The first case of Outsourcing reported in India was way back in 1967
 GHATGE & PATIL CONCERN’S EMPLOYEES’ UNION Vs. GHATGE & PATIL (TRANSPORTS) PRIVATE LTD. 22/08/1967 –Supreme Court
 GHATGE & PATIL (TRANSPORTS) carried on the business of transport and removal of goods by road. It owned a fleet of trucks and employed drivers and cleaners to run them. In 1963 the company, finding difficulty in observing the provisions of the Motor Transport Workers Act 1961, introduced a scheme whereby the trucks, instead of being run by the company itself were hired out to contractors at a fixed rate per mile.
 Employees of the company who were engaged in running the trucks resigned their jobs and most of them who had for- merely been drivers became contractors under the scheme.
 The workmen's’ Union however raised a dispute asking for the reinstatement of the ex-employees who had been given work on contract basis.
 The Tribunal held that the contract system could not be said to be an unfair labour practice, for the ex-employees were never coerced or forced to resign their jobs, and they got more benefits from the contract system than from their original contract of employment.
 In appeal to the Supreme Court the Union contended that the ex-employees of the company continued to be workmen notwithstanding that they were posed as independent contractors, that the beneficent legislation conceived in the interests of transport workers was being set at naught by the company, and that the setting up of the contract system amounted to unfair labour practice.
…… to be continued
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The concept of relationship is totally changed as ‘principal to principal’ and not that of employer-contractor.
In Group 4 Securitas Guarding Ltd. & Another vs. Employees’ Provident Fund Appellate Tribunal & Ors., 2012 LLR 22 the Delhi High Court has held that where the contractor, being employer providing services of man-power, is having control over the personnel being supplied by him to the establishments by way of issuance of appointment letters, making payment of wages and other allowances, taking disciplinary actions, effecting their placement, transfer and termination of services, the relationship between such a contractor and the establishment where the man-power is supplied by him would be of ‘principal to principal’ and not that of employer-contractor.
Yes- after the advent of the Contract Labour( Abolition & Regulation ) Act 1970.
V.Sounder Rajan
HR & Employment Law Attorney
Specializing for Recruiting and Contract Staffing Industry
M: 98401-42164
IMPORTANT POINTS IN GHATGE & PATIL (TRANSPORTS) CASE
i)  Since the drivers had resigned their  jobs    they could  not  be said to be employed in  the  Motor  Transport undertaking.  The word ‘employed’ in the definition of Motor Transport Act.   Worker  is not used in the sense of  using     the services  of a person but rather in the sense of  keeping  a person    in one’s service.  Persons who are  independent     and hire  a vehicle for their own operation paying a fixed    hire per  mile from their earnings cannot be said to     be  persons employed in the Motor Transport Undertaking in the sense  of persons     kept in service.  The operators were therefore     not Motor Transport Workers within the definition.
(ii) There was no bar in law to the introduction of the con- tract  system.     A  person must be  considered    free  to  so arrange his business that he avoids a regulatory law and its penal consequences which he has without the arrangement,  no proper means of obeying.  This, of course, he can do only so long as he does not break that or any other law.
(iii)  Those  who resigned did so voluntarily and  they     got substantial benefits under the new system. 
(iv) The Tribunal was right  in its conclusion that there was no  exploitation  of the ex-employees.  There was  thus no unfair labour practice.  The present  case     was not analogous to the case of contract labour when employment of  labour through a contractor or middleman put the  labour at  a disadvantage in collective bargaining and thus  robbed labour of an important weapon in its armoury.
..... to be contd
V.Sounder Rajan
HR & Employment Law Attorney
Specializing for Recruiting and Contract Staffing Industry
M: 98401-42164
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