VSRD International Journal of Technical & Non-Technical Research, Vol.

IX Issue I January 2018 / 57

e-ISSN: 0976-7967, p-ISSN: 2319-2216 © VSRD International Journals: www.vsrdjournals.com, UGC Approved Serial No. 48578

RESEARCH PAPER

CONTRACT LABOUR IN INDIA : A CRITICAL EVALUATION

Ankit Sourav Sahoo
Assistant Professor, Department of Law, Sambalpur University, Sambalpur, Odisha, INDIA.
Corresponding Email Id: cutemasoom620@gmail.com

ABSTRACT
Employees who do not work directly for an organization, but are employed by a firm that has a contract to do specific work for the
organization are known as contract labourers. Contract labour has to be employed for work which is specific and for definite duration.
Contract labour at large is not borne on pay roll or is paid directly. To regulate this system the government enacted the Contract
Labour (Regulation & Prohibition) Act, 1970 to secure the status of contract labourers and to abolish them from certain establishment
and it came into force on 10th February, 1971. However, certain degree of judicial activism has ensured the fairness of such system of
labour to an extent.

Keywords: Workmen, Labourer, Contract Labour, Contractor, Pay roll, Casual Labour, Temporary Employment.

the condition of contract labourers to be appalling and

1. INTRODUCTION
Labour administration is one of the most critical tasks of
an entrepreneur. In order to improve upon the rigorous
labour regulations, the industrial sector in India is
principally resorting to contract labourers, who are
governed by the Contract Labour (Regulation and
Abolition) Act of 1970. The system of employing
contract labour is prevalent in most industries in different
occupations including skilled and semi skilled jobs. It is
also common in agricultural and related operations and to
some extent in the services sector. Employees who do not
work directly for an organization, but are employed by a
firm that has a contract to do specific work for the
organization are known as contract labourers. A workman
is deemed to be employed as Contract Labour when he is
hired in connection with the work of an establishment by
or through a Contractor. Contract workmen are indirect
employees; persons who are hired, supervised and
remunerated by a Contractor who, in turn, is compensated
by the establishment. Contract labour has to be employed
for work which is specific and for definite duration.
Contract labour, by and large is not borne on pay roll or is
paid directly. This article intends to highlight different
constitutional and socio-legal aspects of contract labour
in India.
their employment exploitative in nature. The concern for
providing legislative protection to this category of
workers, whose conditions have been found to be
abysmal, resulted in the enactment of the Contract Labour
(Regulation and Abolition) Act (hereinafter referred to as
the Act) by the legislature in 1970. The principal aim of
the Act was and still is to prevent exploitation of contract
labour and also to introduce better conditions of work.
Contract labourers primarily 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 not paid the same wages or allowed the same
working conditions. This practice has led to the
mistreatment of these labourers as they are not employed
directly by the employer. Furthermore, the Act was
passed with an attempt to combat the problem which did
not allow these contract labourers to avail the rights and
benefits which were availed by the permanent workers
under different labour and industrial provisions. The main
objective of the Act was to prevent the oppression of
these labourers and to abolish the practice of contract
labour wherein

3. THE WORK IS OF PERENNIAL

2. CONSTITUTIONAL BACKGROUND
The deplorable condition of contract labour in India was
studied by various Commissions, Committees, and also
the Labour Bureau and the Ministry of Labour before and
after independence. All these organizations have found
NATURE
 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.
 The work is of the nature that it can employ
Ankit Sourav Sahoo
considerable number of whole time workmen;
 The work can be done by ordinary or regular
workmen.
4. MEANING AND CONCEPT
The act is applicable to an establishment of a Principal
Employer in which twenty or more workmen are
employed. To constitute the number, not only are the
workers employed by one Contractor to be counted, but
the total number of contract labourers engaged by
different Contractors has to be counted. It does not apply
to establishments in which merely work of an intermittent
or casual nature is performed. However if such work was
performed for more than 120 days in the last one year or
was of a seasonal character and was performed for more
than sixty days in a year, then the act is applicable. The
work site may or may not belong to the Principal
Employer, but that will not stand in the way of
application of the Act or in holding that a place or work
site where industry, trade, business, manufacture or
occupation is carried out is not an establishment. It is
notable that the Act is not confined to private employers
but also applies to the government. The jurisdiction of the
Central and State Government has been laid down by the
definition of the ‘Appropriate Government’ in the Act as
amended in 1986. The Act defines ‘workman’ as meaning
any person employed in or in connection with the work of
any establishment to do any skilled, semiskilled or
unskilled manual, supervisory, or clerical work for hire or
reward, whether the terms of employment are express or
implied. In the Central sphere, the Central Industrial
Relations Machinery (also known as Chief Labour
Commissioner) has been entrusted with the responsibility
of enforcing the provisions of the Act and the rules made
thereunder, through Inspectors, Licensing Officers,
Registering Officers and Appellate Authorities appointed
under the Act. Regular inspections are being conducted
by the Field Officers of the CIRM and prosecutions are
launched against the establishments, whenever violations
of the Act, Rules or notifications prohibiting employment
of contract labour are detected.
5. JUDICIAL INTERPRETATION
After the enactment of the Act, which took place on the
5th September, 1970 but came in to force on the 10th
February, 1971, the Courts did not have to face
impediments in granting relief to the wronged party in
disputes regarding the facilities which should be provided
to contract labourers for those guidelines had
unambiguously been enumerated in Sections 16, 17, 18
and 19 of the Act. The definitions of employer, contractor
and workmen had also been provided by the Act in
Section 2 which helped the court interpret the meaning of
these words which under normal circumstances seem too
broad and vague. The Courts can now also construe as to
when certain labourers are to be considered as contract
labourers and to what rights they are lawfully entitled.
VSRDIJTNTR, Vol. IX (I) January 2018 / 58
One of the first cases to have come up before the Courts
which required elucidation of this expression was Heavy
Engineering Mazdoor Union v. State of Bihar. It was
asserted in the case that the phrase ‘under the Authority
of’ must be interpreted in detail and that ‘Authority’ must
be construed according to its ordinary meaning which
means legal power given by one person to another to
perform an act. It established in light of the situation that
albeit the entire share capital was vested in the name of
President of India, and its nominees and extensive control
was vested in the Central Government, it did not make
the organization in question an industry carried on under
the authority of Central Government. The position of the
Heavy Engineering Case is again strengthened by the
Apex Court in Steel Authority of India Limited and Ors
v. National Union Water Front Workers and Ors.,
asserting that ‘Appropriate Government’ in relation to an
establishment would be the Central Government if, the
concerned Central Government company or undertaking
is included by name in clause (a) of Section - 2 of the
Industrial Disputes Act, or any industry carried on by or
under the authority of Central Government or by a
railway company, or any such controlled industry as may
be specified in this behalf by the Central Government,
otherwise in relation to any other establishment, the
Government of the State in which that other
establishment is situated, will be the Appropriate
Government.
In an endeavour to answer the grave ambiguities
regarding the absorption of workmen in industries
abolishing contract labour, in the case of R.K. Panda &
Ors. Vs. Steel Authority of India Ltd, the Hon’ble Apex
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. However, the right to be absorbed by
the employer directly is neither proposed nor mentioned
in the Act. The 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. The Court
directed the Company to comply with the following:
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 absorption and not prior to that.
In the case of Rourkela Shramik Sangh v. Steel Authority
of India Ltd, the Hon’ble Supreme Court held that the
contract labourers who were less than 58 years old and
medically fit should be absorbed by the Principal
Employer. Here the Court reverted back to the decision
which it gave initially. Its decision showed that it has
Ankit Sourav Sahoo
again approached the problem of contract labour from a
very realistic point of view and not merely on the basis of
what has been written in the statute. The Court also took
into consideration that it would be unjust to leave the
labourers unemployed after the abolishment of contract
labour.
While evaluating the constitutionality of obligations,
imposed on the employer, for the benefit of its workmen,
the Apex Court considered its standing ratios of the past
which was given in the case of Basti Sugar Mills Ltd. v.
Ram Ujagar and Ors. This case, although was decided
before the enactment of this Act, is relevant to the current
discussion because it effectively answers the question that
whether obligations imposed on the employer regarding
conferring amenities on contract labourers is violative of
Article 19 (1) (g) of the Indian Constitution. In this case
the Court clearly stated that public welfare supersedes
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.
Again In the case of Gammon India Ltd. and Ors. v.
Union of India and Ors.,it was held that the duty of the
employer is not only paying wages to the labourers but
also providing them with basic amenities in order to
maintain their health and well-being. Hence the
expenditures incurred by the employer are not a form of
tax imposed on him but form a part of this responsibility
towards his labourers which he cannot shirk, and in no
means can this obligation be referred to as wasteful or
unnecessary restrictions. Thus, it cannot be said to be in
contravention of Article 19 (1) (g). By giving this
decision, the Hon’ble Apex Court clearly gave a message
to the industrialists that the right to carry on business
cannot be enjoyed without fulfilling the duties which they
have towards their labourers.
In recent times, in the case of Bhilwara Dugdh Utpadak
Sahakari Sanstha Ltd. Vs Vinod Kumar Sharma (Dead)
by LRs, The Hon’ble apex court held that the appeal
reveals the unfortunate state of affairs prevailing in the
field of labour relations in our country. In order to avoid
their liability under various labour statutes employers are
very often resorting to subterfuge by trying to show that
their employees are, in fact, the employees of a
contractor. It is high time that this subterfuge must come
to an end. Labour statutes were meant to protect the
employees/workmen because it was realised that the
employers and the employees are not on an equal
bargaining position. Hence, protection of employees was
required so that they may not be exploited. However, this
new technique of subterfuge has been adopted by some
employers in recent years in order to deny the rights of
the workmen under various labour statutes by showing
VSRDIJTNTR, Vol. IX (I) January 2018 / 59
that the concerned workmen are not their employees but
are the employees/workmen of a contractor, or that they
are merely daily wage or short term or casual employees
when in fact they are doing the work of regular
employees. This Court cannot countenance such practices
any more. However, earning profit by exploiting labour
cannot be permitted in a democratic country and welfare
state that ideally functions for the people.
Subsequently, in Nihal Singh & ors vs State of Punjab &
ors, The Supreme Court of India has followed the
principles of the Bhilwara Dugdh Utpadak Sahakari
Sanstha’s case and the hon’ble court observed that even
the state governments and public sector banks should not
be allowed to avail cheap labour for decades because
such practice is not consistent with their obligations to
function in accordance with the constitution.
6. MAGNITUDE OF THE STUDY
In India, A total of 384 million persons are employed at
various levels and out of the total employed 51% are self-
employed, while 33.5% are engaged as casual labour and
15.6% are employed as regular wage or salaried
employees. The Labour Bureau, Ministry of Labour and
Employment conducted a study on the Working
Condition of Contract Labours (2000-01) in Cement
Manufacturing Industry, Food Corporation of India (FCI)
and National Thermal Power Corporation (NTPC) and
found that maximum employment of contract workers is
in Cement Manufacturing Industry (28331) followed by
FCI depots (18112), NTPC units (17900) and Cement
Related Mines (1290) but the ratio of contract workers
was highest in FCI depots (50.2 percent) and lowest in
Cement Related Mines (16.9 percent).
7. SUGGESTIONS
 Public sector undertakings and government
machineries should not be allowed to employ cheap
contractual labour for prolonged period of time.
 Social Security of the poor workmen must be
considered before formulation of any laws governing
the issue.
 There is high necessity of coordination among
stakeholders for implementation of law concerning
contract labour.
 The government and NGO sector must make
endeavour to create awareness.
 The labour organizations must make proper venture
for strict implementation of governmental policies.
8. CONCLUSION
The first step to ensure the proper administration of
justice is to make the contract labourers aware of their
rights and responsibilities so that they’ll be able to find
out any irregularities of law or practice and take
necessary steps for its cure. Further, it is necessary to
Ankit Sourav Sahoo VSRDIJTNTR, Vol. IX (I) January 2018 / 60

empower the workers to complain to an independent

authority in a confidential manner; and giving
punishment or reward to a supervisor on the basis of such
complaints is a more effective way of combating corrupt
practices. We have come to an era of industrialization
when multinational companies, their Indian cohorts,
various global financial agencies and the Indian
Government have all been baying for the blood of the
workers. The industrial scenario is one where the
prevailing management theories lay emphasis on ‘just-in-
time’ production. This postulates, in the current
management parlance, ‘flexibility’ of labour. This only
means more contract labour, more casual labour, fewer
rights for unionisation etc. The official policy appears to
be that the workers will have to sacrifice if the country’s
economy is to survive. Various state governments in india
have usually employed contract labour in the name of
menial work..

9. REFERENCES
[1] Longman Business English Dictionary, Financial
Times Lexicon, available at
lexicon.ft.com/Term?term=contract-labour
[2] Standard Vacuum Refining Company v. Their Workman,
1960 SCR (3) 466
[3] Section - 1 (4) and (5), Contract Labour (Regulation
and Abolition) Act, 1970
[4] Lionel Edwards Ltd. v. Labour Enforcement Officer,
(1977) 51 FJR 199 (Cal)
[5] BHEL Workers’ Association v. Union of India,
(1985) 1 SCC 630
[6] Section - 2 (1) (a), Contract Labour (Regulation and
Abolition) Act, 1970
[7] Section - 2 (i), Contract Labour (Regulation and Abolition)
Act, 1970
[8] Available at http://clc.gov.in/estb/shtm/history.php
[9] 1969 (19) FLR 27
[10] (2001) 7 SCC 1
[11] (1994) 5 SCC 304
[12] (2003) 4 SCC 317
[13] 1964 SCR (2) 838
[14] 1974 SCR (3) 665
[15] Decided by Supreme Court of India in Civil Appeal No’
2585 of 2006 on 01st September 2011
[16] Decided by Supreme Court of India in Civil Appeal No’
1059 of 2005 on 07th August 2013
[17] 66th Round of NSSO, 2009-10
[18] Labour Bureau, Ministry of Labour and Employment;
‘Report on the Working Condition of Contract Labour in
Cement Manufacturing Industry, Cement Related Mines,
Food Corporation of India and National Thermal Power
Corporation’; Government of India, Chandigarh/Shimla,
2000-01.
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