Contract Labour Act Applicability on services of transportation on contract

Dear All, Greetings!
We have engaged one vendor – A car rental company which provides us the services of transportation to us on a KM basis. They have around 20 luxury cars driven by their drivers.
I just want to ask whether CLRA will be applicable on them or not as we have entered in to contract on a KM basis? or Labour license will be applicable on them or not?
Request you to please advise.
Regards
Ranjeet

Under this kind of arrangement the provisions of CLRA Act will not apply. This is not a contract OF Service but a Contract FOR Service. Under this, the contract is for providing transportation service in return for a fee to be paid according to the usage or kilometer run. In this arrangement, we do not fill the fuel, we do not carry out any maintenance of the vehicle nor we pay the wages of the drivers. It is just like hiring a taxi or truck. In contract FOR service the servant master relationship will not be present between the principal employer and the Contract Labour. We do not know who all are going to come with car or truck and it is not our responsibility to see that the person driving the car has a valid licence to drive it or who is the real owner of the car etc.

The situation would be different if the arrangement is like, we have a few cars and we fill fuel, maintain them but take drivers from outsider and pay the outsider an amount based on the services he has given us. Under this, the arrangement is that we take the services OF some drivers through another person who undertakes to provide us the services OF the drivers. In such an arrangement, we own vehicles, maintain them and pay taxes etc and what ever happen to the vehicles are our own responsibility. For running the vehicles we take the service of drivers either directly or through a contractor. We will also ensure that the person engaged is having valid licence to drive. This is contract OF service wherein there is a master-servant relationship and whatever we pay the drivers or the contractor, who will pay the drivers, is just salary or remuneration for the work or service rendered by the driver(s). Under this arrangement supervision by the Principal employer is also present. The driver is expected to come every day at a prescribed time and is expected to remain till a certain time etc. In the former arrangement, there is no prescribed time but are called as and when required. The rest of the time, they are free to get engaged somewhere else also.

Madhu.T.K

I hasten to add that the mode or method of the payment of consideration agreed upon between the parties to a contract can not be a factor in isolation of other ingredients constituting a contract between the Principal Employer and the Contractor so defined under the CLRA Act,1970. The basic requirement for a person to be a ' contractor' as per sec.2(1)(c) of the Act is that he must either execute his contract through "contract labour ' or supply 'contract labour'. If we revert to the definition of "contract labour" under the Act, the fact of hiring of such workmen by or through a "contractor" should be in or in connection with the work of the establishment would alone bring out the real and legal meaning intended by the CLRA Act,1970 for its purpose. In other words, if the purpose of the contract is extraneous to the work of the establishment, neither of them would be ' contract labour' or a ' contractor' respectively under the Act. If the transportation services is incidentally integral to the work of the establishment, the position would be different as in the case of running a statutory canteen through any contractor.Since the arrangement described in the post is a pure "contract for service" as observed by Mr.Madhu, I reiterate that the provisions of the CLRA Act are not applicable to it.

Dear Mr. Madhu /Mr. Umakanthan,

We have checked with the labour authorities and taken a legal view on it. As per them, CLRA will be applicable on the vendor, including the procurement of the labour license as it involves the manpower to drive the cars which is at present 38 in numbers.

We have the same drivers on a daily basis who all are plying with these vehicles for our guests. As per the section 2 (C) of the contract labour act, A contractor, in relation to an establishment, means a person who undertakes to produce a given result for the establishments, other than a mere supply of goods and articles of manufacture to such establishment, through contract labour or who supplies contract labour for any work of the establishment and includes a Sub-contractor.

Request you to please advise.

Regards

Ranjeet

There is no dispute over the definition of contractor, but what will satisfy a contractor as per CLRA is one who undertakes to produce a given result for the establishment, "other than" a mere supply of goods or articles....... You should see the words "other than" and read it as one who undertakes to produce a given result by himself or through other labours supplied by him other than mere supply of goods and services. The latter words signify that one who supplies raw materials will not become a contractor even though he also brings in something which will lead to produce a given result. Similarly, persons who render some service like transporting of raw materials and finished goods to or from the factory (transports and logistics), provision of finance to the company and making transfer of funds possible(banks), giving promotional advertising to the products (advertising) etc are also assisting the company directly. If all these are going to become contractors, then our bank managers and other officers, drivers who bring materials or take finished goods from the factory and those actors who do fantastic work in advertisement movies will also become part of CLRA. But they are not because they are providing some service and we have entered into a contract for their service.

There can be 38 or even more number of taxi drivers with whom you might have made arrangements, and these drivers may be driving the car for your guests only, but when they are paid according to the trips or per km run, it should only be considered as "purchase of a service". CLRA will attract only when you PAY WAGES for the service. The taxi fare or the purchase value is not just wages or the cost of labour of the driver but will certainly include fuel cost, depreciation, interest etc. Therefore, I strongly believe that in your case the provisions of the CLRA Act will not come.

Madhu.T.K

It is good if we refer the attached verdict by the Supreme Court of India in Hassan Coop.Milk ... vs ESI Corporation. It was observed that when we do not know who all are the employees (drivers) of the contractor (Cab service provider) and how much the latter pay the former, there cannot be any Master Servant relationship. Please find the attachment.
Madhu.T.K

Dear Madhu Sir,
Thank You so much for your clarification. Your knowledge has always guided us on a right path.
I would request you to please share your number with us so that we can ask for your guidance only in case of urgencies.
Regards
Ranjeet

Thanks for the complements and I am happy that you people get benefited by my advices.
My mobile No. is 9847583239.
Madhu.T.K

Hi Madhu,

Though you are right about its applicability on the hirer of the services from the contractor, but the question herein is its applicablity on the contractor.

It is true that the contract is for services, the relation is of independent contractor and whether or not the contractor carries the license has no bearing on the hirer of the services but to do its deligence and to ensure the contractor has and is legally compliant, we as hirer shall be requesting all such licenses applicable on the contractor and it is in that purview the question was asked and still lies, is this act applicable on such a contractor providing cab services?

Regards,
Zaid

Zaid, I have repeatedly said that in respect of cab services there is no master- servant relationship but the consideration for service is measured in terms of kilometer run and not according to wages paid to the operator. If the cab service is hired for a trip, or if your employee travels in a train or a bus, will you ask for the details of wages paid to the train or bus crew? When you transport your goods through a transporter will you ask about the wages and other contributions payable to the driver who is driving the truck? No, because there exists an agreement for doing some service and the consideration for such service is not measured on the basis of salary paid but on the basis of other parameters.

At the same time, if you have a cab or truck and you hire drivers through an agency who supply (driver) manpower and in consideration pay the agency the an amount then that amount shall be labour involved amount which will cover the wage payments to those drivers engaged by you and a margin of profits or an amount to cover the cost of administration. In such an arrangement all the cots of repairs, fueling etc will be borne by you. But in the former arrangement, you will not fuel the cab nor will you incur the cost of repairs.

I think the above details were given in my earlier post also. I am afraid, Zaid has not gone through the posts in detail.