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Dear All, Request your opinion. We have done an agreement with a company for providing the vehicles to us along with the drivers. So it is an agreement between my company suppose M/s. to M/s. B.

Now recently, we came to know due to a legal case that this company M/s. B have done a subcontract with other party for providing drivers to third party without our knowledge and they are placed at our premises.

1-Is their any scope in law where a contractor can also do the sub contract with the third party (When Principal employer dont have knowledge about it)?

2- Whether such contract are valid in law or they are void?

3-M/s. B is a contractor to M/s. A but when they have done a sub contract they have not obtained any license/ registration certificate under Contract labour act.

4:- What can be legal implication on Company M/s. A (Actually the principal employer)?

Please Advise.



When you entered into contract with "B" did you put in a further safety clause-no subcontracting will be permissible.
Whether a breach of contract has taken place can be determined only by reading the whole contract to see what all clauses have been mutually agreed upon.

Dear Mr. Rao.
The clause of sub contract is not there.
My question is different, I want to ask whether is it permissible in law that a contractor can do the sub contract for the principal employer with or without their knowledge?

Again the specific wordings in your contract would need to be examined. Contracts normally prohibit third party sourcing to avoid such situations.
Hello Ranjeet,
While Nathrao is addressing the legality of the situation you mentioned, HAVE you faced any problems/issues @ the ground level vis-a-vis the performance, etc of the drivers.....who now belong to the outsourcing partner of M/S B?
Does it really matter IF M/S B outsources his requirement for the Drivers AS LONG AS the work @ your Company, M/S A, gets done without any problems?
How are the Driver Accident Insurance & other angles covered in your Agreement with M/S B?

Dear Ranjeet
I also echo Mr. Sateesh in this matter.
Do you face any problem in the service of M/s B. If the answer is yes, did you call and discuss with M/s.B.
Whenever you engage any vehicle you must ensure the proper documents of the vehicle and the valid driving licence of the driver. If the women employees are available and the vehicles are being arranged for the conveyance of the women employees, then, obviously you must ask M/s B to submit the police verification report for the drivers being engaged in the hired vehicle.
As a matter of fact, what is your doubt. If you give some more details, our members will guide you to resolve your issue.

Dear Ranjeet,

If I remember correct, you have raised a separate thread about the another episode of this story and got the view points of several members including myself. The avoidance of queries in bits and pieces on the same issue would facilitate totality of understanding of people like me to offer our remarks in an effective manner. Reiterating my reply to the other thread that a contract entered into between an ultimate user and a Rental Car Service Provider with his own drivers for cars on rent can not be a contract of service attracting the applicability of the CLRA Act,1970, let me answer your present questions as below:

(1) The fulfilment of contractual obligations of either parties to the contract has to be strictly in terms and conditions of the contract only.

(2) As per Sec.2(b) of the CLRA Act, engagement of contract labour can be without the knowledge of the principal employer.

(3) As per Sec 2(c) of the CLRA Act, a sub-contractor is also a contractor. Taking up licence is a different matter depending upon the no. of workmen employed by such sub-contractor.

Dear Mr. Ranjeet,

When u have not put any clause for sub-contracting. Then M/s A can make sub-contract for hiring drivers. It is legal.

The considerable point is that the sub-contract is for hiring drivers (menpower).

If your co. is registered with PF-ESI and Leave Entitlement, pls take care the sub-contractor (M/s C) must follow all Legal and Statutory Compliances.

You can ask M/s B to produce record of Salary disbursement (should be as per Minimum Wages and made thru Bank Transfer), PF-ESI Challan (with ECR),

Bonus Payment Proof, Leave records etc.

Next time when you will renew the Agreement, pls add the below points:-


The Contractor (M/s B) shall comply with provisions of all Labour Laws, rules and regulations applicable to the employment of Associates and the services agreed to be provided pursuant to this Agreement and shall obtain all necessary registrations, licenses, approvals, sanctions from PF, ESI, Contract Labour Regulation and Abolitions Act,1970 and under other applicable laws, availing leave with wages benefit to all the employees by giving leave or by paying leave with wages, paying Bonus under bonus act. The Contractor (M/s B) shall conform in all respects with the provisions of laws, regulations, bye-laws or orders and shall keep M/s A indemnified against all fines and liabilities and liabilities of every kind for breach of such laws, regulations, bye-laws and orders as aforesaid.

You can Amend the existing Agreement also with mutual discussions.

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