http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 12

PETITIONER:

DENA NATH AND ORS.

Vs.

RESPONDENT:

NATIONAL FERTILIZERS LTD. AND ORS.

DATE OF JUDGMENT22/11/1991

BENCH:

YOGESHWAR DAYAL (J)

BENCH:

YOGESHWAR DAYAL (J)

SHETTY, K.J. (J)

CITATION:

1992 AIR 457 1991 SCR Supl. (2) 401

1992 SCC (1) 695 JT 1991 (4) 413

1991 SCALE (2)1081

ACT:

Contract Labour (Regulation and Abolition) Act,

1970---Title, Preamble and Statement of Objects and

Reasons--purpose and scheme of the Act.

Contract Labour (Regulation and Abolition) Act,

1970--Sections 7, 12--Non-Compliance of by Principal Employ-

er and Contractor respectively---Effect---Employees employed

through Contractor whether becomes Principal Employer's

employees.

Constitution of India, 1950--Article 226--Writ of man-

damns--Question of abolition of contract labour-Government

to decide under section 10 of the Contract Labour (Regula-

tion and Abolition) Act, 1970 and not the High Court in a

writ proceeding.

HEADNOTE:

Following its earlier decision in 1991(1) P.L.R.I. the

High Court held that the principal employer and the Contrac-

tor were liable for prosecution under the Contract Labour

(Regulation and Abolition) Act, 1970, if they made non-

compliance of section 7 and section 12 of the Act, respec-

tively. Further, it was held that the employee employed

through the contractor did not become the employees of the

principal employer.

C.A.No. 2335 of 1991 arose by special leave from the

decision of the High Court. The point involved in other

appeals is common. This Court, on the question, if the

principal employer did not get registration under section 7

of the Act and/or the contractor did not get a licence under

Section 12 of the Act, whether the person so appointed by

the principal employer through the contractor would be

deemed to the direct employees of the principal employer or

not, dismissing the appeals,

HELD:- 1. The long title and the preamble of the Con-

tract Labour (Regulation and Abolition) Act, 1970 show that

it is an Act to regulate the employment of contract labour

in certain establish-

402

ments and to provide for abolition in certain circumstances

and for matters connected therewith. The Statement of Ob-

jects and Reasons mentions that the system of employment of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 12

contract labour has tended itself to various abuses and the

question of its abolition had been under consideration of

the Government for a long time. [405 E]

2. The Contract Labour (Regulation and Abolition) Act

serves two-fold purpose (1) regulations of the conditions of

service of the workers employed by the contractor who is

engaged by a principal employer; and (2) also provides for

the appropriate Government abolishing contract labour alto-

gether, in certain notified processes operation or other

works in any establishment. Neither the Act nor the Rules

framed by the Central Government or by any appropriate

Government provide that upon abolition of contract labour,

the said labour would be directly absorbed by the principal

employer. [407 H-408 A]

3. The Act as can be seen from the Scheme of the Act

merely regulates the employment of contract labour in cer-

tain establishment and provides for its abolition in certain

circumstances. The Act does not provide for total abolition

of contract labour but it provides for abolition by the

appropriate Government in appropriate cases under Section 10

of the Act. [413 H-414 A]

4. In the present case and the other connected Special

Leave Petitions no notification has been issued by the

appropriate Government under Section 10 of the Act. [414 B]

5. It is not for the High Court to inquire into the

question and decide whether the employment of contract

labour in any process, operation or in any other work in any

establishment should be abolished or not. It is a matter for

the decision of the Government after considering the matter,

as required to be considered under Section 10 of the Act.

[414 C-D]

6. In proceedings under Article 226 of the Constitution

merely because contractor or the employer had violated any

provision of the Act or the Rules, the court could not issue

any mandamus for deeming the contract labour as having

become the employees of the principal employer. [414 E]

M/s Gammon India Ltd. and Others v. Union of India,

[1974] 1 SCC 596; Standard Vacuum Refining Co v. Their work-

men, [1960] 2 LLJ 233 (S.C.); F.C.I. Loading and Unloading

Workers Union v. Food Corpora-

403

tion of India 1986 (2) SLR 454 (Karnataka); Food Corporation

of India Workers Union-v. Food Corporation of India and

others. [1990] 61 FLR 253 (Gujarat), referred to.

Gian Singh & Others v. F.C.I., 1991(1) PLR 1 (Punjab and

Haryana); The Workmen of Best & Crompton Industries Ltd. v.

The Management of Best & Crompton Engineering Ltd. Madras

and Ors, 1985(1) LLJ 492 (Madras); and United Labour Union

and Others v. Union of india and Others, 1990(60) FLR 686

(Bombay), over ruled.

P. Karunakaran v. The Chief Commercial Superintendent

and Others, 1988(2) LIC 1346 (Kerala) and New Delhi General

Mazdoor Union v. Standing Conference of Public Enterprises

(Scope) & Another, 1991(2) Delhi Lawyer 189, approved.

JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2355 of

1991.

WITH

Civil Appeal Nos. 2356-66/91, 2366A-69/91, S.L.P.(C)

Nos. 9755/ 91, 9830/91 & 10235-43 of 1991.

From the Judgment and Order dated 27.2.91 of the Punjab

& Haryana High COurt in C.W.P. Nos. 8872/89, 10463,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 12

10462/89, 15085/90, 17092/ 89, 11381/90, 15599/90, 12573/89,

14551/89, 10951/90 and 195 of 1991.

D.S.Tiwatia, Anil Mauriya, A.K.GoeI, Mrs. Sheela Goel

and B.Y.Kulkarni for the Appellants.

G.Ramaswami Attorney General, G.L.Sanghi, Sudhir Walia,

S.Murlidhar and Y.P.Rao for the Respondents.

The Judgment of the Court was delivered by

YOGESHWAR DAYAL, J. These appeals raise a question of

the scope and effect of failure of compliance with Section 7

and/or Section 12 of the Contract Labour (Regulation and

Abolition) Act, 1970 (hereinafter referred to as 'the Act').

The question involved is that if the principal employer

does not get registration under Section 7 of the Act and/or

the Contractor does not get a licence under Section 12 of

the Act whether the persons so appointed by the principal

employer through the contract would be deemed to be the

direct employees of the principal employer or not.

404

There is a direct conflict between the decisions of the

High Courts of Punjab, Kerala on the one hand and the deci-

sions of Madras, Bombay, Gujarat and Karnataka High Courts

on the other. The view of the Punjab and Kerala High Courts

is that the only consequence of non-compliance either by the

principal employer of Section 7 of the Act or by the con-

tractor in complying with Section 12 of the Act is that they

are liable for prosecution under the Act; whereas the view

of the High Courts of Madras, Bombay, Gujarat and Karnataka

is that in such a situation the contract labour becomes

directly the employee of the principal employer.

For the sake of convenience we deal with the facts of

Civil Appeal No. 2355 of 1991.

This appeal arises from the decision of a Division Bench

of the Punjab & Haryana High Court dated 27th February, 1991

passed in writ petition No. 8872 of 1989. The Division Bench

while deciding a batch of writ petitions followed its earli-

er decision in the case of Gian Singh & Ors. v.F. CI.,

(1991) PLR 1. (Letters Patent Appeal No. 1215 of 1990) which

has since been reported in 1991 (1) PLR 1. The Division

Bench in the aforesaid case of Gian Singh held that if the

principal employer does not get registration as required

under Section 7 of the Act and/or the Contractor does not

get the licence under section 12 of the Act, the persons who

are appointed by the principal employer through the contrac-

tor, the only consequence is the penal provisions contained

in sections 23 and 24 of the Act and that the principal

employer or contractor can be prosecuted under those sec-

tions, but the Act nowhere provides that such employees

employed through the contractor would become the employee of

the principal employer.

In the High Court judgment, under appeal, reliance was

placed on behalf of the workmen on the views of the High

Courts of Karnataka, Madras, Gujarat and Bombay in the cases

reported as FCI. Loading and Unloading Workers Union v. Food

Corporation of India (1986) (2) SLR 454, The Workmen of Best

& Crompton Industries Ltd. v. The Management of Best &

Crompton Engineering Ltd., Madras and Ors., (1985) (1) Lid

492; Food Corporation of India Workers Union v. Food Corpo-

ration of India and Others (1990) 61 FLR 253. and United

Labour Union and Others v. Union of India and Others, (1990)

60 FLR 686t but the High Court took the view that it was not

applicable.

To appreciate the correctness of one view or the other.

it will be necessary to go through the object and the scheme

of the Act. The object; of the Act were dealt with by the

Supreme Court in the case of M/s

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 12

405

Gammon India Ltd. and Others v. Union of India and Others,

(1974) 1) SCC 596 in paragraph 14 at page 600 as follows:

"The Act was passed to prevent the exploita-

tion of contract labour and also to introduce

better conditions of work. The Act provides

for regulation and abolition of contract la-

bour. The underlying policy of the Act is to

abolish contract labour, wherever possible and

practicable, and where it cannot be abolished

altogether, the policy of the Act is that the

working conditions of the contract labour

should be so regulated as to ensure payment of

wages and provision of essential amenities.

That is why the Act provides for regulated

conditions of work and contemplates progres-

sive abolition to the extent contemplated by

Section 10 of the Act, Section 10 of the Act

deals with abolition while the rest of the Act

deals mainly with regulation. The dominant

idea of Section 10 of the Act is to find out

whether contract labour is necessary for the

industry, trade, business, manufacture or

occupation which is carried on in the estab-

lishment."

As the long title and the preamble of the Act shows that

it is an Act to regulate the employment of contract labour

in certain establishments and to provide for abolition in

certain circumstances and for matters connected therewith.

The Statement of Objects and Reasons mentions that the

system of employment of contract labour has tended itself to

various abuses and the question of its abolition had been

under consideration of the Government for a long time. The

Planning Commission had made certain recommendations in the

Second Five Year Plan viz. it undertook a study in this

behalf on improvement of service conditions of contract

labour where the abolition was not possible. The general

consensus thereafter was that the contract labour system

should be abolished wherever possible and practicable and

further that in a case where the system could not be abol-

ished altogether, the working conditions of contract labour

should be regulated so as to ensure payment of wages and

provision of essential amenities.

The above objects have been brought into the Act which

was enacted in 1970. Section 2 gives the definition of

various words while section 3 deals with the constitution of

Central Advisory Board and section 4 deals with the consti-

tution of State Advisory Board. These boards are empowered

to constitute various committees as mentioned in section 5.

Chapter III is important and deals with 'registration' of

establishment employing contract labour while Chapter IV

deals with 'licensing' of

406

contractors employed by these establishments. Section 7

deals with registration of certain establishment notified by

the Government and these establishments are obviously the

principal employers as defined in section 2(g). Section 8

provides for revocation of registration in certain cases and

section 9 deals with the effect of non-registration.

Under Section 9 no principal employer of an establish-

ment, to which the Act applies shall; (a) in case of an

establishment required to be registered under Section 7, but

which has not been registered within the time fixed for the

purpose under that section (b) in the case of an establish-

ment the registration in respect of which has been revoked

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 12

under Section 8 employ contract labour in the establishment

after the expiry of the period referred to in clause (a) or

after the revocation of registration referred to in clause

(b), as the case may be. Section 10 deals with the prohibi-

tion of employment of contract labour which reads as fol-

lows:

"10. Prohibition of employment of contract

labour - ( 1 ) Notwithstanding anything con-

tained in this Act, the appropriate Government

may, after consultation with the Central Board

or, as the case may be, a State Board, prohib-

it, 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 establish-

ment, 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 -

.lm18

(a) whether the process, operation

or other work is incidental to, or neces-

sary 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 establish-

ment;

(c) whether it is done ordinarily

through regular workmen in that establish-

ment or an establishment similar theretO;

(d) whether it is sufficient to

employ considerable number of whole time

workmen."

Chapter IV deals with the licensing of contractors. Sub

clause (1) of

407

Section 12 states that w.e.f. such date as the appropriate

Government may, by notification in the Gazette, appoint, no

contractor to whom this Act applies shall undertake or

execute any work through the contract labour except under

and in accordance with the licence issued in that behalf by

the Licensing Officer. Sub-clause (2) of Section 12 provides

that subject to the provisions of the Act, a licence in

sub-section (1) may contain such conditions including, in

particular, conditions as to hours of work, fixation of

wages and other essential amenities in respect of the labour

contract as the appropriate Government may deem fit to

impose in accordance with the rules, if any, made under

Section 35 and shall be issued on payment of such fees and

on the deposit of such sum, if any, as security for due

performance of the conditions as may be prescribed. Section

14 provides for revocation, suspension and amendment of the

licences while Section 15 provides for an appeal. Chapter VI

deals with the penalties and procedures. Section 22 deals

with the obstructions. Section 23 deals with contravention

of provisions regarding employment of contract labour and

Sections 24 and 25 deal with other offences and offences by

companies. Chapter VII makes certain miscellaneous provi-

sions and Section 30 provides that laws and agreements

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 12

inconsistent with the provisions of the Act shall be void

except where such agreements or contracts or standing orders

afforded more favourable facilities to the employees than

provided under the Act. We shall also refer to Rule 25 of

the Rules which mentions the conditions subject to which

licence could be issued to a contractor under Section 12.

The said rule inter alia provides that a licence issued to a

contractor shall not be transferable, that contractors

cannot employ workmen in excess of the number specified

therein and that rate of wages payable to the workmen shall

be the rate prescribed under the Minimum Wages Act, 1948.

Clause (v)(a) of the Rule 25(2) is important and reads as

follows:

"In cases where the workmen employed by the

contractor perform the same or similar kind of

working as the workmen directly employed by

the principal employer of the establishment,

the wage rates, holidays, hours of work and

other conditions of service of the workmen of

the contractor shall be the same as applicable

to the workmen directly employed by the prin-

cipal employer of the establishment on the

same or similar kind of work.'

Rule 25(2) further provides for accommodation for women

and children and for the times of work of females.

From the above provisions it is clear that the Act

serves two-fold purposes (1) regulation of the conditions of

service of the workers employed by the contractor who is

engaged by a principal employer and; (2)

408

also provides for the appropriate Government abolishing

contract labour altogether, in certain notified processes,

operation or other works in any establishment. Neither the

Act nor the Rules flamed by the Central Government or by any

appropriate Government provide that upon abolition of con-

tract labour, the said labour would be directly absorbed by

the principal employer.

The question arises when the Act does not provide for

such a measure, but contents itself by merely regulating the

conditions of service of the contract labour, can the Court

in proceedings under Article 226 of the Constitution, where

the principal employer or the licence contractor violates

the provisions of Section 9 or 12 respectively, direct that

the contract labour so employed would become directly the

employee of the principal employer.

The view of the Bombay High Court in the case of United

Labour Union and Others v. Union of India (supra) was really

concerned with the appropriate Government for purposes of

notification being issued under Section 10(1) of the Act. It

took the view that the Central Government was the appropri-

ate Government in relation to Air India Corporation but

after analysing the provisions of Section 2(ii)(b),

7,8,12,20,21 and 29 the Bombay High Court took the view---

"The combined effect of these provisions makes

it clear that for a valid employment of con-

tract labour, two conditions must be ful-

filled, viz., (1) every principal employer of

an establishment must be registered and (2)

the contractor must have valid licence. In

other words, the mere registration by the

principal employer or the holding of licence

by contractor alone will not enable the man-

agement to treat the workmen as contract

labour. Whilst considering the provisions of

the Act, it must be kept in mind that this Act

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 12

is a piece of beneficial legislation. The aim

of the Act is to regulate conditions of serv-

ice of contract labourers and to abolish

contract labour under certain circumstances.

It is therefore meant for securing proper

conditions of service to under contract la-

bour. It is not the purpose of the Act to

render workmen jobless. The interpretation

which must be given is one which would further

these objects and not one which results in

greater hardship. It must be noted that there

is no provision which states that the rela-

tionship of principal employer and workmen

comes to an end on the abolition of contract

labour. On the contrary as already stated

there is a deemed contract labour only if the

two conditions of registra-

409

tion and licence are fulfilled. In such a case

i.e., where either or both the conditions are

not fulfilled, the necessary implication would

be that the workmen remain workmen of the

principal employer. It must be remembered that

on a failure of the contractor to provide

amenities or to pay wages the principal em-

ployer remains liable for the same. The same

would be the position on a failure by reason

of there being no valid contract labour.

Mr. Dhanuka, however, submitted that

the Act provides certain penal consequences

for non-registration. He submits that there no

such provision in the Act, the same cannot be

implied. He submits that in the absence of any

such provision the Court cannot give any

direction to that effect. In my view, the

penal provisions are provided to dissuade

employers from attempting to commit a breach

of the provisions of the Act and the Rules

made thereunder. They do not detract from the

position that there can be no deemed contract

labour if the two conditions are not satis-

fied. If the protection or right given by

reason of a deeming provision is not available

then the natural consequence must follow in

addition to the penal consequence, unless

there is a provision to the contrary. As

already stated, in the Act there is no provi-

sion that the services of the workmen, qua the

principal employer, stand terminated on the

contract labour becoming invalid and/or abol-

ished".

(emphasis supplied)

The question arising before us directly came up for

consideration before a division bench of the Gujarat High

Court in the case of Food Corporation of India Workers Union

v. Food Corporation of India and Others (supra) which ob-

served :-

It is evident that (,i) the principal

employer should obtain a Certificate of Regis-

tration and (ii) the workmen can be employed

on contract labour basis only through licensed

contractor. The Certificate of Registration is

required to be obtained by the principal

employer, issued by the appropriate Government

under the provisions of Section 7 of the Act.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 12

The licence is to be obtained by the contrac-

tors under the provisions of Section 12 of the

Act. The workmen can be employed as contract

labour only through licensed contractor.

Unless both these conditions are complied

with, the provisions of the Contract Labour

(Regulation and Abolition) Act, 1970 would not

be

410

attracted. Both these conditions are required

to be fulfilled, if one wishes to avail of the

provisions of the Act. Even if one of the

conditions is not complied with, the provi-

sions of the Contract Labour (Regulation &

Abolition) Act, 1970 would not be attracted.

Therefore, in a situation wherein either of

these two conditions is not satisfied, the

position would be that a workman employed by

an intermediary would be deemed to have been

employed by the principal employer. In the

result it is declared that during the period

when the two conditions of obtaining registra-

tion under Section 7 by the principal employer

and of holding licence by the contractor are

not complied with and the workmen are employed

by contractor, the workmen can claim to be

direct employees of the principal employer."

The decision of the Madras High Court in The Workmen of

Best & Crompton Industries Ltd. v. The Management of Best &

Compton Engineering Ltd., Madras and Ors., really arose out

of an award given by the Labour Court in an industrial dis-

pute. The industrial dispute had been raised by the workmen

of the principal employer. They challenged the termination

of service of workmen by the Management as the Management

did not requisition the service of 75 workmen after 16th

October, 1978 on the ground that they were employed by the

licensed contractor. This led to an industrial dispute and

on a reference made of the said industrial dispute, the

Labour Court rejected the contention of the Management and

held that the so called contractor was a mere name-lender

and did not hold licence under the Act and directed the

reinstatement of the workmen with backwages and other bene-

fits. This award of the Labour Court was challenged before

the High Court by the Management by a writ petition. The

learned Single Judge of the Madras High Court took the view

that the conclusion of the Labour Court that the labour

contractor was not early a labour contractor, but lie was

merely acting as a tool in the hands of the Management is

not supported either by the pleadings of the parties or by

the evidence. According to the learned single Judge there

was absolutely nothing to displace the weighty documentary

evidence in favour of the Management and therefore, he

characterised the finding entered by the Labour Court to the

contrary as being perverse and vitiated The division bench

in Letters Patent Appeal reversed this finding of the

learned Single Judge.

The High Court observed at page 497 -

"In order to enable the Management to have the

benefit of the contract labour, the Act has

now legalised the employment of

411

such contract labour, provided the intermedi-

ary contractor holds, a valid licence and

provided the Management also holds a valid

licence as principal employer. This is subject

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 12

to the prohibition contemplated under S. 10.

There is no need for us to examine the content

of S.10 in this case. In order to regulate the

employment of contract labour and to provide

for abolition in certain circumstances, the

said Act came to be passed. According to S. 7:

"Provided that the registering officer may

entertain any such application for registra-

tion after expiry of the period fixed in this

behalf, if the registering officer is satis-

fied 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 estab-

lishment a certificate of registration con-

taining such particulars as may be

prescribed".

Under S.12 of the Act, no contractor to whom this Act

applies, shall undertake or execute any work through con-

tract labour except under and in accordance with a licence

issued in that behalf by the licensing officer. Sub-s.(2) of

S. 12 provides:

"Subject to the provisions of this Act, a

licence under sub-s. (1) may contain such

conditions including in particular conditions

as to hours of work, fixation of wages and

other essential amenities in respect of con-

tract labour as the appropriate Government may

deem fit to impose in accordance with the

rules, if any, made under S.35 and shall be

issued on payment of such fees and on the

deposit of such sum, if any, as security for

the due performance of the conditions as may

be prescribed".

The combined effect of these two provi-

sions in our view makes it clear that for a

valid employment of-

"(1)Every principal employer of an establish-

ment 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 registra-

tion of the

412

establishment; contract labour, two conditions

should be satisfied, viz., not only the prin-

cipal employer but also the contractor should

possess the requisite licence. In other words,

the holding of licence by one alone will not

enable the management to treat the workmen as

contract labour."

The High Court of Kerala in the case of P. Karunakaran

v. The Chief Commercial Superintendent and Others, (1988) 2

L.I.C. 1346 took the same view as was taken by the Punjab &

Haryana High Court in the judgment under appeal. A similar

view was expressed by the Delhi High Court in the case of

New Delhi General Mazdoor Union v. Standing Conference of

Public Enterprises (Scope) & Another, (1991) 2 Delhi Lawyer

189.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 12

The reference to the Labour Court/Industrial Tribunal

could be as to whether it is necessary for the Management to

employ contract labour directly or indirectly; a question

can as well be referred whether the engagement of contract

labour was bona fide or it was a camouflage. In appropriate

cases in industrial adjudication appropriate directions can

be given to the principal employer in this behalf. This

has been the subject matter of decisions by the

Tribunals/Labour Courts and by this Court also. The case of

Standard Vacuum Refining Co. v. Their Workmen 1960 2 LLJ 233

is a case on this point. It was a case where the workmen

employed by an oil refinery demanded that the contract

system of labour adopted by the company for cleaning mainte-

nance of the refinery belonging to the company should be

abolished and the said demand was referred for adjudication.

It was found that the work for which the contract was given

is incidental to the manufacturing process and is necessary

for it and of a perennial nature which must be done every

day and in these circumstances the Industrial Tribunal

directed the Company to abolish the contract system of

labour with effect from a particular date and to have the

said work done through workmen engaged by itself. This

direction was given in view of the fact that the work was of

a permanent nature and the labour employed through contrac-

tor was receiving much less wages than the unskilled workmen

of the company and they were not having any other benefits

and amenities like provident fund, gratuity, bonus, privi-

lege leave etc. On the award of the Industrial Tribunal the

Supreme Court gave the finding that it was an industrial

dispute as defined under Section 20c) of the Industrial

Disputes Act. In dealing with the question whether the

Tribunal was justified in giving the directions for abolish-

ing the contract system the Supreme Court noted that indus-

trial adjudication generally does not encourage employment

of contract labour in modern times and it would be necessary

to examine the merits of the dispute apart from gen-

413

eral consideration that contract labour should not be

encouraged; and that n any case the decision should rest not

merely on theoretical or abstract objections to contract

labour but also on the terms and conditions of the contract

labour and the grievance made by the workmen thereof. On

facts the Supreme Court observed:

"It may be accepted that the contractor in the

present case is an independent person and the

system is genuine and there is no question of

the company carrying on this work itself and

camouflaging it as if it was done through

contractors in order to pay less to the work-

men. But the fact that the contract in this

case is a bona fide contract would not neces-

sarily mean that it should not be touched by

the industrial tribunals. If the contract had

been mala fide and a cloak for suppressing the

fact that the workmen were really the workmen

of the company, the tribunal would have been

justified in ordering the company to take over

the entire body of workmen and treat it as its

own workmen. But because the contract in this

case was bona fide, the tribunal has not

ordered the company to take over the entire

body of workmen. It has left to it to decide

for itself how many workmen it should employ

and on what terms and has merely directed that

when selection is being made preference should

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 12

be given to the workmen employed by the

present contractor."

The Supreme Court also noticed that the industrial

dispute was confined to the cleaning maintenance of the

plant; the work was incidental to manufacturing process and

the work is necessary for it and was of a perennial nature

which must be done every day and such work is generally done

by workmen in the regular employment of the employer and

there would be no difficulty in having regular workmen for

this kind of work. It noted that the matter would be differ-

ent if the work done was of an intermittent or temporary

nature or was so little that it would not be possible to

employ full-time workmen for the purpose.

It would be noticed that after the aforesaid observa-

tions of the Supreme Court in the case of Standard Vacuum

Refining Company (supra) the Parliament while giving power

to the appropriate Government to prohibit employment of

contract labour in any process or operation or other work in

any establishment gave the guidelines in clauses (a),(b),(c)

and (d) of sub-section (2) of Section 10, as noticed earli-

er, and guidelines are practically based on the guidelines

given to the Tribunals in the aforesaid case of Standard

Vacuum Refining Coral)any by this court. The Act as can

414

be seen from the scheme of the Act merely regulates the

employment of contract labour in certain establishment and

provides for its abolition in certain circumstances. The Act

does not provide for total abolition of contract labour but

it provides for abolition by the appropriate Government in

appropriate cases under Section 10 of the Act.

In the present case and the other connected Special

Leave Petitions no notification has been issued by the

appropriate Government under Section 10 of the Act vis-a-vis

the type of establishment with which we are concerned.

It is not for the High Court to inquire into the ques-

tion and decide whether the employment of contract labour in

any process, operation or in any other work in any estab-

lishment should be abolished or not. It is a matter for the

decision of the Government after considering the matter, as

required to be considered under Section 10 of the Act. The

only consequences provided in the Act where either the

principal employer or the labour contractor violates the

provision of Sections 9 and 12 respectively is the penal

provision, as envisaged under the Act for which reference

may be made to Sections 23 and 25 of the Act. We are thus of

the firm view that in proceedings under Article 226 of the

Constitution merely because contractor or the employer had

violated any provision of the Act or the rules, the Court

could not issue any mandamus for deeming the contract labour

as having become the employees of the principal employer. We

would not like to express any view on the decision of the

Karnataka High Court or of the Gujarat High Court (supra)

since these decisions are under challenge in this court, but

we would place on record that we do not agree with the

aforequoted observations of the Madras High Court about the

effect of non-registration of.the principal employer or the

non-licensing of the labour contractor nor with the view of

Bombay High Court in the aforesaid case. We are of the view

that the decisions of the Kerala High Court and Delhi High

Court are correct and we approve the same.

In the result C.A.2355 of 1991 fails and is dismissed

and in view of the observations in C.A. 2355 of 1991,

C.A.Nos.2356-66/91, 2366A-69/91 and S.L.P.(C) Nos. 9755/91,

9830/91 & 10235-43/91 are also hereby dismissed. In the

circumstances of the case, parties are left to bear their

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 12

own costs of the present proceedings.

V.P.R. Appeals dis-

missed

415