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A Study of Contract Labour Regulation and Abolition Act, 1970

Written by: Shashank Agarwal & Saurabh Tiwari - Law Students
Legal Service
  • 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) 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. 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.

    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.

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