Who Needs CLRA Registration: NGO 'A' or Construction Company 'B'? Seeking Legal Advice

Hello learned legal experts,

I need your magic of legal advice in the matter given below:

NGO and Construction Contract Issue

'A' is an NGO working for corporate and PSU for their CSR activities. Recently, A got a contract from the government to build a school, and A has awarded the contract to company 'B', which specializes in construction. Here, the government is just funding the NGO 'A', and subsequently, A is giving money to company 'B' to carry out construction work to build a school. Company B is engaging daily laborers whose work is not regular in nature, and daily workers are also not the same every day. Now, the labor authority is asking NGO A to obtain CLRA registration as a principal employer and issue Form-V to company B. In this case, kindly advise me whether NGO 'A' needs to obtain CLRA registration or if company B will apply for CLRA registration?

In this scenario, NGO 'A' would need to obtain registration under the Contract Labour (Regulation and Abolition) Act, 1970 (CLRA Act) as the principal employer. They would then issue Form V to Company 'B', the contractor. This ensures compliance with labor regulations regarding the engagement of daily labor for construction work.

Hello Dipti,

Please understand that workers engaged in construction are not the same every day. They will be changed daily based on their availability in the local market, and the number of workers will also vary depending on the availability of masons. Therefore, maintaining a muster roll is not possible.

The second point is that the NGO is asked to build the school, which is not a company.

Given that the workers are not the same every day and maintaining a muster roll might not be feasible, there are still certain obligations under the Contract Labour (Regulation and Abolition) Act, 1970 (CLRA Act) that need to be fulfilled.

Principal Employer Obligations under the CLRA Act

Since the NGO 'A' is undertaking the construction project, it would still be considered the principal employer under the CLRA Act. Even though the school being built is not a company, the construction work undertaken by the NGO falls within the purview of the CLRA Act. In such a situation, while the requirement to maintain a muster roll might not be applicable due to the nature of the work, NGO 'A' is still responsible for ensuring compliance with other provisions of the CLRA Act, such as obtaining registration and issuing necessary forms to the contractor (Company 'B').

It is true that a school is not an industry. It is also true that the NGO is not building a school, but only a building. That building will become a school only when the academic sessions start or when the building acquires an academic status. Until the school gets the required accreditations from the education departments or others concerned, it will remain as a building. If the school management fails to get the accreditations, they cannot run a school in that building. Then the building may be used for any other purposes. At that point in time, is it possible for the law enforcement officials to ask the contractor to comply with the legal requirements? No. If they allow constructions for a school building without compliance relating to labor law, then almost all constructions would be for schools only, and after completion, the owner of the 'school' will never go for permission to run a school, leading to making the building available for office or trading purposes.

NGO's Role and Legal Compliance

NGO is expected to do some charitable activities and not construction activities. Moreover, profitability is not at all a test for deciding whether an undertaking is an 'industry' or not. In Bangalore Water-Supply & Sewerage Vs R. Rajappa & Others (1978 AIR 548, 1978 SCR (3) 207), the Supreme Court of India has said that the absence of a profit motive is irrelevant to decide whether an undertaking is an industry or not. Company A may not gain anything from its business of construction (though practically impossible!) but is carrying out some activity which is:

- Systematic in nature,
- Organized by cooperation between employer and employee, and
- For the production and/or distribution of goods and services calculated to satisfy human wants and wishes.

Certainly, if Company A is engaging Company B as their contractor for getting the work done, they should obtain RC under the CLRA and issue Form V to the contractor, Company B, to get a license to engage 20 or more than 20 workers.

Labor Compliance and Worker Engagement

It is immaterial whether you engage permanent workers or workers for a single day. What is relevant is if you employ a worker even for a single day, you should give wages, statutory welfare contributions like ESI or EPF. You cannot say that each day you have different faces. If your license (under CLRA) is for, say 50 workers, you will be having only 50 workers on a day, what is preventing you from registering them under ESI or PF every day? If you find it difficult, you should engage one set of people regularly so that some administrative work can be reduced. You cannot blame the law for your inability to follow it. If X is engaged today and in his place, Y is engaged another day, yes, you should have both under your ESI and PF as insured or members, and it will not add cost to you because you are paying wages and contributions equal to their physical working days, and in no case, it would exceed the number as agreed and evidenced by the RC.

Hi Sidhu Bhai, In this scenario, NGO 'A' would typically be considered the principal employer under the Contract Labour (Regulation and Abolition) Act (CLRA), as they have contracted Company 'B' to carry out construction work. As the principal employer, NGO 'A' would be responsible for ensuring compliance with the CLRA Act.

Here are some key points to consider:

Principal Employer Responsibility
The principal employer is responsible for ensuring compliance with various labour laws, including the CLRA Act, at the workplace. This includes obtaining registration under the CLRA Act, maintaining records, and issuing necessary forms.

CLRA Registration
Since NGO 'A' is the principal employer in this case, they would typically need to obtain registration under the CLRA Act. This registration is required if the establishment or contractor engages a certain number of contract labourers.

Form V Issuance
As the principal employer, NGO 'A' would also be responsible for issuing Form V to Company 'B'. Form V is a certificate of registration that indicates compliance with the CLRA Act.

Company 'B' Compliance
While Company 'B' is engaged in construction work and hiring daily labourers, they are considered a contractor under the CLRA Act. However, as the principal employer, NGO 'A' holds the primary responsibility for compliance.

Contractual Obligations
NGO 'A' should ensure that their contract with Company 'B' includes clauses requiring compliance with all relevant labor laws, including the CLRA Act.

Consultation with Legal Experts
It's advisable for NGO 'A' to consult legal experts or labor law professionals to ensure compliance with all applicable regulations and to handle any queries or notices from labor authorities effectively.

In summary, NGO 'A' would typically need to obtain CLRA registration as the principal employer and fulfill related compliance requirements, including issuing Form V to Company 'B'. However, consulting with legal experts familiar with labor laws in the relevant jurisdiction would provide specific guidance tailored to the situation. Thanks

The establishment wants to engage a contractor or award work on a contractual basis to be done by the workmen. The engagement of manpower exceeding 20 individuals requires registration under the CL(R&A) Act. Once registered under the CL(R&A) Act, the establishment can then engage contractors.

Please go through this act; you'll have answers to all your doubts.

The Buildings and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996