Is Our Buyer a 'Contractor' Under the Contract Labour Act, 1970? Seeking Clarity

Dear Respected Seniors, We recently sold an old plant building to an external party through an auction. As per the conditions of the sale order, the buyer is obligated to dismantle the plant's metal structures, cut them into manageable pieces, load them onto trucks, and transport them away from our premises. The buyer has enlisted the services of over 150 laborers to carry out this work. In this context, could the buyer be classified as a 'contractor' as per the definition provided in Section 2(1)(c) of the Contract Labour (Regulation and Abolition) Act, 1970? And is it necessary for him to obtain a license under this Act?

Based on the activities described, the buyer in this scenario could potentially be classified as a 'contractor' under the Contract Labour (Regulation and Abolition) Act, 1970. According to Section 2(1)(c) of the Act, a contractor is defined as a person who undertakes to produce a given result for the establishment, through contract labor or who supplies contract labor for any work of the establishment. In this case, the buyer is engaging laborers to perform specific tasks related to the dismantling and removal of the plant's structures, which aligns with the definition of a contractor under the Act.

Regarding the necessity of obtaining a license under the Contract Labour Act, it is crucial to comply with the legal requirements to avoid any potential issues. As per the Act, if the buyer is indeed considered a contractor, they would likely need to obtain a license to engage contract labor for the specified work. Failure to do so could lead to legal implications and penalties. It is advisable for the buyer to review the specific provisions of the Contract Labour Act and seek legal counsel to ensure full compliance with the regulations.

Since you have surrendered your factory license and sold the property, including the building, you cannot engage any laborers or contractors. The person who has bought the property must deploy his personnel to dismantle the building, etc. In this process, you have no role, and there does not exist any Principal Employer-Contractor relationship between you and the person who bought your factory building. Since you have sold the property and the factory license is canceled, you cannot issue Form V declaring that you have engaged a contractor. However, the contractor, being an employer who hires workers for dismantling and transporting scraps, must follow relevant laws like ESI, PF, etc. If he wishes to do it with a contractor or by engaging contract workers of 20 or more, he can take registration under CLRA. In that process, you will not become a party since you have already sold the factory building and premises.

Respected Madhu T K Sir, Thanks for your comments. However, Sir, the situation is a little bit different.

Plant structure within a non-working open cast mine

The plant structure is within a non-working open cast mine. We have sold the structure by auction, but the mine is still under our control, and we have not surrendered the lease to the State Government. Will this situation make us liable to fulfill the obligation as a Principal Employer?

Role of the Occupier After License Surrender

I believe that once the license to run a factory or mining activity is surrendered, the occupier has no role in it. It is true that the land belongs to you, but the land is not being used for the purpose for which it was given to you, right? Now, if we accept that you are still the owner of the premises, how can we issue Form V to the contractor if we do not have a license to run a mine or factory? Think from that angle.