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Madras High Court· 11 September 2026

Are workmen employees of the contractor alone where the labour contract under the Contract Labour (Regulation and Abolition) Act, 1970 is genuine and neither sham nor nominal?

Management of Tractor and Fa v. M.Saravanan
WA(MD).2864/2025 · 2026:MHC:3761 · W.A.(MD)No.2864 of 2025
Coram: Justice C.V.Karthikeyan · Justice R.Sakthivel
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Answer

Workmen are employees of the contractor alone where the labour contract is genuine and neither sham nor nominal.

Yes. Workmen are employees of the contractor alone where the labour contract is genuine and neither sham nor nominal. Both the management and the contractors were registered under the Contract Labour Act and no prohibition notification had been issued under Section 10(1), so the regularisation principle in Steel Authority of India did not apply. Once the Labour Court and the Single Judge had concurrently found the contract genuine, the only conclusion was that the workmen were employees of the contractor, and the writ court would not sit in review over concurrent findings of fact.

Headnote

Contract Labour (Regulation and Abolition) Act, 1970 — S.10(1) — Industrial Disputes Act, 1947 — S.2-A — Contract labour — Employer-employee relationship with the principal employer — Genuine labour contract — Burden of proof — Adverse inference — Relief not sought — Permanent status — Contract labour — Genuine contract — Principal employer — Held: Where both the principal employer and the contractor are registered under the Contract Labour Act, no prohibition notification under s.10(1) has issued and the labour contract is genuine and neither sham nor nominal, the workmen are employees of the contractor and of none other. Kirloskar Brothers Ltd. v. Ramcharan, followed; SAIL v. National Union Waterfront Workers, distinguished. (¶50, 62, 75, 82) Industrial law — Burden of proof — Adverse inference — Held further: The burden of proving an employer-employee relationship lies on the person who sets up that plea. An adverse inference under s.114(g) of the Evidence Act for non-production cannot be drawn where no finding is rendered that the documents are required and no notice to produce under Or.XII r.8 CPC was issued. Workmen of Nilgiri Coop. Marketing Society, followed. (¶65, 66, 73, 76, 77) Writ jurisdiction — Relief never sought — Held further: The learned Single Judge could not declare the workmen permanent or fasten joint compensation on the principal employer on a relief never sought before the Labour Court. Management's appeals allowed; workmen's appeals dismissed. (¶79, 80, 81, 83, 84)

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In the Court's own words
Paragraph 50It must however be pointed out that a notification under Section 10(1) of the Tamil Nadu Industrial Establishment (Conferment of Permanent Status to Workmen) Act, 1981 can only be issued only by the Government and it is an admitted fact that no such notification had been issued and this that had also been confirmed by the learned Single Judge. We would therefore immediately state that this judgment is not applicable to the facts of this case.
Paragraph 62The examination of the issue whether the workmen were direct employees of TAFE or had been engaged by the contractor would involve first determining whether TAFE and the contractors were registered under the Contract Labour (Regulation and Abolition) Act, 1970 and whether the agreement between the two of them were genuine or sham and nominal. A finding had been rendered by both the Labour Court and by the learned Single Judge that this contract between TAFE and the contractors were genuine and not sham and nominal.
Paragraph 75It had also been held by the Hon'ble Supreme Court in (2023) 1 SCC 463 (Balwant Rai Saluja and another), referred supra, that once it had been found that the contract between the management and the contractor was not found to be sham and nominal, then the only conclusion which should be reached was that the workmen were employees of the contractor and of none other.
Paragraph 78We hold that in these Writ Appeals, we should not sit in judicial review over concurrent findings of fact by both the Labour Court and by the learned Single Judge.
Paragraph 82We hold that no grounds have been made to establish that the workman had been employed directly by TAFE. We hold that the workmen had been employed by the contractor and by none else and particularly, not by TAFE. We uphold the consistent finding of the Labour Court and of the learned Single Judge that the contract between TAFE and the contractor was genuine and neither sham nor nominal. We hold that there was never employer-employee relationship between TAFE and the workmen. We therefore dismiss the Writ Appeals filed by the Workmen.
Acts & Sections
Section 10(1) Contract Labour (Regulation and Abolition) Act, 1970Section 114(g) Indian Evidence Act, 1872Order XII Rule 8 Code of Civil Procedure, 1908

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Also decided in this judgment
Does the burden of proving an employer-employee relationship lie on the person who sets up that plea?Can an adverse inference under Section 114(g) of the Indian Evidence Act, 1872 be drawn where no finding is rendered that the documents are required?Can a relief of permanent status never sought by the workmen before the Labour Court be granted by the Writ Court?
Plain-language answer prepared by the LexStreak Editorial Desk — verify against the judgment. Source: Madras High Court. Corrections