CONTRACT LABOUR (REGULATION AND

ABOLITION) ACT, 1970

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INTRODUCTION

 The Contract Labour (Regulation and Abolition) Act, 19701 was enacted to regulate the employment of contract
labour in certain establishments and to provide for its abolition in certain circumstances.
 Applicability: The act is applicable to:

a. every establishment in which twenty or more workmen are employed or were employed on any day of the preceding
twelve months as contract labour;
b. every contractor who employs or who employed on any day of the preceding twelve months twenty or more
workmen.
 Non- applicability:

a. An establishment which performs an intermittent or casual nature of work.- The appropriate Government shall
decide upon the intermittent or casual nature of work after
b. consultation with the Central Board/ State Board.
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IMPORTANT DEFINITIONS

1. Section 2(b): Contract Labour

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SECTION 7: REGISTRATION OF CERTAIN ESTABLISHMENTS

(1) Every principal employer of an establishment to which this Act applies shall, within such period as the
appropriate Government may, by notification in the Official Gazette, fix in this behalf with respect to establishments
generally or with respect to any class of them, make an application to the registering officer in the prescribed manner
for registration of the establishment:
Provided that the registering officer may entertain any such application for registration after expiry of the period fixed
in this behalf, if the registering officer is satisfied that the applicant was prevented by sufficient cause from making
the application in time.
(2) If the application for registration is complete in all respects, the registering officer shall register the establishment
and issue to the principal employer of the establishment a certificate of registration containing such particulars as
may be prescribed.

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FOOD CORPORATION OF INDIA LOADING AND UNLOADING
WORKERS UNION V. FOOD CORPORATION OF INDIA (1990) 1 GLR 384
 Background: It is the contention of the petitioners that the Food Corporation of India (FCI) engages more than 20
hands in employment, it is covered by the Act and that since the FCI is not registered under the said Act, so far as
the petitioners nos. 2 to 158 are concerned, they are to be treated as direct employees of the FCI. It has been
specifically alleged in the petition that although contractors came and went but the labourers remained constant for
the last 15 years.
 The contention of the petitioners is that the contractors are merely intermediaries and the employers of the
petitioners are FCI. The petitioners have to maintain work schedule as fixed by the respondent no. 2. It has also
been alleged that the respondent no. 2 has economic control over the petitioners' subsistence, continuance of
employment through their agencies or contractors. It has been further alleged that the petitioners' entry into
respondents' office premises vis-a-vis their work schedule is subject to the consent and approval of the
respondents. In other words, the respondents have ultimate say both in appointments and termination of the
service of the petitioners. It has been further alleged that so far as the petitioners are concerned the contractors
have no part to play but only to carry out the instructions given by the principal employer that is the FCI. The
contractors act under the supervision and total economic control of the FCI. The wages paid by the FCI to the
labours are only channelled through the said contractors, when one contractor goes out and a new contractor
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comes in the labourers stay as it is and do not go out with the contractors. It is also the contention of the
petitioners that they are paid less than the regular employees of the FCI. In short, the respondents are violating the
HELD:

 For certain periods the principal employer, i.e., the Food Corporation of India, did not possess Certificate of
Registration as required under the provisions of Section 7 of the Act, Similarly, the contractors through whom the
workmen were engaged also did not possess licence issued under Section 12 of the Act by the "appropriate
Government" for certain periods. Therefore, in relation to this period, the workmen can very well claim that the
workmen were employed directly by the principal employer, i.e., F.C.I.

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SECTION 10: PROHIBITION OF EMPLOYMENT OF CONTRACT
LABOUR
(1) Notwithstanding anything contained in this Act, the appropriate Government may, after consultation with the
Central Board or, as the case may be, a State Board, prohibit, by notification in the Official Gazette, employment of
contract labour in any process, operation or other work in any establishment.
(2) Before issuing any notification under sub-section (1) in relation to an establishment, the appropriate Government
shall have regard to the conditions of work and benefits provided for the contract labour in that establishment and
other relevant factors, such as—
(a) whether the process, operation or other work is incidental to, or necessary for the industry, trade, business,
manufacture or occupation that is carried on in the establishment;
(b) whether it is of perennial nature, that is to say, it is of sufficient duration having regard to the nature of industry,
trade, business, manufacture or occupation carried on in that establishment;
(c) whether it is done ordinarily through, regular workmen in that establishment or an establishment similar thereto;
(d) whether it is sufficient to employ considerable number of whole time workmen.
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Explanation.—If a question arises whether any process or operation or other work is of perennial nature, the decision
of the appropriate Government thereon shall be final.
AIR INDIA STATUTORY CORPORATION V. UNITED LABOUR
UNION AIR (1997) I LLJ 1113 SC
 When the principal employer is enjoined to ensure those rights and payment of wages while the contract labour
system is under regulation, the question arises whether after abolition of the contract labour system those
workmen should be left in a lurch, denuding them of the means of livelihood and the enjoyment of the basic
fundamental rights provided while the contract labour system is regulated under the Act?
 Though the legislature has expressly not mentioned in the consequences of such abolition, the very scheme and
ambit of S.10 of the Act clearly indicates the inherent legislative intent of making the erstwhile contract laborers
direct employees of the employer on abolition of the intermediary contractor.
 Therefore, it is submitted that the Court took a pragmatic approach and cast a duty on the principal employer to
absorb the contract labor once a notification for abolition of the contract labor is made under S.10(1) of the Act.
Otherwise, the true intention of the Act would be frustrated. The intention of the Act is to abolish the contract
labor wherever and whenever there is possibility but not throwing the workers out of job rather through
absorption.

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STEEL AUTHORITY OF INDIA V. UNION OF INDIA, AIR 2006 SC
3229

 The Air India case was overruled prospectively in Steel Authority of India Lid. v. National Union Waterfront
Workers and the Supreme Court took just a diametrically opposite view to that of Air India case.
 The Court in this case observed that neither S. 10 of the CLA Act nor any other provision in the Act, whether
expressly or by necessary implication, provides for automatic absorption of contract labour on issuing a
notification by appropriate Government under sub-section (1) of S. 10, prohibiting employment of contract labour,
in any process, operation or other work in any establishment.
 Consequently, the principal employer cannot be required to order absorption of the contract labour working in the
establishment concerned.

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BHARAT HEAVY ELECTRICALS LTD. V. MAHENDRA PRASAD
JAKHMOLA (2019) 13 SCC 82
 Bharat Mahindra Heavy Electricals Ltd. (hereinafter “BHEL”) entered into agreements with various contractors,
in order to ensure the completion of certain projects. During the course of work undertaken towards such end, the
employment of some contract labourers was terminated. The contract labourers contended that such termination
amounted to violation of the Uttar Pradesh Industrial Disputes Act, 1947 (hereinafter “Act”).
 Issue: On appeal to the Supreme Court, the issues framed by the Hon’ble Court, in order to determine as to
whether the workmen were employees of BHEL or not, were:
i. Whether the principal employer pays the salary instead of the contractor; and
ii. Whether the principal employer controls and supervises the work of the employee.
 Held: The court held that in order to fall under the definition of an ‘employee’, as provided in the Act, the wages
of such contract labourers must be directly paid by the principal employer, which was not the case in the present
matter as it was observed that the contractors directly paid the workmen. Secondly, it was held that the principal
employer was not in direct control and did not supervise the work of the workmen. The Apex Court opined that
merely because the principal employer directs the workmen of contractors as to ‘what to do’, after entering into
such agreement with contractors, does not imply that said principal employer has direct control and supervision. 10
 Applying the above test to the matter at hand, the court held that the workers under contract were not direct
employees of BHEL, as BHEL did not have direct control and supervision over the contract laborers.