DR.

RAM MANOHAR LOHIYA NATIONAL LAW

UNIVERSITY

Labour Law
Final draft on

Nestle Workers Struggle in Rudrapur, Uttarakhand : An Analysis

of the Judiciary’s approach towards Contract Labour and
Employer-Employee Relationship
Submitted as a part of Project Work undertaken for the partial fulfilment of the B.A. LL.B. (Hons.) 5-Year Integrated
Course of RMLNLU-Lucknow

Submitted to: Submitted by:

Dr. Prasenjit Kundu Saharsh Chitransh
Assistant Professor (Law) EnRoll No.- 170101112
Dr. Ram Manohar Lohiya National Law University B.A. LL.B.(Hons.) VIth Semester
 DECLARATION
I, Saharsh Chitransh, hereby declare that this project work entitled as, “Nestle Workers Struggle in
Rudrapur, Uttarakhand: An Analysis of the Judiciary’s approach towards Contract Labour and
Employer-Employee Relationship” is an original piece of work. This work is submitted as a part of
project work undertaken for the partial fulfilment of the B.A. L.L.B. (Hons.) 5-year integrated course of
Dr. RMNLU.

Saharsh Chitransh

170101112
Introduction

1100 contract workers were terminated from their employment in June 2015 from a Nestle
India Plant in Rudrapur, Uttarakhand. This action from the industry management was result
of the countrywide recall of all Maggi variants when the tests by India’s food regulator
revealed the presence of high levels of lead and monosodium glutamate in them. The factory
cited stoppage of production and non-availability of work as the reason for such an
immediate action.1
The suffering of the contract workers in the Nestle India plant is not one of its kind but is the
case of every contract worker in the country who continues to perform unskilled and skilled
jobs in industries, but does not enjoy the wage/ pay structure, social security benefits and the
labour legislations have proved ineffective in helping their cause.2 Governments also play a
role in the exploitation of workers by providing ‘competitive wages’ to the multinational
companies and big corporations and also simplify labour laws to increase investment in their
countries which result in increased vulnerability of the workers.3 Courts have also been only
too quick to go by the surface form an thus conclude that no employer- employee
relationship exists between the contract workers and the company thus missing the essential
relationship that often exists between the two. 4 Krishna Iyer’s perspective remarks in the
Royal Talkies 5 case and Hussainbhai’s 6 case that the courts must lift the veil and not be
mislead by legal appearances, is given the go by.
Such a system of exploitation can be traced back to neoliberalism, the latest phase of
capitalism which was a reply of the capitalist system to the crisis of stagflation in 1970s.7 The
primary aim of neoliberalism has been to secure the financial benefit of the capitalist class.
The process of restructuring of economy varied from country to country but predominantly,
the neoliberal policy framework included privatisation, liberalisation and flexibilisation of

1
Anupam Trivedi, ‘Maggi Ban: Nearly 1,100 contract workers lose jobs at Nestle factory’ <
https://www.hindustantimes.com/india/maggi-ban-nearly-1-100-contract-workers-lose-jobs-at-nestle-
factory/story-cnYHnbjDwm0cD51MsREqtK.html > accessed 21 March 2020.
2
Ashish Das and Dhananjay Pandey, ‘Contract Workers in India: Emerging Economic and Social
Issues’ (2004) 40 Indian Journal of Industrial Relations 242-265.
3
Maria Artuso and Carolan McLarney, ‘A Race to the Top: Should Labour Standards be Included in
Trade Agreements?’ (2015) 40 VIKALPA 1.
4
Colin Gonsalves, ‘Tragedy of Contract Workers’ (1988) 23 EPW 403.
5
Royal Talkies, Hyderabad & Ors v Employees State Insurance Corp 1978 AIR 1478.
6
Hussainbhai, Calicut v Alath Factory Thozhilali 1978 AIR 1410.
7
Alejandro Reuss, ‘What can the crisis of US Capitalism in the 1970s teach us about the current crisis
and its possible outcomes?’ < http://www.dollarsandsense.org/archives/2009/1109reuss.html >
accessed 23rd March 2020.
labour, drastic reductions in welfare expenditure by the State, etc. in order to cut down on
wages and other benefits of workers. 8 In furtherance of the neoliberal policies of the
government, the right to organisation i.e., to form trade unions and collective bargaining have
come under severe attack. In light of this an increase in the number of ‘non standard work
arrangements’ or ‘precarious’ or ‘vulnerable’ forms of employments is seen across the
world. 9 On the one hand the workforce consisting of permanent employees has been
drastically reduced and on the other hand precarious forms of employment like part time,
temporary, casual , fixed term, etc. have increased significantly. 10 Globalisation and
liberalisation have shifted production process to countries where there is cheap supply of
labour, the labour laws are weak and where there is lack in the unity and subsequently
strength of the working class.

In light of the above mentioned assertions, this research paper argues that the Nestle workers
struggle in Rudrapur is a result of the miseries that the contract labour face in the country and
the state machinery which involves both government and the judiciary have worked to
exacerbate these atrocities. Further, such a curbing of the right of the workers and the
flexibility in the labour market is a result of the neo-liberal policies which have been adopted
by the states across the world in order to increase the benefits of the working class. Lastly,
the contract workers struggle in Rudrapur is a replica of the theory of class struggle as
propounded by Karl Marx and shows why unionisation of contract workers can be an
effective remedy to tackle the repressive policies of the government against contract workers
and can also reduce the vulnerability and flexibility in the labour market.

8
Saumyajit Bhattacharya, ‘Vicissitudes of the Relationship between State, Labour and Capital: an
Appraisal of Neoliberal Labour Market Reforms in India and Beyond’ (2007) 40 LCS 106.
9
Hemalata, ‘Neoliberalism and Trade Unions-I’ <
https://peoplesdemocracy.in/2017/0528_pd/neoliberalism-and-trade-unions-i > accessed 21st March
2020.
10
Alakh N Sharma, ‘Felxibility, Employment and Labour Market Reforms in India’ (2006) 41 EPW
2078.
Significance of flexibility in the Labour Market

The terms “labour market flexibility” and “globalization” are interrelated and part of the
package called the Washington Consensus. The structure promoting flexibility in the labour
market was aimed at deregulating the labour market by removing the regulations which
protected the employment of the workers.11 There was a deterioration in the employment rate
along with an acceleration in the GDP growth rate in the 1990s. The reasons for decline in
the employment rate can be assigned to the technical developments and corresponding policy
changes in the preceding years. As a result, the substantial portion of the GDP growth came
from increase in productivity and augmenting capital intensity of the economy. The capital
intensive growth saw an increase in the unorganised sector of the workforce which followed
deceleration in the employment growth.
However, there is a chunk of economic thinkers which attribute the decrease in the
employment growth in the organised sector in India to the rigidity in the labour market
which, they believe, has increased the labour costs of enterprises, thereby creating
impediments in the investment (including foreign investment) and growth.
Employment protection laws are also believed to be inefficient and inequitable, leading to
slow- down in growth, and dividing workers into protected and unprotected categories. A
counter to the above argument of rigidity in the labour market can be that the social security
legislations are only applicable to only 8 to 9 per cent of the total workforce. This also
depicts another fact that the remaining of the workforce is facing a deplorable condition.
The industrial establishments have increasingly exempted with permanent workers in the
non- core activities and have employed temporary (either regular or casual) and contractual
workers, either through outsourcing to the other establishments or directly recruiting more
and more such “flexible” workers with the help of intermediaries. These establishments have
also been able to achieve flexibility with respect to wages as can be observed from the fact
that where the real wages of the workers reached a plateau in the late 1990s, the emoluments
of their supervisors increased substantially.
The ‘shift away’ from the from the formal sector to the informal sector of the work force
depicts the arrival of neo –liberal policy framework which is accompanied with a significant
changes in the economic sector, represented by the network of global production chains and

11
Guy Standing, Beyond the New Paternalism: Basic Security as Equality (2002 Verso, New York).
the accompanying fragmentation and flexibilities in the production process along with
concentration of capital.12 All these changes were effected without much resistance from the
work force primarily because of lack of unity among the workforce. Further such changes,
which are a part of the dominant ideology of liberalisation and globalisation, are emphatically
propagated by the state and its various organs which encompasses the legislature, executive
and the judiciary. These institutions have changed their stance from protecting worker’s
interests to an absolutely employer centric approach.
This has resulted in the decline in the strength of the trade unions and hence the bargaining
power of the workmen. The increase in the number of unions at the level of firms have
resulted in the weakening of the bargaining power of federated and centralised trade unions.
The bargaining power is further weakened by the predominance of managerial power with
the employers which allow them to adopt new strategies like outsourcing and parallel
production.
Trade unions have been further weakened by the ascendancy of managerial rights and new
strategies like outsourcing and parallel production.
A shift in the employment pattern from permanent to temporary is accompanied with a
systematic channelling of jobs from a position where the workers had bargaining powers to a
position where no bargaining power exists and this has been done by the use of tactics like re-
designation of workers.
All these developments have resulted in the weakening of the collective bargaining
machinery.
A further adverse situation is a which result from this is a truce between the local unions and
the employers which greatly affects the interests and welfare of the workers. For example, the
fear of losing jobs has impelled unions to accept relocation, downsizing, productivity linked
wages, freezes in allowances and benefits, voluntary suspension of trade union rights for a
specific period and commitment to modernisation.13 The increase in the instances of lockout
and decrease in the number of strikes depicts a weakening of the worker’s bargaining
capacity and an increase in the militancy of the employers.14 These factors have enabled the
employers to blatantly ignore the rigidities of labour law and thus resorting to flexible
practices on a wide scale. In a significant number of cases where informal routes have been

12
Saumyajit Bhattacharya, ‘Vicissitudes of the Relationship between State, Labour and Capital: an Appraisal of
Neoliberal Labour Market Reforms in India and Beyond’ (2007) 40 LCS 106.
13
Alakh N Sharma, ‘Globalization, Work and Social Exclusion in India’ (2004) Kunda Datar Memorial Lecture
26.
14
Ruddar Dutt, Lockout in India (2003 Institute for Human Development, New Delhi).
adopted (e.g., unofficial closures), the workers have suffered a lot, as they have been
deprived of their dues.15

Judiciary’s Approach Towards Neo- Liberal Policies

In the present climate of neo- liberal ‘rule of law’ proselytization, the structural adjustment
most relevant for capital against labour is labour flexibility. Labour flexibility is dealt with by
the Contract Labour (Regulation and Abolition) Act 1970 in India. The statute permits
principle employer to hire workers on a contract basis. The statute also compels abolition of
the contract labour system from any industry and thereby promotes the use of regular
employees under certain circumstance. During the period of 1980s and 90s, the courts in
India ruled in favour of regularisation of contractual workforce on the abolition of contract
labour system16 but later on in the late 90s and till today the Indian courts have refrained from
giving such liberal interpretations to the provisions of the Contract Labour Act and thus
jeopardized the regularization of the contract workers. 17 Supreme Court in another case
justified the employment of temporary and casual workers and also held that, “the courts
must be careful in not interfering unduly in the economic arrangements of the affairs of the
state of its instrumentalities.”18
On the debate between ideologies of socialism and economic development in the neo- liberal
era, the Indian courts have observed for a change of approach with respect to industrial
relations which aimed at protecting only the interest of the workers. 19 The court have also
propounded for a change in the labour policy on account of globalization in order to meet the
requirements of industrial production and compete on a global level. The welfare and security
measures aimed at protecting the social and economic security are termed ‘distortions’
because of their non compatibility with the neo- liberal ideals thereby demanding a more
flexible labour regime which suits the global capital.
Further judicial developments have diluted the constitutional guarantee of equal pay for equal
work which has been made subject to factors like permanence of employment20, educational

15
Tirthankar Roy, ‘Social Costs of Reforms: A Study of Job Loss with Special Reference to Declining
Industries in 1990- 1998’ in S Uchikawa, Labour Market and Industries in India (2003 Manohar Publications,
Delhi).
16
Lal Beva Hotel and Bakery Mazdoor Union v Bharat Petroleum Corporation 1993 (1) LLN SC 965; Munna
Khan v Union of India 1989 (Suppl) (2) SCC 99; Air India v United Labour Union 1997 (1) LLN SC 457.
17
Steel Authority of India Limited v National Union Waterfront Workers 2001 (7) SCC 1.
18
Secretary State of Karnataka and others v Umadevi and others 2006 (4) SCC 1.
19
Hombe Gowda Educational Trust v State of Karnataka (2006) 1 SCC 430.
20
State of Orissa v Balaram Sahu AIR 2003 SC 33.
 21
qualification and sanctioned post. Earlier, wrongful terminations were dealt with
reinstatement of workmen along with guarantee of back wages, but now such dismissals are
only compensated with lump sum payments with very little chance of reinstatement.22 The
burden of proof for proving the fact of employment relations has been shifted from the
employer to the worker. 23 This indirectly absolves the employer to keep workers’ record
which is mandatory condition under law. 24 This helps the employer in manipulating the
employment relations as it becomes difficult on the part of the workers to prove relationship
of employment in the absence of documentation proof.
In the case of BALCO Employees25, the court upheld the decision of disinvestment by the
Government which was made without consulting the employees of the establishment. In this
case the court upheld the bypassing of the mandatory requirement of providing prior notice to
the workers by the management even if it affected the interest of the workers. The court
based its judgement on the reasoning that the it was necessary for the government to change
its policy in public because of a change in the economic climate, thus hinting towards the
justification of neo- liberal policies of the government over the interest of the workers.
The case of Indian Drugs & Pharmaceuticals Ltd v RK Shewarmani 26 depicts another
instance of the vanishing rights of the workmen. In this case the medical representative of
the appellant company was facing a departmental enquiry for not joining duty at the
transferred place and thus was kept out of work. Later the company brought in an amendment
in its conduct and discipline rules and terminated the employee for being absent for more
than thirty days from work. In this case the Supreme court upheld the termination of the
employee by citing prospective application of the amendment. The court completely ignored
the fact the employee remained out of employment due to compulsions of departmental
proceedings. The court didn’t not notice that the employer brought in the amendment with the
ulterior motive of terminating the services of the employee27 and hence took a very employer
centric approach.
Hence the effect of neo- liberalism policies of the government is also depicted in the manner
in which the judicial courts in India have attempted to bring about a change in the labour law
jurisprudence by adopting a employer- centric approach and completely ignoring the basic
21
HP Gupta v Union of India (2002) 10 SCC 658.
22
Employers Management of Central P and D Institute Ltd v Union of India AIR 2005 SC 633.
23
KCP Employees Association Madras v Management of KCP Ltd Madras AIR 1978 SC 474.
24
Section 25D, Industrial Disputes Act 1947.
25
BALCO Employees Union v Union of India AIR 2002 SC 310.
26
(2005) 6 SCC 76.
27
V Sudesh, ‘Vanishing Rights of Workmen- A Comment on Indian Drugs & Pharmaceuticals Ltd v RK
Shewarmani’ (2005) 47 Journal of Indian Law Institute 544-550.
rights and issues relating to the workforce. Further, the judiciary in the neo- liberal era has
also tried its best to uphold the flexibility in the labour market which is brought in by the
economic polices of the government and thereby serving the capitalist interests of the
multinational corporations.

Contract Labour

The roots of contract labour system can be traced in the colonial era when colonial
governments found it difficult to recruit workforce for their industrial establishments. This
was largely because the British employers were not acquainted with the basic problems
associated with the local workforce like difficulty of mobility, caste, religion, language,
customs, etc. The colonisers found it hard to deal with such problems and therefore they used
to hire contractors whose served as a middleman and helped the principle employer in the
recruitment and supervision of the workforce.
Since there was absence of organisation on the part of the contract workers, they were easily
prone to exploitation by their respective employers. To tackle this problem, Whitley
Commission on Labour (1860) was set up to inquire into the existing conditions of labour in
industrial undertakings and plantations in India. It recommended the establishment of system
where the issues relating to the workers can be addressed.28 Following this many committees
like Bombay Textile Labour Enquiry Committee, The Bihar Labour Enquiry Committee, the
Rega Committee, etc. were set up to inquire into the socio- economic conditions of contract
labour in India. The recommendations of these committees played a crucial role in widening
the scope of the definition of ‘workers’ by incorporating contract labour under it in the
enactments like Factories Act 1948, The Mines Act 1952 and The Plantations Labour Act
1951.
Later in the case of Standard Vacuum Refinery 29 , the Supreme Court observed that the
contract labour should not be employed in cases where the work is of a perennial nature, is
essential for the running of the factory, adequate enough to employ a significant number of
whole time workman and is similar to the work done by regular/ permanent workmen. Then
came the Contract Labour (Regulation and Abolition Act) 1970, to provide for regulation of
the employment of contract labour and its abolition under certain circumstances.

28
‘J.H. Whitley and the Royal Commission on Labour in India 1929- 31’ <
http://eprints.hud.ac.uk/id/eprint/33702/ > accessed 5 March 2020.
29
Standard Vacuum Refinery Company v Their Workmen 1961 AIR 895.
However, even the bringing in of a contract labour specific legislation hasn’t stopped the
plight of the contract workers in India. The contract workers are not given minimum wages
even though it is prescribed in the Contract Labour Act. The socio and economic security
schemes provided to the contract workers are ineffective due to lack of efficient execution
from the part of government authorities. Example can be take of provident fund benefit
provided to contract workers in which both the contractor and the workers contribute. This
contribution on the part of the workers is more often a burden rather than a benefit as every
month a certain amount is deducted from the worker’s salary to be included in the PF
account. The problems arise when often discrepancies are found in the PF accounts because
the contractor has not periodically contributed his/ her share in the workers’ PF accounts.
Further other kinds of discrepancies include incorrect details of workers in the PF account
due to which the are unable to access the amount which is deposited in their accounts during
the course of employment and also when they change their contractors. Further no assistance
is provided by the contractors to help the workers maintain a fault free account.
Further they are often deprived of the basic amenities provided under the Employees’ State
Insurance Corporation (ESIC) scheme due to documentation errors on the part of the
contractor. This results in ESIC hospitals and dispensaries refusing to provide medicines and
medical facilities to the workers and their families. There are also various legal issues
relating to them. The principle employer doesn’t consider the contract workers as its
employee and therefore evades any kind of liability towards them. In the case of Nestle
Workers in Rudrapur, most of the contract workers are migrant workers with no security of
tenure or employment. There is no fixed work hour in which they can work on a regular basis
and further they are not provided overtime once in case they do more than eight hours of
work.30
Further since, the Contract Labour Act though mentions about abolition of the contract labour
system under Section 10 of the Act, it does not contemplate the consequences of such a step.
These are some of the legal issues which are still a part of the long-drawn debate on the
contract workers.

Judiciary’s approach towards establishing the employer- employee relationship

In the case of Shivnandan Sharma 31 , the contract workers were treasurers who were

30
In conversation with a Trade Union member of Inqalabi Mazdoor Kendra, Rudrapur.
31
Shivnandan Sharma v Punjab National Bank Pvt Ltd 1995 1 LLJ 688.
appointed via an intermediary contractor but with the approval of the employer. The court
relied heavily on the contract between the company and the contractor and held that since
there was sufficient supervision and control on the part of the employer, the workers were
employees of the company. The court also held that it is irrelevant that the wages were paid
to the workers by the contractor since in any case the money came from the company’s
coffers. In the case of Standard Vacuum32, the court held that permanent workers could raise
a dispute on behalf of the contract workers and also that the contract labour system could be
abolished even if bona fide. In United Bidi Workers case33, that the contract labour system
was brought to camouflage the employer- employee relationship and industrial laws.
In the case of Bqsti Sugar Mills 34 , the state legislators brought in UP
Industrial Disputes Act. Section 2(1) (iv) of the Act enunciated that owner of an industry is
an employer under the Act if the owner contracts for execution of work which is ordinarily a
part of the industry. Thus, this legislation served as a boon for the contract workers. It is
interesting to see that no other State took such an initiative to help the cause of the contract
workers.

Then comes the case of Silver Jubilee 35 , where the case for the first time intimated its
discontent with the control and supervision test and observed that society has become more
complex now and applying only the contract and supervision test won’t be enough to test an
employer- employee relationship between the workers and the employer. The court brought
in further two criteria along with the control and supervision test. The first one was
ownership of tools test according to which if the industry owner provides for the tools then
this factor will lend itself towards employment. The second criteria was chance of profit and
risk of loss test which says that a worker who receives allocated remuneration based upon
piece- work or time spent, with no risk or loss is likely an employee rather than operating a
separate business. The court also made reference to organisational test which was based on
whether the work done by the contract worker was was part and parcel of the work normally
done in the organisation.
In the Burmah Shell Case36 the Supreme Court excluded the contract workers by excluding
them from the ambit of the Industrial Disputes Act and held that since a specific legislation

32
The Standard Vacuum Refining v Its Workmen and Ors 1960 2 LLJ 233.
33
Janab S Ahmed Hussain and Sons v Secretary United Bidi Workers 1964 2 LLJ 633.
34
State of UP and Ors v Basti Sugar Mills 1960 2 LLJ 447.
35
Silver Jubilee Tailoring House v Chief Inspector of Shops 1973 2 LLJ 130
36
Burmah Shell Oil Storage v Burmah Shell Management Staff 1971 AIR 922.
i.e., The Contract Labour (Regulation and Abolition) Act, the workers can’t litigate under the
ID Act which was a general law.
Finally in Ram Singh Case37, the court laid down that in determining the relationship between
the employer and the employee “control test” is not to be taken as the sole test. The court
proposed an integration test as one of the relevant tests. The court held that: “Integration test
is applied by examining whether the person was fully integrated into the employer’s concern
or remained apart from or independent of it. The other factors which may be relevant are-
who has the power to select and dismiss, to pay remuneration, deduct insurance
contributions, organise the work, supply tools and materials and what are the mutual
obligations between them.” The Supreme Court later in the case of Balwant Rai Saluja38
upheld the integration test and thus this test is the leading precedent in deciding the
employer- employee relationship.
It can be seen in the approach of the judiciary through the chain of judicial precedents that the
judiciary in the beginning to a liberal approach to decide the employer- employee relationship
but with the assent of the neo- liberal era, the tests used by the judiciary became more and
more complex and it started ruling in favour of the employers rather being pro worker. In
light of this argument, Justice Krishna Iyer words that the courts must lift the veil of
technicalities and see that the real employer is the company and not the contractor and that
the courts must not be misled by legal appearances hold great significance in today’s era.39
Further, the judiciary should also realise that if it wants to help the cause of the contract
workers, the best method is to bring them under the ambit of the employer- employee
relationship, else the employers in co- operation with the contractors will continue to exploit
the workers in multifarious ways.

Absorption of Contract Labour by the Principle Employer

The economic reforms of 1992 increased the private sector partnership and ownership of
manufacturing sector on one hand and reduced the monopoly of the state in these sectors on
the other. This as affected by selling off public assets which were not profitable in the past

37
Ram Singh and Others v Union Territory Chandigarh (2004) 1 SCC 126
38
Balwant Rai Saluja v Air India Ltd 2014 LLR 1009.
39
Royal Talkies, Hyderabad & Ors v Employees State Insurance Corp 1978 AIR 1478.
and were an unwanted responsibility on the State exchequer. This resulted in public sector
economy being subjected to market changes and competition. The Contract Labour
(Regulation and Abolition) Act was brought in with the intention of regulating the contract
workers, providing them with better conditions of employment and abolishing the practise
where ever possible. In a scenario where the contract labour system is abolished, the debate
for the automatic absorption of contract workers emerges and it becomes imperative to save
them. However, the stand of the judiciary in India has been pro- employer rather than pro-
worker in such circumstances.
The issues of whether there should be automatic absorption of contract labour on its abolition
first came before the Supreme Court in the case of Air India Statutory Corporation v United
Labour.40 In this case the court took a pro worker stand and held that when the contract
labour system is abolished on the notification of the government, it instils a right in the
workmen to be employed as regular employers in the establishment where they were hitherto
working. The court established the employer and employee relationship between the principle
employer and the contract workers. The court held that the intention behind drafting of
Section 10 of the Contract Labour Act was not to deprive workers of their means of
livelihood by casting them out of employment. The intention was rather to achieve regularity
and permanency of employment by removing the role of intermediary contractor. The court
recognised the absence of any provision relating to absorption in the Contract Labour Act but
it held that in order to further the principles of social and economic justice as mentioned in
the Constitution, the appropriate authority has to act according to the law mentioned above.
The court also observed that the absorption of the contract labour would not be a burden on
the principle employer as he/ she would have hired, in the first place, only those number of
contract workers as required to discharge the duties in the establishment. Further, it is always
open for the principle employer to retrench the extra workmen under the Industrial Disputes
Act.
However, the five judge bench in the Steel Authority41case overruled the previous decision
and created a new jurisprudence on this issue. The court in this case held that the automatic
absorption of the contract workers upon the abolition of contract labour system was not
contemplated in Contract Labour Act. The court while giving a literal interpretation to the
statute held that, “since there was no mention of the absorption process, or any other

40
1997 7 SCC 377.
41
Steel Authority of India Limited and Ors v National Union for Waterfront Workers and Others 2001 II LLJ
1087.
consequence of the abolition of the contract labour, it shows that the Act was intended to
work as a permanent solution to the problem rather than to provide a one- time measure by
departmentalising the existing contract labour, who fortuitously happened to be the employed
contract labour on the relevant date over and above that contract labour employed for a
duration of time earlier. Therefore, it is not for the High Courts and the Supreme Court to
read in some unspecified remedy on Section 10. Such an interpretation will go far beyond the
principle of ironing out the creases and the scope of interpretative legislation and therefore is
clearly impermissible.”
Later the regularization of temporary casual workers was jeopardized in the case of Secretary
State of Karnataka and others v Umadevi and others42. In this case the court held that even
though the employer is entitled to get their work done by temporary and casual workers on a
regular basis, they are under no obligation to regularise the service of these workers.

In the Bhilwara Dugdh 43 case, the court held that the ratio of the SAIL judgement 44 is
applicable to cases where the contract labour is abolished under Section 10 of the Act as a
consequence of the notification of the appropriate Government and not where the contract
between the principle employer and the contractor is a subterfuge to avoid obligations under
beneficial legislation. In case the existing contract is found to be sham, the court can remove
the intermediate contractor and reinstate the workers as employees of the principle employer.
The court in this case observed the effects of globalisation and liberalisation and held that it
has lead to exploitation of workers in the name of economic growth by the advent of sham
contracts. Although this case protects the contract workers against sham contracts, the case of
Steel Authority still is the guiding precedent on the fundamental issue of absorption which
leaves the contract workers in a precarious situation once the contract labour is abolished.
This might not be the consequence which the legislators had in mind when they drafted the
Contract Labour Act to protect the interests of the contract workers.

Unionisation of Contract Workers

In the case of Nestle Worker’s struggle in Uttarakhand, the contract workers were removed
without giving notice with immediate effect. The striking fact which was found in this case

42
2006 (4) SCC 1.
43
Bhilwara Dugdh Utpadak Sahkari Sangh Ltd v Vinod Kumar Sharma (2011) 15 SCC 209.
44
n (28).
was that even after 1100 contract workers were fired in one go, there was no resentment
shown by the contract workers who were dismissed. Their dismissal went unnoticed through
the eyes of media and the employers were never questioned. There is no union of workers in
Rudrapur which has resulted in lack of unity amongst them and therefore their concern was
never raised against the employer.45
The contract worker system was brought about to bring in more flexibility in the labour
market. If the contract workers were allowed to unionise, this would lead to rigidity in the
labour market and will reduce the profit ratio of the employers. This is the reason why the
factory administration disallows the unionisation of the contract workers. This fact can be
highlighted in the various struggles of the contract workers throughout the country.
In the case of Daikin workers struggle, where a large number of contract workers were fired
along with 50 permanent workers in their struggle to register the union.46 The management
has refused to accept the demands of unionisation of contract workers along with the
permanent workers in the factory and has also refused the demand to regularize all the casual
and permanent workers in the Daikin plant.47 In the Maruti Suzuki Workers Union case, 13
Maruti Union members were given life sentence for struggling for union formation and
abolition of contract labour system.48
In the case of Vedanta workers struggle, over 500 workers protested in Vedanta Alumina
Limited’s refinery situated at Lanjigarh. The main demands of the workers were
regularisation of jobs, fulfilment of promised employment of displaced persons, health care
facilities, education for their children and compensation for their land which was acquired by
the industry. In this case, the protesting wokers were attacked by Odisha Industrial Security
forces and the company hired goons for the peaceful protest.49 Again in the case of Honda
Workers Strike where the contract workers were hired under the false promise of making
them permanent employees after 3 years but the promise was not fulfilled by the employer.

45
In conversation with a Trade Union member of Inqalabi Mazdoor Kendra, Rudrapur.
46
Thoozhilalar Koodam, ‘Police Brutality on Daikin Workers- Fact Finding Report’ <
https://tnlabour.in/news/7853 > accessed 14th April 2020.
47
Thoozhilalar Koodam, ‘The Protracted struggle of Daikin workers enters penultimate phase’ <
https://tnlabour.in/factory-workers/6297 > accessed 14th April 2020.
48
< https://marutisuzukiworkersunion.wordpress.com/2017/03/19/free-the-maruti-workers-13-maruti-union-
members-given-life-sentence-for-struggling-for-union-formation-abolition-of-the-contract-worker-system/ >
accessed 14th April 2020.
49
‘Vedanta again gets State Forces to attack Workers and Displaced People’ <
http://ntui.in/2019/03/20/vedanta-again-gets-state-forces-to-attack-workers-and-displaced-people/ > accessed
14th April 2020.
On top of it, the workers were maltreated and were harassed on a regular basis.50
Another striking observation which comes out of the above mentioned cases is that the the
cause of the contract workers is espoused by the Trade Unions which are formed by the
permanent workers only when the permanent workers have suffered at the hands of the
employer along with the contract workers. In cases where the contract workers have alone
suffered, the trade unions have failed to bring forth their cause. This highlights the unpleasant
reality that permanent workers themselves are unwilling to extend the union membership to
contract workers. This can be understood by the fact that in majority of factories the number
of contract workers that are hired are significantly more in numbers as compared to the
permanent workers. In case the permanent workers allow the contract workers to become
members of the union, the demands and issues of the permanent workers would instantly be
marginalised. Further the permanent workers earn a much higher salary as compared the
contract workers and this wage difference results in their economic self- interest militating
against the inclusion of contract workers in union membership.51
However, Supreme Court in its recent judgement in the case of State of Punjab v Jagjit
Singh52 held that the principle of ‘equal pay for equal work’ would be applicable to all the
concerned temporary employees, so as to vest in them the right to claim wages, at par with
the minimum of the pay-scale of regularly engaged Government employees, holding the same
post. This judgement strikes at the heart of the two- tier hierarchy created amongst the
workers of permanent and contract workers. This judgement may also be a guiding light for
the Supreme Court to work towards the benefit of the private sector employees also. This
would lead to bridging up the socio- economic gap between the temporary and permanent
workers and thus would help entire work force to unite against the market forces. It can then
lead to contract workers asserting their demands more freely without the fear of risking their
jobs.

Conclusion

In light of the discussions in the preceding chapter, it is clear that the neo- liberal policies are
doing great deal of damage to the labour market and also the socio- legal justice in the

50
‘Honda Worker’s Strike: Ease of Maltreating Labour’ < http://www.hardnewsmedia.com/2016/11/honda-
workers-strike-ease-maltreating-labour > accessed 14th April 2020.
51
G Sampath, ‘On Parallel Tracks’ < https://www.thehindu.com/opinion/op-ed/On-parallel-
tracks/article16090950.ece > accessed 14th April 2020.
52
State of Punjab and Orr v Jagjit Singh and Ors Civil Appeal No 213 of 2013.
society. On the one hand it is promoting precarious forms of labour practices; on the other it
is snatching away the fundamental rights away from the workers. The Indian judiciary has
also not come to the aid of the contract workers and has worked to make their situations more
vulnerable. Judicial decisions like Steel Authority of India and Ram Singh have broken the
employer- employee relationship between the contract worker and the employer and have left
workers with nowhere to go once Government send notification for the abolition of contract
labour. Further, legislations like the Contract Labour (Regulation and Prohibition) Act have
failed both substantially and in application and have worked in opposition to their objectives.
In such a situation, where both the legislators and the judiciary are not giving any sign of
progressive steps, unionisation of contract workers and unity of contract workers with
permanent workers can do a lot to protect the right of the contract workers.

Bibliography

Statutes
• Contract Labour (Regulation and Prohibition) Act 1970
• Industrial Disputes Act 1947

Case Laws
• State of Punjab and Orr v Jagjit Singh and Ors Civil Appeal No 213 of 2013
• Bhilwara Dugdh Utpadak Sahkari Sangh Ltd v Vinod Kumar Sharma (2011) 15 SCC
209
• Steel Authority of India Limited and Ors v National Union for Waterfront Workers
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• Royal Talkies, Hyderabad & Ors v Employees State Insurance Corp 1978 AIR 1478
• Balwant Rai Saluja v Air India Ltd 2014 LLR 1009
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• HP Gupta v Union of India (2002) 10 SCC 658

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• Ashish Das and Dhananjay Pandey, ‘Contract Workers in India: Emerging Economic and
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(2007) 40 LCS 106
• Ashish Das and Dhananjay Pandey, ‘Contract Workers in India: Emerging Economic
and Social Issues’ (2004) 40 Indian Journal of Industrial Relations 242-265
• Colin Gonsalves, ‘Tragedy of Contract Workers’ (1988) 23 EPW 403
• ia Artuso and Carolan McLarney, ‘A Race to the Top: Should Labour Standards be
Included in Trade Agreements?’ (2015) 40 VIKALPA 1
Books
• Tirthankar Roy, ‘Social Costs of Reforms: A Study of Job Loss with Special
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Industries in India (2003 Manohar Publications, Delhi).
• Guy Standing, Beyond the New Paternalism: Basic Security as Equality (2002 Verso,
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