CONTRACT LABOUR LICENSE NOT REQUIRED WHEN CONTRACT DEPLOYS PERMANENT EMPLOYEES - BASANTA KUMAR MOHANTY VS STATE OF ORISSA 1991
Orissa High Court
Basanta Kumar Mohanty vs State Of Orissa on 8 July, 1991
Equivalent citations: (1992) IILLJ 190 Ori
Author: A Pasayat
Bench: A Pasayat
JUDGMENT A. Pasayat, J.
1. A short but interesting question whether prosecution of petitioner under Section 24 of the Contract
Labour (Regulation and Abolition) Act, 1970 (in short 'the Act') is justified arises in this revision
application.
2. Background facts, shorn of unnecessary details, are as follows:
Petitioner is the Director in charge of Security and Detective Services (India) Limited. The said
concern is hereinafter referred to as the 'contractor'. According to the prosecution, contractor and
consequentially petitioner was liable for prosecution in terms of Section 24 of the Act. Prosecution
report was submitted by the Assistant Labour Officer and Inspector under the Act alleging that the
petitioner entered into an agreement with Talcher Thermal Power Station Expansion Main Building
Division, Talcher (described herinafter as 'principal employer') for engagement of security guards;
these guards were contract labour and therefore, contractor was required to take licence under the
Contract Act, and having not done so violated Section 12 of the Act.
3. Petitioner refuted the allegation on the ground that the Act had no application to it and therefore, the
prescculion as launched was not maintainable in law. The learned Sub-Divisional Judicial Magistrate,
Talcher (in short 'S.D. J.M.') and the learned Sessions Judge, Dhen-kanal did not accept the petitioner's
contention and held that the Act had application and therefore, conviction under Section 24 was in
order.
4. For resolution of the dispute involved, it is meet to refer to definitions of 'workman', 'contract labour'
and 'contractor' as given in the Act. They are as follows:
Workman:
"Workman' means any person employed in or in connection with the work of any establishment to do
any skilled, semi-skilled or un- skilled manual, supervisory, technical or clerical work for hire or
reward, whether the terms of employment be express or implied, but does not include any such person-
(a) who is employed mainly in a managerial or administrative capacity; or
(b) who, being employed in a supervisory capacity, draws wages exceeding five hundred rupees per
mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers
vested in him, functions mainly of a managerial nature; or
(c) who is an out-worker, that is to say, a person to whom any articles or materials are given out by or
on behalf of the principal employer to be made up, cleaned, washed, altered, ornamented, finished,
repaired, adapted or otherwise processed for sale for the purpose of the trade or business of the
principal employer and the process is to be carried out either in the home of the outworker or in some
other premises not being premises under the control and management of the principal employer.
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Contract Labour:
a workman shall be deemed to be employed as 'contract labour' in or in connection with the work of an
establishment when he is hired in or in connection with such work by or through a contractor, with or
without the knowledge of the principal employer;
Contractor:
'contractor', in relation to an establishment, means a person who undertakes to produce a given result
for the establishment, other than a mere supply of goods or articles of manufacuture to such
establishment, through contract labour or who supplies contract labour for any work of the
establishment and includes a sub-contractor;":
A workman shall be deemed to be employed as a contract labour when he is hired in or in connection
with the concerned work by or through a contractor with or without the knowledge of the principal
employer. Primary aspect, therefore, to be considered in a case of this nature is whether the concerned
workman was hired in or in connection with principal employer's work by or through a contractor.
Stand of the prosecution is that the contractor entered into agreement with the principal employer for
supply of certain security guards for a price and therefore, the engaged persons were contract
labourers.
5. Strong reliance is placed on Ext. 3, the agreement of principal employer with contractor.
Undisputedly, the contract between the contractor and the principal employer was for rendering
security service and the profession charge payable was for deployment of several named categories of
employees. They are one Assistant Security Office-cum-Inspector, one Sergeant, six Head Guards and
forty-seven Guards. Amount payable to each one of them was indicated. The nature of job which was
to be undertaken by these categories of employees is not forthcoming from the documents placed
during trial. Definition of 'workman' excludes persons employed mainly in a managerial or
administrative capacity or employed in a supervisory capacity drawing wages exceeding a particular
amount.
6. A workman shall be deemed to have been employed as contract labour when he is hired in, or in
connection with a particular work of the principal employer. The determinative factor, therefore, is
whether a workman was hired in or in connection with work of an establishment. A permanent
employee who during his employment can be placed at different establishments at the choice of the
contractor cannot be called to be a contract labour because he is not hired in or in connection with the
work of any particular establishment. The logic behind this conclusion is that where employment of a
person is unrelated with any specific work of any establishment, he is not a contract labour, because his
employment has no nexus with any particular work of any establishment. The terms of engagement of
one of the security guards were filed as a specimen sample. There is no dispute that similar terms
existed for other Security Guards. The document is a part of Ext. A. Conditions 3 and 4 of the
appointment order vide No 1878/ SDS. Dated July 31, 1982 read as follows:
"3. That you will be whole-time employee of the organisation and you will not engage yourself
anywhere in any work or profession or employment either honorary or otherwise during your
employment with us. You will work with honesty , sincerety and loyalty.
4. That you will be liable to be transferred to any unit of the organisation without any extra allowance
or benefit."
(emphasis by me) From a bare look thereat, it is apparent that the engagement was not in or in
connection with any work of any particular establishment. Merely because a contractor undertakes to
render any particular service and engages its employees, it does not ipso facto lead to engagement of
contract labour, unless persons who are engaged were hired for any particular job. That is the
distinctive feature. Prosecution has failed to establish that the contractor hired any particular person for
engagement with the principal employer's work. On the contrary the evidence of the informant clearly
shows that he had not verified the service conditions of the employees under the contractor and had not
verified any document to find out such service conditions. He also admitted that he did not know the
11/5/2019 Basanta Kumar Mohanty vs State Of Orissa on 8 July, 1991
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method and manner of discharge of work by the Security Guards employed by the contractor and
whether they were to act under the instruction of the contractor, and that the principal employer had no
control over the security guards employed by the contractor. He accepted that he did not know as to
what emoluments and other benefits the employees were getting from the contractor, and that a lump
amount was being paid by the principal employer for the total service of guards engaged. In the
absence of any definite material that the employment of all or any of the employees was for work in or
in connection with the principal employer's establishment, the conviction cannot be maintained.
Consequentially, the sentence awarded is nullified.
7. The revision application is allowed.
Courtesy: Indian Kanoon
Basanta Kumar Mohanty vs State Of Orissa on 8 July, 1991
Equivalent citations: (1992) IILLJ 190 Ori
Author: A Pasayat
Bench: A Pasayat
JUDGMENT A. Pasayat, J.
1. A short but interesting question whether prosecution of petitioner under Section 24 of the Contract
Labour (Regulation and Abolition) Act, 1970 (in short 'the Act') is justified arises in this revision
application.
2. Background facts, shorn of unnecessary details, are as follows:
Petitioner is the Director in charge of Security and Detective Services (India) Limited. The said
concern is hereinafter referred to as the 'contractor'. According to the prosecution, contractor and
consequentially petitioner was liable for prosecution in terms of Section 24 of the Act. Prosecution
report was submitted by the Assistant Labour Officer and Inspector under the Act alleging that the
petitioner entered into an agreement with Talcher Thermal Power Station Expansion Main Building
Division, Talcher (described herinafter as 'principal employer') for engagement of security guards;
these guards were contract labour and therefore, contractor was required to take licence under the
Contract Act, and having not done so violated Section 12 of the Act.
3. Petitioner refuted the allegation on the ground that the Act had no application to it and therefore, the
prescculion as launched was not maintainable in law. The learned Sub-Divisional Judicial Magistrate,
Talcher (in short 'S.D. J.M.') and the learned Sessions Judge, Dhen-kanal did not accept the petitioner's
contention and held that the Act had application and therefore, conviction under Section 24 was in
order.
4. For resolution of the dispute involved, it is meet to refer to definitions of 'workman', 'contract labour'
and 'contractor' as given in the Act. They are as follows:
Workman:
"Workman' means any person employed in or in connection with the work of any establishment to do
any skilled, semi-skilled or un- skilled manual, supervisory, technical or clerical work for hire or
reward, whether the terms of employment be express or implied, but does not include any such person-
(a) who is employed mainly in a managerial or administrative capacity; or
(b) who, being employed in a supervisory capacity, draws wages exceeding five hundred rupees per
mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers
vested in him, functions mainly of a managerial nature; or
(c) who is an out-worker, that is to say, a person to whom any articles or materials are given out by or
on behalf of the principal employer to be made up, cleaned, washed, altered, ornamented, finished,
repaired, adapted or otherwise processed for sale for the purpose of the trade or business of the
principal employer and the process is to be carried out either in the home of the outworker or in some
other premises not being premises under the control and management of the principal employer.
11/5/2019 Basanta Kumar Mohanty vs State Of Orissa on 8 July, 1991
https://indiankanoon.org/doc/1250163/ 2/3
Contract Labour:
a workman shall be deemed to be employed as 'contract labour' in or in connection with the work of an
establishment when he is hired in or in connection with such work by or through a contractor, with or
without the knowledge of the principal employer;
Contractor:
'contractor', in relation to an establishment, means a person who undertakes to produce a given result
for the establishment, other than a mere supply of goods or articles of manufacuture to such
establishment, through contract labour or who supplies contract labour for any work of the
establishment and includes a sub-contractor;":
A workman shall be deemed to be employed as a contract labour when he is hired in or in connection
with the concerned work by or through a contractor with or without the knowledge of the principal
employer. Primary aspect, therefore, to be considered in a case of this nature is whether the concerned
workman was hired in or in connection with principal employer's work by or through a contractor.
Stand of the prosecution is that the contractor entered into agreement with the principal employer for
supply of certain security guards for a price and therefore, the engaged persons were contract
labourers.
5. Strong reliance is placed on Ext. 3, the agreement of principal employer with contractor.
Undisputedly, the contract between the contractor and the principal employer was for rendering
security service and the profession charge payable was for deployment of several named categories of
employees. They are one Assistant Security Office-cum-Inspector, one Sergeant, six Head Guards and
forty-seven Guards. Amount payable to each one of them was indicated. The nature of job which was
to be undertaken by these categories of employees is not forthcoming from the documents placed
during trial. Definition of 'workman' excludes persons employed mainly in a managerial or
administrative capacity or employed in a supervisory capacity drawing wages exceeding a particular
amount.
6. A workman shall be deemed to have been employed as contract labour when he is hired in, or in
connection with a particular work of the principal employer. The determinative factor, therefore, is
whether a workman was hired in or in connection with work of an establishment. A permanent
employee who during his employment can be placed at different establishments at the choice of the
contractor cannot be called to be a contract labour because he is not hired in or in connection with the
work of any particular establishment. The logic behind this conclusion is that where employment of a
person is unrelated with any specific work of any establishment, he is not a contract labour, because his
employment has no nexus with any particular work of any establishment. The terms of engagement of
one of the security guards were filed as a specimen sample. There is no dispute that similar terms
existed for other Security Guards. The document is a part of Ext. A. Conditions 3 and 4 of the
appointment order vide No 1878/ SDS. Dated July 31, 1982 read as follows:
"3. That you will be whole-time employee of the organisation and you will not engage yourself
anywhere in any work or profession or employment either honorary or otherwise during your
employment with us. You will work with honesty , sincerety and loyalty.
4. That you will be liable to be transferred to any unit of the organisation without any extra allowance
or benefit."
(emphasis by me) From a bare look thereat, it is apparent that the engagement was not in or in
connection with any work of any particular establishment. Merely because a contractor undertakes to
render any particular service and engages its employees, it does not ipso facto lead to engagement of
contract labour, unless persons who are engaged were hired for any particular job. That is the
distinctive feature. Prosecution has failed to establish that the contractor hired any particular person for
engagement with the principal employer's work. On the contrary the evidence of the informant clearly
shows that he had not verified the service conditions of the employees under the contractor and had not
verified any document to find out such service conditions. He also admitted that he did not know the
11/5/2019 Basanta Kumar Mohanty vs State Of Orissa on 8 July, 1991
https://indiankanoon.org/doc/1250163/ 3/3
method and manner of discharge of work by the Security Guards employed by the contractor and
whether they were to act under the instruction of the contractor, and that the principal employer had no
control over the security guards employed by the contractor. He accepted that he did not know as to
what emoluments and other benefits the employees were getting from the contractor, and that a lump
amount was being paid by the principal employer for the total service of guards engaged. In the
absence of any definite material that the employment of all or any of the employees was for work in or
in connection with the principal employer's establishment, the conviction cannot be maintained.
Consequentially, the sentence awarded is nullified.
7. The revision application is allowed.
Courtesy: Indian Kanoon
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