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by adopting an operational flexibility in the construction of provision. This is whathas been done in the matter of filing complaint under the provisions of theNegotiable Instruments Act vis-a-vis the competence of the complainant.

THE ISSUES, CONCERNS, PROBLEMS AND REMEDIES INMANAGING THE CONTRACT LABOUR

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- By Mr. D. Samuel Abraham, M.A. B.L., Sr. Law Officer, Chris»•.Medical College, Ida Scudder Road, Vellore 632 004.

The word 'Contract' is derived from the word 'Consensus'. In short, to navalid contract between two or more parties, there must be consensus of mind anlUU5them. In other words, the subject of contract must be understood by the second partyas,the same way first party has understood it. As applicable for goods physically forsupply and service, can 'service of labour hired? If so, on what basis and regulations?In this century of 'knowledge' and 'rights' especially in a democratic country likeIndia,what are the reasonable restrictions placed on the Service of Labour. To answerthis, the Indian parliament enacted The Contract Labour (Regulation and Abolition)Act, 1970 (hereinafter called Act), which was notified in 1971.

NECESSITY OF CONTRACT LABOURThe subject Contract Labour is not new to the Indian Society. It has been in

.existence from time immemorial. It is being followed in our day-to-day activities. Forxample, you engage a mason to construct an extra bathroom in your house in direct

employment. He may come at lOam, slowly takes his instrument, asks his assistant tomix the cement, sand and water. It will take a considerable time; puts the woodenplatform slowly and finally starts the work around 11 am. After an hour, he goes forcoffee break followed by smoking time; resumes work at 12 noon. Works till 2 pmand then goes for lunch followed by small chit-chatting with his fellow men followedby a nap. He resumes working at 3 pm. The same drama is repeated till 5 or 5.30 pm.!he output is so poor; but given the same work for a labour contract, you Supply the'Diaterial. The same mason comes at your door at 7 am works till 6.30 pm activelyengaging his fellow workmen! The magic is that he may finish it with the shortestduiation by persuading others down-to-earth. In the same way, in Industry, theemployers engage contractors to supply labours for the following reasons:

1.No direct supervision is required by the Principal employer.

2. Job is completed within the shortest duration.3. Liability to pay the benefits to the workmen is lesser than direct employees.4. Employees can concentrate on other core issue or very important assignment rather

." concentrating in the subsidiary or non-core issues.

However, as there were many cases of exploitations by the employers and in manyinstances, there were no real contracts with the contractors of labour but it existed onlyin paper, the parliament decided to regulate the engagement of contract labours and insome cases abolish the same. As the labour legislations are always enacted to thebenefit of workmen, liberal interpretations were given by the judiciary.

A careful reading of the Act may reveal that if there is non-compliance of theprovisions of the Act, penal provisions are provided in Section 22. In short, the lawhas provided the penalties for non-compliance. But, many High Courts and in few

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cases by the Supreme Court, the judiciary discussed at length, "the Consequentialeffect" and ordered regularisation of service with the Principal employer with effectfrom the date, the contract between the Principal employer and labour contractorwas declared camouflage or sham contract. This had happened both in public andprivate sectors. The following are few case laws for the benefit of our readers.

1. Standard-Vacuum Refining Company of India v. Its workmen and others,1960 (3) SCR 466

The Supreme Court declared that if the job is of perennial nature done by thecontract labours and if less salary is being given to the contract labours whencompared to regular workmen, then court can order regularization of service of thecontract workmen with the principal employer.

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2. Gammon India Limited and others Vs. Union of India and others, 1974(1) SCC 596

The Supreme Court declared that intention of parliament was to regulate theworking conditions of contract labour to ensure payment of wages and otheressentials.

3. Hussain Bhai v. Alath Factory, Tezbilali Union, 1978 (2) LLJ 397A workmen under CLRA Act is also a workman under Industrial Disputes Act.

The contractor would be the employer of such person. The principal employerunder the Act would be employer under I.D. act in certain circumstances.

4. Deenanath v. National fertilizers Ltd., 1992 AIR S2 457Held: Neither the act nor the rules framed by the Central Government provide

that upon abolition of contract labour, the said labour would be directly absorbed bythe principal employer. Hence, automatic absorption is not possible.

5. R.K. Panda v. Steel Authority of India, 1994 LLR 634 (SC)Held: The primary object of the Act is to prevent the exploitation of the Contract

labour by the contractor or the establishment. Supreme Court ordered absorption ofall the workmen, subject to few conditions.

6. Gujarat Electricity Board, Thermal Power Station, Ukai, Gujarat v. HindMazdoor sabha, 1995 LLR 552

Held: Thermal power in Gujarat - 1500 workers under Contract - Hail from Adivasi.- Contractors exploited the workers - Worked more than 20 years and more - SupremeCourt ordered absorption of most of the contract labourers by appointing a Committee.

7. Air India Statutory Corporation v.. United Labour Union, 1997 LLR 288Held: The Writ Petitions filed by the workmen of the contractor to abolish

contract labour in sweeping, dusting, cleaning etc, was allowed by Single Judge ofthe High court Bombay, which was upheld by the Supreme Court, by the ThreeJudges Bench.

8. Food Corporation of India, Bombay and others v.. Transport and Dockworkers union and others, 1997 (7) SCC 59

Held: If contract labour is abolished by Courts, automatic absorption of contractlabour by the Principal employer.

9. International Airport Authority of India v. International Air CargoWorkers' Unions, 2009 LLR 923 SC

Held: No automatic absorption.

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to. Steel Authority of India Ltd, v. National Union Water Front Workers, 2001LLN 135 : 2009 LLR 923 sc

Held:

(a) State can abolish any class of employment under contract labour

(b) State can do it only on the recommendation of the committee speciallyconstituted for their purpose.

(c) Air India judgment overruled

(d) No automatic absorption of contract labour on its prohibition or abolition.

(e) When the adjudicator has held that contract as camouflage, the contractworkers will be automatically absorbed with the Principal employer.

(f) The contract workers already absorbed will not be affected

(g) Neither SC nor HC can declare a contract sham or valid contract; onlyIndustrial Tribunal can declare as it is the adjudicator before whom both theparties can prove their respective claim.

Reliefto the employer:Beinga judgement of a Five Judge Bench (Constitutional), the employersbe very happy that

1. It puts a full-stop for automatic absorption, in case the State prohibits orabolishes Contract Labour.

2. The Supreme Court or High Court cannot prohibit the employment of ContractLabour.

3. The Supreme Court or High Court shall not go into the genuineness orotherwise of a contract.

4. This judgment may hold good unless it is overruled by a Seven-Judge Bench,which is a remote chance.

'Limitation of the right of the employer:l'he judgment brought few limitations to the rights of the employer; now he is-bound to conduct the case properly by submitting proper records to prove thatcontract is genuine and valid. Now he stands before an Industrial Adjudicator,

o is at par with a District Judge to declare the validity of his contract; If he fails tove, the Adjudicator may order absorption of all the contract labour who were

. g immediately before the award; Appeal against the orders of Tribunal aboutdecisions before the Single Judge of the High Court, Division Bench of the High

and Supreme Court to get more and more time.is no more in practice. Thee Court has limited the writ jurisdiction both for High Court and Supreme

. Therefore, the employers can escape from the imminent danger if and only iffollow the provisions of the Act properly; the power to adjudicate and declare

contract has been entrusted with fairly a lower level judiciary which an employeruld take conscious note of the procedure in CLRA Act, 1970.

How to make a Valid Contract:

The following are very simple procedures which, if followed, can save anloyer from the Industrial tribunal.

ll Principal employer register his Company name with Inspector of Factories'~ormI)

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2. Ensure that License is granted to the contractor by the Inspector of Factories(Form VI).

3. Ensure periodical renewal (Form VII)4. Intimation notice about commencement / Completion of work (Form VI B).5. Maintain Registers of Contractors (Form XII).

6. Ensure employment card is issued to all the contract employees by theContractor.

7. The principal employer should send Annual Return about the Contractors forthe year ending December 31 (Form XXV)The principal employer should ensure that the Contractor is maintaining the

register like Muster Roll, Register of Wages, Register of Deductions, Register ofovertime, Register of Fines and Register of Advances.

These are only paper works but if papers are maintained, employer can easilyprove that the contract is genuine and valid. Another fact to be underlined is thatmany of the employers think that if they have an agreement with a contractor oflabour. in a valid stamp paper, it is enough and valid: He is not at all correct;'because unless he sends all the relevant documents to the Inspector of factories andmaintain few other records, mere copy of an agreement will be considered as acamouflage or sham contract.

Characteristics of Sham Contract:(i) Presence of direct supervtsion of contract employeesofficers/employees of principal employer(ii) Absence of documents to show that there is valid contract.

(iii) Absence of Registration by the Principal Employer orContractor.

In Short, it depends upon who pays the wages, for whose benefits the contraworkmen works whether to his employer (Contractor) or to its principal employUnder whose supervision; the moment a contract worker is entrusted to work undan officer of the principal employer, the contract becomes camouflage. ThPrincipal employer, if he notices any irregularity or any allegation of contra,worker, he should address the issue again with contract labour to the contractdirectly and should not take any disciplinary action.

It may not be justified if a mention is not made about the latest case lawMadras Rubber Factory United Workers Union v. The Chief InspectorFactories, Chennai & Ors., 2010 (3) LLN 359, wherein the Hon'ble High CoMadras dismissed nearly four Writ Petitions filed by the Trade Union only becathe management of Madras Rubber Factory scrupulously followed the procedand produced documents to the utmost satisfaction of the Inspector of FactoriThe Inspector of Factories in his Affidavit filed before the Court, said that he carefuse to issue license in the absence of any law prohibiting it.

From the foregoing discussions, the employers may easily understand the variadvantages and benefits to employ contract labour but at the same time, they shodo their paper work scrupulously to avoid unnecessary litigation.

66 . Labour Law Notes/February-2011