M. Gopal vs The Assistant Labour … on 14 February, 1997

Karnataka High Court
M. Gopal vs The Assistant Labour … on 14 February, 1997
Equivalent citations: ILR 1998 KAR 251, 2000 (3) KarLJ 214
Bench: V M Kumar


1. A common question has been raised in a batch of writ petitions. The above case has been treated as the lead case and all the Counsels interested in the question raised in the group have been heard. Besides, this

Court requested Mr. M.C. Narasimhan and Mr. K. Kasturi to appear and assist the Court. They have commendably discharged their duties.

2. Sri S.N. Murthy led the arguments on behalf of the petitioner and Mr. S. Vijayashankar, learned Advocate General, assisted by Smt. S. Sujatha, learned Government Pleader, defended the State.

3. The area of controversy is regarding the implementation and working of the Contract Labour (Regulation and Abolition) Act, 1970 (hereinafter referred to as ‘the Act’). All the questions that might plausibly arise have been considered by the Supreme Court in the celebrated judgment in Gujarat Electricity Board, Thernal Power Station, Ukai v Hind Mazdoor Sabha and Others . Yet, in view of the arguments advanced by the learned Counsel, it has become necessary to consider the contentions.

4. The petitioner in the instant case is the licensee to supply contract labour to Mother-Dairy, G.K.V.K. Post, Bangalore, for carrying on the work of packing, washing and cleaning. Annexure-A, dated 29-7-1995 is the licence issued under the Act in that behalf. Before the expiry of the period of licence, an application was made by the petitioner for the purpose of renewal thereof under Section 12 of the Act read with Rule 29 framed thereunder. Thereupon, a show-cause notice Annexure-C was issued by the respondent who is the Licensing Authority appointed under Section 11 of the Act, to show cause why the request for the renewal should not be rejected. The reason assigned for the rejection read as follows:

Annexure-D is the alleged reply submitted by the petitioner. By Annexure-E impugned order, the request for renewal was rejected. In doing so, the respondent stated as follows:

“3. The applicant has failed to submit his explanation within the prescribed time limit.

4. The Hon’ble Supreme Court of India in the case of Gujarat Electricity Board, supra, has in its landmark judgment on contract labour observed that the employment of contract labour in any process, operation or work which satisfies the factors mentioned in clauses (a) to (d) of Section 10(2) of the Act is an unfair labour practice and hence they should on their own, discontinue the contract labour and absorb as many of the labour as is feasible as their direct employees.

5. Whereas, in exercise of the powers conferred under Rule 23 of Contract Labour (R & AO Karnataka Rules, 1974, the

application submitted by Sri M. Gopal, M/s. Venu Enterprises, No. 11, 10th “D” Cross, 1st Main Road, W.C. Road, Mahalakshmipuram, Bangalore is rejected. Since, the nature of works for which contract labour is engaged packing, washing and cleaning work is of perennial in nature for which regular workmen can engaged”.

Annexure-E order is challenged by the petitioner in this writ petition. Though a right of appeal is conferred under Section 15 of the Act, that is not treated as an effective alternative remedy (and rightly too) in the light of the reasons adopted by the respondent while rejecting the renewal application. This refusal to renew is challenged on the following grounds:

(1) That there is no valid exercise of the power conferred under Section 12 of the Act by the respondent.

(2) That the power sought to be invoked is what is conferred under Section 10 of the Act and that power is not vested in the respondent-the Licensing Authority.

(3) That the refusal to renew the licence amounts to abolition of the contract labour which the Licensing Authority is not entitled to do.

(4) The Licensing Authority has no jurisdiction to trench upon the power of the Central/State Government conferred under Section 10 of the Act.

(5) That the Licensing Authority cannot abolish the contract labour system in any form or manner.

(6) That as the decision making process adopted by the Licensing Authority is vitiated the decision itself illegal.

Several aspects were urged to highlight the above contentions. As they are all subsidiary to the above and the above points mainly cover the issues in question, I am not adverting to them separately. Besides, the consideration of the above aspects are intrinsically interlinked and, therefore, I am considering them together.

6. The object for enacting the Contract Labour (Regulation and Abolition) Act, 1970, is disclosed from the objects and reasons accompanying the Bill. It reads as hereunder:

“The system of employment of contract labour lends itself to various abuses. The question of its abolition has been under the consideration of Government for a long time. In the second Five Year Plan, the Planning Commission made certain recommendations, namely, undertaking of studies to ascertain the extent of the problem of contract labour, progressive abolition of the system and improvement of service conditions of contract labour where the abolition was not possible. The matter was discussed at various meetings of Tripartite Committees at which the State Governments were also represented and general consensus of opinion was that the system should be abolished

wherever possible or practicable and that in cases where this system could not be abolished altogether, the working conditions of contract labour should be regulated so as to ensure payment of wages and provision of essential amenities.

2. The proposed Bill aims at abolition of contract labour in respect of such categories as may be notified by appropriate Government in the light of certain criteria that have been laid down, and at regulating the service conditions of contract labour where abolition is not possible. The Bill provides for the setting up of Advisory Boards of a tripartite character, representing various interests, to advise Central and State Governments in administering the legislation and registration of establishments and contractors. Under the scheme of the Bill, the provision and maintenance of certain basic welfare amenities for contract labour, like drinking water and first-aid facilities, and in certain cases rest-rooms and canteens, have been made obligatory. Provisions have also been made to guard against details in the matter of wage payment”.

Articles 38, 39(a) and 39(d), 42, 43 and 48 broadly indicate the mandate given by the Constitution to the State in the matter of securing social justice to the workers – organised and unorganised. Therefore, any construction or interpretation being made to an enactment legislated to achieve the said object should be made keeping the above said constitutional provisions in the mind. While construing the provisions of the Act which has been enacted with this object in mind, the object for which the enactment was made has to be kept in mind. The statutory functionaries under the Act have to determine the intention of the statute, the purpose behind the legislation and strive to achieve the intention of the legislature expressed in the form of the legislation. But at the same time by such interpretation and construction, they cannot certainly move away and destroy the very purpose for which the statute was enacted. And if the language of the Act is clear, no interpretational exercise can be undertaken in the avowed object of achieving the goal of the legislation and thereby mutilate the statute.

6. With these in mind and the principles ensuing out of Gujarat Electricity Board’s case, supra, we may now examine the legislation. The Act envisages regulation as well as abolition of the contract labour. Patently, legislature did not want to put an end to the system of contract labour. As noticed by the Supreme Court, the Act only recognises the continuance of the system of contract labour in a regulated manner and in some areas it is allowed to exist. It contemplates to deal with the contract labour by prohibiting the same in the manner indicated in Section 10 and by regulating it in the manner indicated in Sections 7 and 12. When the question of prohibition arises, a separate machinery is cast in Section 10 detailing as to how the prohibition has to be given effect to. While so, Sections 7 and 12 provide the infrastructure for the regulation of the contract labour. Section 10 on the one hand and Sections 7 and 12 on the other, operates in different fields and are not

intended to overlap. Section 1(4) of the Act takes out from the purview of the Act every category of establishment in the event it employs less than 20 workers. In other words, the system of contract labour can be in vogue in any establishment which employs less than 20 employees unless the Government invokes its power under the proviso to Section 1(4) and brings the establishment also under its purview. There is yet another exclusion clause, i.e., what is contained in Section 1(5). It contemplates that to an establishment which has performed work for less than one hundred and twenty days in the preceding twelve months or is an establishment of a seasonal character and that establishment has worked less than sixty days in a year, the Act will not apply, irrespective of the total number of its employees. To sum up, the legislature itself recognised that an establishment can employ contract labour unrestrained by the statute if:

(1) it has less than 20 employees;


(2)   the work performed in the establishment is intermittent or casual in nature, and 

(a)    for less than 120 days in the preceding 12 months or 

(b)   for less than sixty days in a year if it is a seasonal industry.


It means, the legislature has given the guidelines to bring in its ambit the establishment to which the legislation would apply. It has itself excluded the area where the Act will not apply and has also indicated the classes of establishment to which it will not apply. It has also provided the circumstances under which the statute will not apply to an establishment even if it employs more than the statutorily prescribed number of workers.

7. In the light of the features of the Act noticed, the question then to be examined herein is the extent of control that can be exercised by the authorities while exercising the power under Sections 7 and 12 of the Act. As stated earlier, the Act itself contemplates the regulation of the system of contract labour. By virtue of Section 10 of the Act, abolition of the contract system can be effected by the State or Central Government, as the case may be. But Sections 7 and 12 are intended only to regulate the contract labour system. Therefore, the power cannot trench on the power under Section 10, and cannot also be used to achieve the said result. The argument advanced by Mr. Murthy in this behalf was that when once a registration is declined or licence is refused impliedly, the result achieved is abolition of contract labour system. I do not think that such contention can be sustained. Section 9 of the Act prohibits any principal employer as defined, from employing any contract labour after the stipulated period. Non-registration disables the principal employer from employing contract labour and violation thereof is made punishable under Sections 23, 24 and 25 of the Act with imprisonment/fine. In other words, the principal employer earns a right to employ contract labour subject to the compliance of the requirements of the statute. There is no challenge to the validity of the restriction placed on this right on the

principal employer by the statute. Therefore, when the statute provides that the special and particular right conferred thereunder can be exercised by the citizen only in accordance with the statutory requirement of the law conferring the right, then a denial of the statutory prerequisite for enjoying the right such as registration or licence does not ipso facto mean that it is a step to abrogate the right earned under the statute.

8. Before proceeding further to examine the claim of the licensee to secure licence under Sections 12 and 13 of the Act or renewal thereof, we must keep in mind an important aspect. Section 12 prohibits any contractor from undertaking or executing any work through contract labour except under and in accordance with a licence. Section 12(2) provides that a licence may be issued subject to such conditions and in terms of rules framed in exercise of the power under Section 35 of the Act. Rule 21 is the relevant rule framed in this behalf. Rule 2l(2) contemplates that an application for licence shall accompany a certificate from the principal employer in Form V declaring that:

“Certified that I have engaged the applicant (name of the contractor) as a contractor in my establishment. I undertake to be bound by all the provisions of the Contract Labour (Regulation and Abolition) Act, 1970 and the Contract Labour (Regulation and Abolition) (Karnataka) Rules, 1974, insofar as the provisions are applicable to me in respect of an employment of contract labour by the applicant in my establishment”.

The licence issued to the contractor declares the name of the principal employer where the contractor may supply the contract labour. In the prescribed application for licence, the contractor has to declare as under:

“3. Particulars of establishment where contract labour is to be employed:

(a) Name and address of the establishment;

(b) Type of business, trade, industry, manufacture or occupation which is carried on in the establishment; and employed in the establishment on any date of the preceding 5 years if so, give details;

(c)    Number and date of certificate of registration of the establishment under the Act;

(d)   Name and address of the principal employer".


In the licence to be issued also, the following entry is made by the Licensing Authority:

"    1. ...........................

2.    This licence is for doing the work of ....(nature of the work to be indicated) in the establishment of ...(name of the principal employer to be indicated) at ....... (place of work to be indicated)".


Therefore, no licensee can secure a licence under the Act without a named principal employer for whom alone he has to work and no principal employer can engage a licensee other than one registered under him and whom he has named under Section 7 of the Act. Thus, the contractor cannot exist without a principal employer and vice versa. Therefore, the right of a contractor to get a licence under the Act is closely interlinked with the right of principal employer to secure a registration under the Act. Hence, these two rights have to he examined conjointly.

9. As noticed supra, on and after the enforcement of Section 9 of the Act, there is no right to an establishment to employ contract labour except in accordance with the requirement laid down by the Act. In other words, the rigour of Section 9 shall stand relaxed only if the requirements thereof are satisfied. If the competent authority holds that these requirements are not satisfied, it necessary follows that relaxation of rigour of Section 9 cannot be had. Therefore, while granting or renewing the licence, the enquiry to be conducted is not confined to the applicant. It has to be projected to the principal employer as well. And if the Licensing Authority finds that the requirement of the principal employer is not intermittent but perennial, the Licensing Authority can reject the application as well. Therefore, if the Licensing Authority refuses the licence or registration “as the applicant does not conform to the requirements of law stated above, it cannot be said that it amounts to abolition of the right itself. It is only a case where the applicant has not satisfied the requirements of law.

10. If we further examine the provisions of the Act and Rules, one can clearly see that registration is not to be granted for the mere asking by an applicant. Under Section 7(1) an application for registration shall be made within a prescribed period in the prescribed manner. Rules 17,18 and 19 are the prescribed rules. Form I is the prescribed application form. It contains the following query:

“6. Particulars of contractors and contract labour-

(a) Name and Address of contractors;

(b) Nature of work in which contract labour is employed or is to be employed;

(c) Maximum number of contract labour to be employed on any day through each contractor;

(c-1) Estimated date of commencement of each contract work under each contractor;

(d) Estimated date of termination of employment or contract under each contractor”.

11. The Registering Authority has power to call upon the applicant to furnish further details to consider the genuineness of the request for registration (Rule 19(1)). The following clause in the application to be made by the principal employer indicates that the contract labour can be employed only for intermittent and not for perennial work, namely:

“(c-1) Estimated date of commencement of each contract work under each contractor.

(d) Estimated date of termination of employment or contract under each contractor”.

12. Section 7(2) provides that if an application for registration is complete in all respects, the Registering Authority may register the establishment. Rule 19 deals with rejection of an application. As can be seen from the succeeding discussion, the purport of the expression “complete” used in the said sub-section and the rule would take colour from the context and it means “correct”. By virtue of the exercise of the power under Section 7 of the Act, the Registering Authority is relaxing the rigour of Section 9 of the Act. In other words, only if the relaxation is had, can the principal employer employ contract labour. It means, the right to employ contract labour is taken away as far as that principal employer is concerned to whom the rigour of Section 9 is not relaxed. To put it plithly, such right stands abolished qua the principal employer when the relaxation of the rigour of Section 9 is declined. If so, it will not be incorrect to conclude that the authority exercising power under Section 7 or Section 12 of the Act is exercising power comparable to one under Section 10 of the Act, but in a different manner.

13. The requirement of registration is only with respect to an establishment which is neither intermittent nor casual. The number of working days mentioned in the explanation to Section 1(5) applies in the first place to the establishment as a whole. The basic requirement is that the establishment, where the contract labourer works, should be neither an intermittent nor casual establishment. In other words, it would be an establishment which works for more than 120 or 60 days, as the case may be. To say that in the event the workers in an establishment work for more than 120/60 days, the said establishment will cease to be an intermittent/casual establishment, while the contract labourer working there, even if he works for more than 120/60 days, as the case may be, will still be discharging intermittent/casual nature of work appears to be an incongruous situation. Therefore, the approximate number of days to be worked by the contract labourer in the establishment in the succeeding 12 months or a year, as the case may be, has also to be considered as a relevant consideration to decide whether he is being employed for a work which is perennial in nature. To reiterate, the Act applies only to an establishment where the work, to be discharged by the worker is perennial in nature. Therefore, it can be treated as relevant consideration if it is ascertained as to whether the contract labourer had worked in the establishment concerned for a period which is sufficient to deny the establishment the status of intermittent or casual status. That circumstance is a relevant consideration. An indication in this behalf can be seen from Section 10(2)(b) of the Act also. Again it has to be considered whether the need of contract labourer is recurring annually for the very same process of work and whether it ia periodical. These are what is contemplated under Section 10(2)(a), (b), (c) and (d) of the Act. They read thus:

“(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.


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".


14. If these be the considerations for prohibiting the contract labour outright, then it can also be considerations to decide whether a registration be granted to an establishment to engage a contract labour and derivatively a licence be granted to a contractor in that behalf. A consideration of the above circumstances may not be with a standard relevant to decide the question of abolition, but nevertheless, these guidelines be the brooding spirit while considering the claim for registration or licence. Hence, the Registering Authority issuing a Registration Certificate under Section 7 of the Act has to ascertain whether the establishment/principal employer will be employing the workers for perennial work or intermittent work as detailed above. The various queries to be answered in the application form have also been made for eliciting these informations. Rule 82(3) of the Rules and the prescribed form used to furnish the relevant’ information facilitate procuring these informations. The rule reads thus:

“(3) Every principal employer shall, within fifteen days of the commencement or completion of each contract work under each contractor, submit a return to the Inspector, appointed under Section 28 of the Act, intimating the actual dates of the commencement or, as the case may be, completion of such contract work, in Form XXVI”.

The prescribed Form (No. XXVI) is also in the following manner:

“Notice of commencement/completion of contract work.

1. Name of the principal employer and address:…………

2. No. and date of Certificate or Registration:…..

3. I/We hereby intimate that the contract work (name of work)…..given to …..(name and address of the contractor)……having licence No….date……has commenced/completed with effect from …..(date) on (date).


 The Inspector                            Signature of the
                                         principal employer".


This will furnish the intimation whether the number of days employed is perennial or intermittent, as the case may be. Hence, when the rule mentions “complete” details, the inference is that it be complete and correct information required to be furnished. If, therefore, the information furnished are incorrect or that it is not true and does not enable the Authority to come to the correct conclusion as to whether the application made be allowed either under Section 7 or Section 12 of the Act, then necessarily the authority has power to reject the registration or licence, as the case may be, and on such refusal of registration or licence, it certainly does not amount to abolition of the contract labour.

15. The rules framed under Section 35 of the Act contemplates that an application to be made for the registration of the firm needing the contract labour. In doing so, it has to furnish the details of the labour and the types of work to be done by the contract labour. As can be seen from Section 1(5) of the Act, it indicates that any establishment performing work for more than 120 or 60 days in the preceding 12 months will not be deemed as an establishment working intermittent or casual in nature. When an application for registration is made to the officer, it must be prima facie shown to him by the applicant that the period of work would be reasonably kept below 120/60 days, as the case may be. Because, if the establishment is an intermittent/casual establishment by virtue of Section 1(5), it cannot get converted itself into a perennial establishment by employing contract labour for more than 120/60 days, as the case may be. Therefore, the explanation to Section 1(5) can be also treated as a test to decide the question of perennial or intermittent nature of employment. If that be so, there is nothing wrong if the authority refusing the registration or the licence, as the case may be, if he comes to the conclusion on such enquiry, that the work for which the contract labour is employed is perennial in nature. In such cases, one cannot also complain that the refusal of registration/licence would amount to the abolition of the contract labour system. Essentially the Act confers the Registration/Licensing Officers to decide whether grounds have been made out to relax the operation of the Act insofar as the principal employer and consequently grant licence to the contractor to supply the contract labour to the principal employer.

16. The statute provides elaborate amenities to be made available by the contractors. But invariably these rules slumber comfortably in the statute book. A recent report on the basis of survey of the contract labour system disclosed that the contractors have failed to maintain

even registers and records and totally failed to provide statutory benefits to the workers though they discharge the same work. As is well-known, the ostensible reason for engaging contract labour instead of direct employee is to gain monetary advantage. But it is high time the competent authorities swing into action and help the contract labourers achieve what has been granted to them under the statute.

17. In the impugned order herein, none of the relevant questions formulated above have been considered. It is seen that the respondent has exercised its power as to whether Section 10 of the Act should be invoked while renewing the application for grant of licence. An application for renewal is no doubt not to be considered in a routine matter. By renewal, a fresh period of licence comes into being. The old licence is replaced and in its place there is a new grant. In other words, it is as if a new licence has been granted for the extended period. That is to say, all the circumstances enabling the grant of licence should be shown to exist on the date when the renewal application is made. Therefore, the officer granting the renewal is entitled to conduct, at the time of granting of the renewal of the licence, similar enquiries that he conducted while he granted the licence initially.

Therefore, briefly put:

(1)    The exercise of the power under Section 7 and Section 12 of the Act is distinct and separate from that of the power under Section 10 thereof.

(2)    While considering the claim for a registration/licence or for renewal under the Act, the Registering Authority has to ascertain whether the work to be performed by the contract labourer under the principal employer is perennial or intermittent in nature.

(3)    That the total number of days for which the contract labourer is engaged is also a relevant consideration.

(4)    The Authority may also consider the nature of work to be discharged by the contract labourer.

(5)    The Authority may also consider broadly whether the circumstances mentioned in Section 10(2) of the Act exist in the particular case and that these considerations shall be the brooding spirit behind while dealing with an application for registration or licence or renewal, as the case may be.

(6)    A renewal application shall also be dealt with on par with a fresh application for registration or licence, as the case may be.


18. The order impugned has sought to exercise its power as if it is exercising the power conferred under Section 10 of the Act and on that basis he has declined to renew the licence. It has adverted to the decision of the Supreme Court which deals with the power under Section 10. The principle therein is more apposite while examining the question of abolition. The existence or otherwise of these circumstances may be a

ground to consider whether the registration/licence be declined or granted. But, the circumstance that the contract labour in the larger interest should be abolished in exercise of the power under Section 10 is not a ground to decline the registration/licence/renewal. Hence, the whole process adopted by the officer is incorrect. The order impugned herein is, therefore, set aside. The respondent is directed to consider the question afresh and pass appropriate orders after hearing the petitioner as well and examining all aspects of the claim in the light of what is stated above. No cost.

Before parting with the case, I wish to place on record the profound gratitude of this Court to Sri M.C. Narasimhan and Sri. K. Kasturi, Advocates, for the considerable help rendered by them to this Court to decide the case.

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