SC: Notification u/s 10(1) of CLRA Act doesn’t make the contract bad in law

The Hon’ble Supreme Court, on 5thJuly 2019, in the matter of The Director Steel Authority Of India Ltd. V. Ispat Khandan Janta Mazdoor Union, observed that neither Section 10 nor any provision in the Contract Labour(Regulation & Abolition) Act, 1970 provides for automatic absorption of contract labour on issuance of prohibition notification by the appropriate Government under Section 10(1).

 The Hon’ble Supreme Court observed that:

If the contract is found to be genuine and a prohibition notification has been issued under Section 10(1) of the Contract Labour(Regulation & Abolition) Act, 1970, in respect of the establishment, the principal employer intending to employ regular workmen for the process, operation or other work of the establishment in regard to which the prohibition notification has been issued, it shall give preference to the erstwhile contract labour if otherwise found suitable, if necessary by giving relaxation of age as it appears to be in fulfilment of the mandate of Section 25(H) of the Industrial Disputes Act, 1947. (Para 35)

Mere issuance of the prohibition notification under Contract Labour(Regulation & Abolition) Act, 1970 will not make the contract/agreement to be void ab initio or bad in law and if the employees are allowed to continue in terms of the earlier agreement after the prohibition notification under Contract Labour(Regulation & Abolition) Act, 1970 has come into force, it may be illegal and continuance of service in the absence of any contract which stands extinguished by virtue of prohibition notification has to face the penal consequences as embedded under the scheme of Contract Labour(Regulation & Abolition) Act, 1970. (Para 41)

Neither Section 10 nor any provision in the Contract Labour(Regulation & Abolition) Act, 1970 provides for automatic absorption of contract labour on issuance of prohibition notification by the appropriate Government under Section 10(1) of the Contract Labour(Regulation & Abolition) Act, 1970 (Para 44)

Copy of judgement: Judgement_05th-Jul-2019

-Tushar Kaushik

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