The idea behind penalized Principle Employer is the end result, after all the workers working through contractors are working in connection or work incidently to principle employer and on the premises of Principle employer and for be benefit of principle only.
Who is getting the end result i.e principle employer, every one know contractor is only a intermidiatary for adminstration purpose.
Contractual/Causual/Out sourced etc etc is only the classification of worker/employee recognized under law, but ultimately work is being done for principle employer.
would like to draw attention toward definition of "Employee". in PF Act as “employee” means any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of 7[an establishment], and who gets, his wages directly or indirectly from the employer, 8[and includes any person,—
(i) employed by or through a contractor in or in connection with the work of the establishment;
In ESI Act -(9) “employee” means any person employed for wages in or in connection with the work of a factory or establishment to which this Act applies and—
(i) who is directly employed by the principal employer, on any work of, or incidental or preliminary to or connected with the work of, the factory or establishment, whether such work is done by the employee in the factory or establishment or elsewhere; or
(ii) who is employed by or through an immediate employer, on the premises of the factory or establishment or under the supervision of the principal employer or his agent on work which is ordinarily part of the work of the factory or establishment or which is preliminary to the work carried on in or incidental to the purpose of the factory or establishment;
Above definitions clearly speaks that any person who is wokring either through the contractor or directely in connection with the work of establishment/factory shall be employee for the purpose of both legislation.
And for contribution/compliance of provision has to be done by the Principle Employer or ensure that the compliance being done.
These legilation being social security the liability is fastened on Principle Employer to provide all benefit envisaged under the Acts because Principle Employer is the real beneficiary of work done by the employee of contractors also.