Section 02 · Licences
Contract labour, and the two obligations employers persistently conflate
Under the Contract Labour (Regulation and Abolition) Act, 1970 the principal employer registers and the contractor licences. Both obligations exist simultaneously; neither discharges the other. An employer holding a copy of the agency's licence and nothing else is unregistered, and the licence in his file is not a defence.
The structure of the Act, briefly
The Act applies to every establishment in which twenty or more workmen are employed, or were employed on any day of the preceding twelve months, as contract labour, and to every contractor who employs or employed twenty or more workmen on any such day. Several state governments have varied the threshold by notification, and the applicable figure should be checked against the state in question rather than assumed from Delhi.
Section 7 requires the principal employer to obtain a certificate of registration. Section 12 requires the contractor to obtain a licence. Section 21 places the obligation to ensure payment of wages on the contractor, with recovery from the principal employer where the contractor fails. Sections 16 to 19 impose welfare obligations — canteen, restrooms, drinking water, latrines and first aid — which likewise fall back on the principal employer on the contractor's default.
The practical consequence, put plainly, is that the principal employer cannot contract out of exposure. He can only ensure that the contractor is licensed, that wages are paid on time and at the correct notified rate, and that there is a record of his having verified both.
- Form I — Application for registrationCLRA, 1970, s. 7; CLRA Central Rules, 1971, r. 17
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Filed by the principal employer with the Registering Officer having jurisdiction. It states the establishment particulars, the nature of the work to be done through contract labour, the name and address of each contractor, and the maximum number of workmen to be engaged on any day through each. The registration fee scales with the number of workmen.
The certificate that issues lists the contractors named in it. Engaging a new contractor not so listed requires an amendment. A registration bearing the name of a housekeeping agency terminated three years ago is, in substance, no registration for the agency presently on site.
- Form IV — Application for licenceCLRA, 1970, s. 12; Central Rules, r. 21
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Filed by the contractor, accompanied by the Form V certificate from the principal employer, security deposit and fee. The licence is granted in Form VI, is specific to the establishment and the work, and states the maximum number of workmen the contractor may engage.
Where the contractor engages more workmen than the licence permits, both the excess engagement and the resulting register discrepancy are actionable. We advise principal employers to compare the licensed number against the gate register periodically rather than at renewal.
- Form V — Certificate by the principal employerCentral Rules, r. 21(2)
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The short certificate confirming that the applicant has been engaged as a contractor in relation to the establishment, and undertaking the principal employer's own obligations under the Act. Without it the licence application is incomplete.
It is issued establishment-wise and work-wise. A single Form V cannot be recycled across a client's four sites, and a contractor asking for one to be issued for work not yet awarded should be declined.
- Form XIII — Register of workmen employed by contractorCentral Rules, r. 75
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Maintained by the contractor, listing each workman with father's name, age, date of joining, nature of employment and the local address. It is the first register an Inspector will ask for, and the register against which the muster roll and wage register are tested for consistency.
- Forms XVI and XVII — Muster roll and wage registerCentral Rules, rr. 78 and 79
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Attendance and wages respectively. Discrepancies between them — a workman shown present on the muster roll but absent from the wage register, or paid at a rate below the notified minimum for his category and skill classification — account for a substantial share of the show-cause notices we see.
- Form XXV — Annual return of the principal employerCentral Rules, r. 82(2)
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Filed for the year ending 31 December, ordinarily by 15 February following, with the Registering Officer. The contractor files a half-yearly return in Form XXIV. Late filing is a common and entirely avoidable default; the return is short and the data is already in the registers.
Who this applies to
- Employers engaging housekeeping, security, facility management, catering, pantry, logistics or technical manpower through an agency
- Employers whose contract headcount has crossed twenty on any single day in the preceding twelve months, including seasonal or project peaks
- Contractors and manpower agencies applying for or renewing a licence in respect of a Delhi establishment
- Occupiers of factories in the NCT of Delhi requiring licence grant, renewal or amendment under the Factories Act, 1948
On peak-day counting
The threshold is tested against any day in the preceding twelve months, not against an average or a month-end figure. A retail establishment that engaged forty temporary workers for a festive fortnight in October has crossed the threshold for the whole year that follows, even if the ordinary strength is six.
Renewals, amendments and lapse
A contractor's licence is granted for a defined period and must be renewed before expiry; application is ordinarily made not less than thirty days before the licence ceases to have effect, and late application attracts an enhanced fee. Where a licence has actually lapsed, the position is materially worse than a late renewal, because the engagement during the lapsed period was unlicensed, and the Inspector's file will record it that way.
Amendments arise more often than employers expect. A change in the licensed number of workmen, a change in the nature of work, a change in the contractor's own address, and a change in the principal employer's authorised signatory each call for an amendment application. So does the addition of a new contractor to the principal employer's certificate of registration.
Our practice is to hold a licence-and-registration schedule for each client showing the number, the issuing office, the expiry date and the custodian by name, and to open the renewal file sixty days ahead. It is an unremarkable discipline, and it prevents most of what goes wrong.
Factories Act licensing
Where the premises constitute a factory within the meaning of Section 2(m) of the Factories Act, 1948 — ten or more workers with power, twenty or more without — the occupier requires approval of plans, registration and a licence under Section 6, read with the Delhi Factories Rules, 1950, together with the notice of occupation under Section 7.
Licence renewal is annual in Delhi practice and is applied for before the year expires. Attendant obligations follow the licence rather than sitting apart from it: the register of adult workers, the notice of periods of work, the leave-with-wages register, the health register where a hazardous process is involved, statutory testing of pressure vessels and lifting tackle, and the annual return in Form 21.
Amendment is required on a change of occupier or manager, on an increase in installed horsepower, or on an increase in the maximum number of workers stated in the licence. Establishments that expand a shop floor without amending the licence are, on the face of the record, operating outside its terms.
References: Contract Labour (Regulation and Abolition) Act, 1970 (ss. 7, 12, 16–21, 23 and 25); Contract Labour (Regulation and Abolition) Central Rules, 1971 (rr. 17, 21, 75, 78, 79 and 82); Factories Act, 1948 (ss. 2(m), 6, 7 and 92); Delhi Factories Rules, 1950. State amendments vary the thresholds and the fee schedule.
Not certain which of your contractors are actually named on your Form I certificate?
That single reconciliation — certificate against current vendor list against gate register — resolves more exposure than any other hour of work in this field.