CONTRACT LABOR (REGULATION AND

ABOLITION) ACT, 1970.

PURPOSES
The act serves essentially two purposes, as reflected in the title:

To abolish the practice of contract labor, as far as possible

Where abolishing contract labor is not possible for reasons of practicality, to

regulate the same.

There are three MAIN PLAYERS under the act

Principal employer (defined in Sec 2(g))

a) Office/ deptt of the Government or local authority- head of the office or deptt.
b) Factory- Owner or Manager, as per Factories Act.
c) Mine- Owner or Agent or Manager as per Mines Act
d) Other establishment- person responsible for supervision and control.

Contractor (defined in Sec 2(c))

a) Undertakes to produce a given result for the establishment through contract labor
b) Supplies contract labor for any work and includes a subcontractor.

Workman (defined in Sec 2(i))

Any person doing any skilled, semi skilled or unskilled, manual supervisory, technical or
clerical work, in an establishment, for hire or reward. Terms of employment may be
express or implied.
Does NOT include:
a) Manager, Administrator.
b) Supervisor drawing wages greater than 500 p.m. or having managerial duties
c) Out worker

ie a person to whom any article or material is given out by or on behalf of the

principal employer to be processed for sale and such processing is not done on the
premises controlled by the principal employer.
Eg welder, washer man, polisher etc

APPLICABILITY of the act:

To every establishment employing 20 or more workers on any day of the

preceding 12 months. Sec 1 (4) (a)

To every contractor employing 20 or more workmen on any day of the

preceding 12 months. Sec 1 (4) (b)

NOT APPLICABLE to:

Establishments in which work performed is of intermittent or casual nature. (Less than
120 days or for a seasonal industry less than 60 days)
RELEVANT CASE:

Gammon India Ltd. Vs. Union of India, 1974

The constitutional validity of the Act and the Central rules were challenged
before the Supreme Court

The petitioner also said that the Act is against Article 19(1)(g) of the
constitution , thereby amounting to unreasonable restriction on the contractors

The petitioner also alleged that the Act violates Article 14 (This article deals with
equality of all persons before law).

JUDGEMENT: The Supreme Court upheld the constitutional validity of the Act &
Rules and held that there is no unreasonableness in the measure.

CHAPTER III - REGISTRATION OF ESTABLISHMENTS EMPLOYING

CONTRACT LABOUR
SEC 7-How/when/whom to apply for registration
The principal employer applies to the registering officer (Sec 6) within a time fixed by the
appropriate government (through the official gazette) for registration
SEC 8-when can the registration be revoked
If the registering officer(RO) is satisfied that the registration

has been obtained by misrepresentation or suppression of material facts, or

has become useless or ineffective

Then, RO can revoke the registration after

giving an opportunity to the principal employer of being heard, and with

Prior approval of the appropriate government

SEC 9- what if registration Not obtained or revoked

Contract labor can not be employed in such cases

SEC 10- Prohibition of employment of contract labour (MOST IMP SECTION)

1.

The appropriate government may prohibit employment of contract labour

2. However, the following factors have to be considered:

(a) whether the process or work is incidental to or necessary for the industry
(b) whether it is of perennial nature
(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
RELEVANT CASES:
1. Standard Vacuum Refinery Company Vs. their workmen, 1960

This case precedes the CLRA.

Its relevance to CLRA arises from the fact that the judgement of the case was
later on used to decide the factors which should be considered by govt when it is
considering prohibition of contract labor in an establishment.
These conditions were:
Contract labour should not be employed where:
The work is perennial
The work is incidental to and necessary for the work of the factory

The work is sufficient to employ considerable number of whole time

workmen; and
The work is being done in most concerns through regular workmen.

2. Deena Nath Vs National Fertilizer Ltd, 1992

Concerned with the question of direct employment of contracted workers after

the prohibition of contract labor in an establishment under Sec 10

JUDGEMENT: Principal Employer not liable to absorb the contract workers

3. Gujarat State Electricity Board Vs Union of India, 1995

Concerned with the question of direct employment of contracted workers after

the prohibition of contract labor in an establishment under Sec 10
JUDGEMENT: Supreme Court recommended that the Central Government
should amend the Act by incorporating a suitable provision to refer to industrial
adjudicator the question of the direct employment of the workers of the excontractor in the principal establishments, when the appropriate Government
abolishes the contract labour.

4. Air India Statutory Corporation Ltd. & Ors Vs United Labour Union & Others,
1996

Concerned with the question of direct employment of contracted workers after

the prohibition of contract labor in an establishment under Sec 10
JUDGEMENT: Supreme Court held that though there exists no express provision
in the Act for absorption of employees in establishments where contract labour
system is abolished by publication of the notification under section 10 (1) of the
Act, the principal Employer is under statutory obligation to absorb the contract
labour.

5. Steel Authority of India Ltd (SAIL) & Others Vs National Union of

Waterfront Workers, 2001

Concerned with the question of direct employment of contracted workers after

the prohibition of contract labor in an establishment under Sec 10
JUDGEMENT: Supreme Court held that neither Section 10 of the Act nor any
other provision in the Act provides for automatic absorption of contract labour
Consequently the Principal Employer cannot be required to order absorption
of the contract labour working in the concerned establishment.
The judgement in Air Indias case was over-ruled prospectively.

6. NTPC Vs Karri Pothuraju & others, 2003

NTPC was running a canteen for its employees, through a contractor

Canteen employees claimed regularization

JUDGEMENT: Canteen is essential under Sec 46 of the fact. Employees to be

regularized

CHAPTER IV: LICENSING OF CONTRACTORS

SEC 12 (1)- Obtaining a license is mandatory for a contractor to be able to
employ contract labor
SEC 13- How to apply/Validity/Renewal of license

Application to be made in the prescribed form, containing particulars of location,

nature of process, operation or work for which contract labour is employed etc

Investigation regarding the above application can be ordered by the licensing

officer

License shall be valid for the period specified and may be renewed from time
to time

SEC 14- Revocation/ suspension/ amendment of license

If the licensing officer(LO) is satisfied that

License granted u/s 12 is through misrepresentation or suppression of facts, or

Holder failed to comply with the provisions of the act, or contravened any
provisions

Then, LO can revoke/ suspend/ amend the license or forfeit any sum

After giving the holder an opportunity of showing cause

SEC 15- Appeal

Any aggrieved person (u/s 7,8,12 or 14) may appeal within 30 days to the appellate
officer

CHAPTER V: WELFARE AND HEALTH OF CONTRACT LABOUR

16 - Canteens to be provided for contract laborers where n > = 100
17 Rest rooms to be provided
18 Facilities for drinking water/ latrines/ urinals/ washing
19 First-aid facilities
20 Liability of Principal employer(PE)

The amenities (covered under 16,17,18,19) shall be provided by PE if

Contractor does not provide the same.

The expenses so incurred by the PE shall be recovered from the contractor.

21 Timely payment of wages

The contractor has to pay the wages in the presence of a representative of the
Principal employer

If contractor fails to pay, liability passes on to PE.

The expenses so incurred by the PE shall be recovered from the contractor.

CHAPTER VI: PENALTIES AND PROCEDURES

SEC 25: Offences by companies-who is responsible?

Every person responsible for the conduct of the companys business at the time
the offence was committed, unless

Any such person proves that the offence was committed without his knowledge
or that he exercised due diligence to prevent it

SEC 26: Who can complain/ who can try an offence

COMPLAIN: either by or with previous written sanction, of the Inspector only

TRIAL: No court inferior to a Presidency Magistrate or Magistrate of first

class can try an offence under the CLRA.

CHAPTER VII: MISCELLANEOUS

SEC 32: Protection of action taken under the Act

No legal proceedings shall lie against any authority mentioned in the Act, for an
action taken in good faith or in compliance with the provisions of the Act

No legal proceedings shall lie against the Government for an action taken in
good faith or in compliance with the provisions of the Act

COMMENTS:

Appropriate government for contractor will be same as of principal employer.

(Sarkar D., alias Dipak Sarkar v. State of Bihar, 1997)

Contract labour cannot become employees of principal employer merely because

contractor or employer has not obtained license or registration respectively.
(Dinanath v. National Fertilizers Ltd. 1992)

Wages paid by Contractor to his workers shall be equal to the wages paid by the
principal employee to his workers doing similar works. (Hindustan Steel works
Construction v. Commissioner of Labour, 1997)

Page updated by Naqi Abbas on January 26 (Republic Day!!), 2006

Page updated by Anitha B on January 13, 2005