Summary
Workers engaged through a licensed contractor at a Kirloskar Brothers plant in Madhya Pradesh lost their jobs when the labour contract ended in 1996. The Labour Court found that they were the contractor's employees. The Industrial Tribunal, applying the MP Industrial Relations Act, held that contract labour automatically become the principal employer's employees and ordered reinstatement, and the High Court upheld that. The Supreme Court restored the Labour Court's award. No notification under Section 10 of the Contract Labour Act prohibited contract labour, and no one alleged or found the contract to be a sham. Under Steel Authority and International Airport Authority, there is no automatic absorption in such a case. The principal employer's occasional payment of wages or PF on the contractor's default does not create an employment relationship.
Issues
- Whether contract labourers engaged through a licensed contractor become employees of the principal employer entitled to reinstatement, absent a Section 10 CLRA notification and any finding that the contract was a sham.
Provisions considered
- Section 10, Contract Labour (Regulation and Abolition) Act, 1970Neither Section 10 nor any other provision provides for automatic absorption of contract labour; absent a prohibition notification and proof that the contract is a sham or camouflage, the principal employer cannot be directed to absorb them. (¶¶ 4, 4.1, 4.3, 4.5, 4.6)
- Sections 2(13) and 2(14), Madhya Pradesh Industrial Relations Act, 1960The Tribunal erred in relying on these definitions of employee and employer; the parties were governed by the CLRA Act, under which any relief had to be granted. (¶¶ 2.4, 4.8)
Held
- No documentary evidence showed the workmen to be the appellant's employees; direct control and supervision lay with the contractor, and they received no benefits, uniform or punching cards from the appellant. (¶ 4.1)
- The principal employer's statutory liability to pay wages and PF dues on the contractor's default, and recover them from the contractor's bills, does not make the contract labour its employees merely because it sometimes made such payments. (¶ 4.2)
- Following Steel Authority of India and International Airport Authority of India, where there is no Section 10 notification and no allegation or finding that the contract was sham, nominal or a camouflage, the question of directing absorption or reinstatement does not arise; the Tribunal and the High Court erred. (¶¶ 4.3, 4.4, 4.5, 4.6, 4.7, 4.8)
Result
Civil Appeal Nos. 8446-8447 of 2022 allowed; the Madhya Pradesh High Court (Indore Bench) judgments dated 09.03.2018 in W.P. (S) No. 1083 of 2004 and 12.11.2018 in W.A. No. 813 of 2018, and the Industrial Tribunal's order dated 05.02.2004, set aside, and the Labour Court's award dated 14.03.2002 restored; no costs.