CONTRACT LABOUR

“Contractor”  in relation to an establishment, means a person who undertakes to produce a given result for the establishment, other than a mere supply of goods or articles of manufacture  to such establishment, through contract labour or who supplies contract labour for any work of the establishment and includes a sub-contractor; ‘A workman shall be deemed to be employed as "contract labour" in or in connection with the work of an establishment when he is hired in or in connection with such work by or through a contractor with or without the knowledge of the principal employer' 

Workman' means, any person employed in or in  connection with the work of any establishment to do any skilled, semi-skilled or unskilled, manual, supervisory, technical or clerical work for hire or reward, whether the terms of employment be express or implied. (Relevant portion only reproduced).

An employer intending to engage contract labour is required to register as principal employer under Section-7 of the Contract Labour Act, and the contractor who undertakes to carry out work for the principal employer is required to take license under Section-12 of the Act.  The Act has not limited the areas for employment of contract labour.  However, Section 10 of the Act empowers the appropriate Government to prohibit by notification employment of contract labour in any process, operation, or any other work in any establishment.  The factors required to be considered by the appropriate government for such prohibition are, that the process, operation or other work should be incidental to or necessary for the industry, the said process, operation or other work should be perennial in nature, and the said process, operation or other work should require considerable number of whole time workmen.
 
CONTRACT LABOUR SHOULD BE GENUINE:
The Hon’ble Supreme Court, in Secretary, Haryana State Electricity Board Vs. Suresh and others was considering claims by contract workmen for regularization of their services in the Board on the ground that the contract labour system was not genuine. Haryana State Electricity Board, a Statutory Board, with one of its primary functions being supply of power to urban and rural areas in the state of Haryana through its various plants and stations awarded contract to contractors to keep the plant and stations clean and hygienic. The workmen of the contractor, after 240 days of working raised a dispute against the Board contending that they  are entitled to be absorbed permanently in the services of the Board in view of their having completed 240 days of work.  The labour court to which the matter was referred, passed an award reinstating the workmen with continuity of service along with 10% back wages.  The board filed writ petitions before the Punjab and Haryana High Court challenging the correctness of the award passed by the labour court.  After hearing, the petitions were dismissed.  The Hon’ble Supreme Court rejected the appeal filed before it.
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From various judgements of the Hon’ble Supreme Court, it is abundantly clear that the Hon'ble Supreme Court would not consider a contractor who merely supplies labour as a genuine contractor, and consequently a principal employer who engages workmen through such contractors would become direct employer of those contract workmen.  This is mainly because, in case of contractors who supply labour only, the work of such labourers will have to be necessarily supervised by the employees of the principal employer.  Even day to day instructions in the matter of work will have to be given by the officers of the principal employer as the contractor would not be on the scene. This would virtually mean, that apart from supplying labour, such contractors would have no more role to play.  In other words, hereafter, it is no longer open to the industry to engage contract workmen through a contractor without involving him in the supervision of his workmen.  The system under which workmen are merely hired through a contractor would not bring such hired workmen within the purview of the Contract Labour Act, as the contractor would be treated as a benami, a name lender and not a genuine contractor as contemplated under the Contract Labour Act.
 
S.N.MURTHY
Senior Advocate, Bengaluru