Principal Employer May Pay Salary And Pf Contribution To The Employees Of The Contractor In Case Of Default Of Contractor

The contract labourers engaged by Kirloskar Brothers Limited through a contractor had filed a claim against the company for the absorption of their services by the company. The claim was made post-termination of their employment by the contractor. The High Court of Madhya Pradesh upheld the decision of the Industrial Tribunal directing the company to reinstate the contract labourers. Aggrieved by the decision of the High Court, the company preferred an appeal before the Supreme Court[1].

The Supreme Court observed that the engagement of contract labourers was in accordance with the Contract Labour (Regulation and Abolition) Act, 1970; and the contractor had ultimate control and supervision over the contract labourers. No benefits, uniforms or punching cards were given by the company. The Supreme Court while holding that the contract labour is not entitled to automatic absorption by the principal employer, held that merely because sometimes the payment of salary was made and PF contribution was paid by the company, which was due to non-payment of the same by the contractor, the contract labourers shall not automatically become the employees of the company.

[1] Civil Appeals Nos. 8446-8447 of 2022