Workers employed by the Contractor do not automatically become the employees of the principal employer in absence of any legal provision

Kirloskar Brothers Limited Vs Ramcharan and Ors. (Supreme Court of India)

Conclusion: The Hon’ble Supreme Court while allowing appeal observed that there is no provision under Section 10 of the Contract Labour (Regulation and Abolition) Act, 1970 that the workers/employees employed by the contractor automatically become the employees of the appellant and/or the employees of the contractor shall be entitled for automatic absorption and/or they become the employees of the principal employer.

Facts: In present facts of the case, feeling aggrieved and dissatisfied with the impugned judgment and order dated 09.03.2018, passed by the learned Single Judge of the High Court of Madhya Pradesh at Indore in W.P. (S) No. 1083 of 2004 and the impugned judgment and order dated 12.11.2018 passed by the Division Bench of the High Court in W.A. (S) No. 813 of 2018, by which the High Court has dismissed the said appeal(s) preferred by the appellant herein – employer confirming the judgment and order passed by the Industrial Tribunal ordering reinstatement and directing that the concerned employees / workmen were the employees of the appellant – principal employer, the principal employer – Kirloskar Brothers Limited has preferred the present appeals.

The respondent Nos. 1 to 6 herein were contractual labourers of the respondent No. 7, who was a contractor engaged by the appellant in terms of contract dated 22.04.1995, which was renewed from time to time, including on 01.08.1995. Upon entering into the contract, necessary compliances under Contract Labour (Regulation and Abolition) Act, 1970 (hereinafter referred to as “CLRA Act”) was completed by the appellant and the respondent No. 7 – contractor. The labour contract came to an end on 07.10.1996. Therefore, the services of the respondents were dispensed with by the contractor. Accordingly, the appellant filed a return under CLRA Act on 25.01.1997, which shows that the contract with the respondent No. 7 had come to an end.

According to the appellant, all statutory payouts, including the salary of the workmen were paid by the contractor since under the CLRA Act, the ultimate responsibility would be upon the appellant if these were not paid by the contractor. By letter dated 06.04.1996, the appellant informed the contractor about deducting an amount of Rs. 7,224/- from the bill payable, for non-deposit of PF contribution for May, 1995. That thereafter, the respondents approached the Labour Court praying inter alia that they were employees of the appellant, who have been orally terminated by the respondent No. 7 and sought to be re­instated in service. That the learned Labour Court vide judgment and order dated 14.03.2002, on appreciation of evidence returned a categorical finding that the Contractor had obtained license under the CLRA Act and that the contesting respondents were the employees of the contractor and not of the appellant.

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