for more than 10 years from
which it could be easily understood that they were being exploited. Therefore the decision
given by the court is highly appreciable as it was in the direction for the betterment of
these workers.
In the case of Steel Authority of India Ltd. v. National Union Water Front Workers again the
same issue was raised. Here the Court acted solely on the basis of what was written in the
Act. The Court said that Section 10 of the Act or any other provision there does not imply
for automatic absorption of contract labour. Therefore, the principal employer cannot be
required to absorb contract labour working in the concerned establishment. Furthermore
the Supreme Court also said that the Act nowhere has said that the contract labourers are
or should be treated as the employees of the employer, but they are the employees of the
contractor. Therefore the employer has no duty or under no obligation to absorb them.
By this case the SC overruled its own decision given in the case of Air India Statutory Corp.
v. United Labour Union. Here it can be seen that the court totally relied upon the provisions
of the Act as it nowhere says about the absorption of the contract labourers after its
abolishment. From this it can be inferred that the SC developed a very strict approach
towards the contract labour.
Again in the case of Municipal Corporation of Greater Bombay v. K.V. Shramik Sangh the SC
had the same view point as in the case of Air India Statutory Corp. v. United Labour Union
and gave the same reasoning as well.
Now in the case of Rourkela Shramik Sangh v. Steel Authority of India Ltd the SC held that
the contract labourers who were less than 58yrs old and medically fit should be absorbed
by the principal employer.
Here the SC reverted back to the decision which it gave initially. Its decision showed that it
has again approached towards the contract labour problem from a very practical point of
view and not on just the basis of what has been written in the statute. The SC also took into
consideration that it would be unjust to leave the labourers unemployed after the
abolishment of contract labour
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abolishment of contract labour.
Now from the above case analysis it can be easily inferred that the Courts have not
developed a steady attitude towards the above issue. The reason for this is the Act itself ,
because it lacks provisions regarding the same. It does not mention anything about the
issue in concern. The Courts therefore faced a problem and in some of the judgements
gave their decision solely based on the basis of the provisions given in the Act while others
gave decisions based on the object of the Act i.e. to protect these labourers from
exploitation. Now if the object had to be achieved the Act should have been more
expressive because on issues like this there has to be certain guidelines provided by the
legislation otherwise these labourers may keep on being exploited.
This problem is still very much prevalent and it can be understood from the fact that
contract labourers went again on a strike at the Manesar factory of Honda Motorcycle and
Scooter India Ltd. (HMSI). The company officials had to call police to avoid any ugly scene
which happened in the same company in 2005 . This shows that how much unrest is
present in the contract labourers as they don’t have any job security and they are exploited
too in terms of wages and working conditions too.
The issue of Article 19 (1)(g)
According to the case Basti Sugar Mills Ltd. v. Ram Ujagar and others which was decided
before the enactment of this Act but still answers the question that whether obligations
regarding conferring amenities on contract labourers is in contradiction to Article 19(1)(g)
or not. In this case the court clearly stated that public welfare comes above private
interests. Right to carry on trade and business does not give a right to the employer to
exploit his workers. The practice of employing a contractor so as to evade the benefits
conferred by major Acts on industrial labour was totally criticized and discouraged by the
Court.
In the case of Gammon India Ltd. and ors. v. Union of India it was held that the duty of
the employer is not only paying wages but also to provide them with basic amenities to
maintain health and welfare of the labourers. Hence the expenditures incurred are not any
tax imposed on the employer but form a part of this duty and in no means can be referred
to as waste or unnecessary restrictions. Now by giving this decision the SC clearly gave a
message to the industrialists that the right to carry on business cannot be enjoyed without
fulfilling the duties whish they are supposed to do.
The author can be reached at: shashank@legalserviceindia.com / Print This Article
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