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Case Analysis

Gammon India Ltd. v. Union of India

Submitted to:

Mr. Girish R

Submitted by:
Ikshit Mittal
Reg. No. - 13A048

Table of Contents

a. Introduction.3
b. Gammon India Ltd. v. Union of India.8
Petitioner....8
Respondents...8
Bench.8
Acts/Statutes/Rules8
Brief Background of the case.8
Issues before the Court9
Contentions of the Petitioners.9
Provisions of law in question..11
Judgement and Analysis of the Reasoning given by the Court..13
c. Conclusion.20
d. Bibliography...22

Introduction
Will of the people is expressed in a nation through governments three distinct activities.
These are the legislative, executive and judicial functions of the government. Corresponding
to these three activities are three organs of the government, namely the legislature, the

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executive and the judiciary. The legislative organ of the state makes laws, the executive
enforces them and the judiciary applies them to the specific cases arising out of the breach of
law. Each organ while performing its activities tends to interfere in the sphere of working of
another functionary because a strict demarcation of functions is not possible in their dealings
with the general public. Thus, even when acting in ambit of their own power, overlapping
functions tend to appear amongst these organs.
It is widely accepted that for a political system to be stable, the holders of power need to be
balanced off against each other. The principle of separation of powers deals with the mutual
relations among the three organs of the government, namely legislature, executive and
judiciary. This doctrine tries to bring exclusiveness in the functioning of the three organs and
hence a strict demarcation of power is the aim sought to be achieved by this principle. This
doctrine signifies the fact that one person or body of persons should not exercise all the three
powers of the government.1
But it is observed that due to several reasons such as overload on the limited Parliamentary
time, lack of expertise, to maintain confidentiality, to tackle emergency, et al, certain
legislative functions are exercised by bodies other than Legislature, which is referred to as
Delegated Legislation.
This paper analyses the Supreme Court ruling in the case of Gammon India Ltd. v. Union of
India in which validity of Contract Labour (Regulation and Abolition) Act, 1970 and Rules
thereunder was challenged on various constitutional and administrative law parameters. For
the purpose of this paper, the concept of Delegated legislation and Excessive Delegation has
been emphasized by the author.

Delegated Legislation:

1 Separation Of Powers: Its Scope And Changing Equations,


http://www.legalserviceindia.com/article/l16-Separagraphtion-Of-Powers.html
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Delegated Legislation means the exercise of legislative power by an agency which is


subordinate to the legislature. Delegated legislation is, at times, referred to as Ancillary,
Subordinate, Administrative Legislation or as Quasi-Legislation
In Halsburys Laws of England it has been said that when an instrument of a legislative
nature is made by an authority in exercise of power delegated or conferred by the legislature,
it is called subordinate legislation.
Most significant milestone with regards to adoption of delegated legislation in India is the
first Presidential reference, In Re Delhi Laws Act, 1951 2. This ruling of the Supreme Court
is considered to be the backbone of delegated legislation regime in India. It dealt with various
aspect associated with delegated legislation from defining the term to the restriction of
essential legislative function.

In words of J. Mukherjee, it is it (delegated legislation) is an expression which covers


multitude confusion. It is an excuse for the legislators, a shield for the administrators and a
provocation to the constitutional jurists3

Simply, when the functions of legislation is entrusted to organs other than the legislature by
the legislature itself, the legislation made by such organs is called delegated legislation.
In India, Rules, Regulations, Orders, Notified Orders, Notifications, Bye-laws denote
Delegated Legislation. Also, the same statute may employ or use different expressions to
denote the exercise of the subordinate law-making power by an administrative body or
agency. E.g. Orders, Notified Orders, Notification under the Essential Commodities Act,
1958.
However, Excessive Delegation of legislative powers is not permissible and Supreme Court
has time to time reiterated that there should not be excessive encroachment of executive on
2 AIR 1951 SC 332
3 Ibid.
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the legislature as that would be opposed to doctrine of separation of powers which is a part of
basic structure of our Constitution.
Excessive Delegation:
In Gwalior Rayon Co v. Asst. Commissioner of Sales Tax4, KHANNA, J., said: The rule
against excessive delegation of the legislative authority flows from and is a necessary
postulate of the sovereignty of the people. The Apex Court in Registrar Cooperative
Societies v. K. Kanjabmu5 observed: delegation unlimited may invite despotism
uninhibited. There is no abdication of legislative functions so long as the legislature has
expressed its will on a particular subject matter, indicated its policy and left the effectuation
of the policy to subordinate legislation provided the legislature has retained the control in its
hand with reference to it so that it can act as a check or a standard and prevent the mischief
by subordinate legislation when it chooses to or thinks fit.
While it is recognized that the doctrine of excessive delegation ought not to be applied in a
pedantic manner because in the modern complex world, it may be difficult for the legislature
to state policies or formulate standards very articulately and power has to be given to the
Administration in broad terms to make rules according to the needs of the situation. But still
the courts must ensure that the doctrine does not become just an incantation or an empty
formality. The statement of policies in the statutes enable the courts later to apply the doctrine
of ultra vires to delegated legislation in a more meaningful and effective manner.
In the present case analysis, the author will deal with the aspects of labour law and delegated
legislation to trace judicial reasoning while interpreting the Contract Labour (Regulation and
Abolition) Act, 1970 and Rules thereunder, which were passed by the parliament to improve
the conditions of Contract Labourers and abolition of the same, wherever possible.
Temporary nature of the job exposes these labours to varied risks of being exploited by their
hirers. Hence, it was imperative for the legislature to step in, in order to safeguard the rights
of these class of workmen and to protect their dignity as a human.

Delegated Legislation in Tax Laws


4 AIR 1974 SC 1660
5 AIR 1980 SC 350
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The extent to which delegation in tax laws is permissible has changed over time. While the
Supreme Courts position has always been that the power to tax is a legislative function and
only matters that incidentally arise in the exercise of that function can be delegated to the
executive, its own interpretation of this position has broadened to allow more substantial
functions to be exercised by the executive.
The Supreme Court stated in Rajnarain v. Chairman, Patna Administration 6 that the
power to tax is essentially a legislative function. Quoting Article 265 of the Constitution of
India, it held that the constitutional mandate is on the legislature for imposing taxes.
Subsequently, the Court held that some elements of the power to tax might devolve onto the
executive after the legislature enacts a law. However, even in that case, it mentioned that
broad powers are not and cannot be delegated to the executive. In other words the power to
delegate is for the purpose of matters of details concerning the working of the tax law in
question.
Despite advocating broad principles that seemingly suggested minimal executive powers, the
Supreme Courts interpretation of the rule that essential legislative functions may not be
delegated actually permitted substantial intervention by the executive. More specifically, the
power to exempt goods or persons, the power to bring additional transactions, commodities
or persons within the purview of a tax and the power to fix the rate of tax itself were held to
be delegable.
The Supreme Court, in Devi Das v. State of Punjab 7 held that it was permissible to confer a
reasonable area of discretion on the Government by a fiscal statute, but a large statutory
discretion by means of a wide gap between the maximum and minimum rates and thus
enabling the government to fix an arbitrary rate is not sustainable.
Just two years earlier, another five judge bench had decided in Corp. of Calcutta v. Liberty
Cinema8 that the power to fix rates and tax a certain group was allowed to be delegated. To
clarify the apparent inconsistency between Devi Das and Liberty Cinema, the Supreme Court
constituted a 7 judge bench to hear Municipal Corporate of Delhi v. Birla Spinning and
Weaving Mills Ltd.9, in which it attempted to resolve the matter. In this case, the respondents
contested the validity of section 150(1) of the Delhi Municipal Corporate Act, 1957. The
provision provided the maximum rate of tax that could be levied, and allowed the Central
Government to decide what the rate would be. The provision was upheld by a majority of 5:2
wherein Wanchoo, CJ wrote in his judgment that such provisions are perfectly valid as
essential legislative function was retained by the legislature in its own hands.

Distinction between Fees and Tax


6 AIR 1954 SC 569
7 AIR 1967 SC 1895
8 AIR 1965 SC 1107
9 AIR 1968 SC 1232
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It is imperative for the analysis of this case that distinction between fees and tax is properly
understood. Executive cant impose taxes by way delegated legislation but they have the
authority to prescribe fee for the service they provide like licensing, registration, etc.
In Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha
Swamiar of Sri Shirur Mutt10, the Supreme Court considered the question as to what are the
indicia or special characteristics that distinguish a fee from a tax proper. B.K. Mukherjea, J.
(as he then was), who spoke for the seven-Judge Bench of this Court in the case, opined that
'tax' defined as "a compulsory exaction of money by public authority for public purposes
enforceable by law and not payment 'for services rendered' " by Latham, C.J. of the High
Court of Australia in Mathews v. Chicory Marketing Board11.
Later, the learned Judge, adverting to features which distinguish 'fee' from 'tax', opined, The
'fee', according to the learned Judge, if had to be regarded as a sort of service or consideration
for services rendered, on the face of the legislative provision, it (fee) must be co-related to the
expenses incurred by Government in rendering the services.

10 AIR 1954 SC 282


11 (1938) 60 CLR 263
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Gammon India Ltd. v. Union of India12

Petitioner: Gammon India Ltd. Etc. Etc.


Respondent: Union of India and Ors. Etc.
Bench:

A. N. Ray, J. (CJI)
P. Jaganmohan Reddy, J.
S. N. Dwivedi, J.
P. K. Goswami, J.
Ranjit Singh Sarkaria, J.

Act/Statutes/Rules:

The Contract Labour (Regulation and Abolition) Act, 1970 (hereinafter referred to as

the Act)
Constitution of India
Contract Labour (Regulation and Abolition) Central Rules, 1971.

Brief Background of the case:


Rights and interests of Contract Labourers were gaining the attention of people in the 1960s.
There was immense pressure on the government to do something for the regulation of
Contract Labour regime and to improve the standards of workers deployed as contract labour
by ensuring suitable working conditions and wages, et al. Hence, to meet this objective, the
12 AIR 1974 SC 960
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Contract Labour (Regulation and Abolition) Act, 1970 was passed by the parliament and was
made applicable to all establishments wherein Contract Labours are deployed. On being hit
adversely by the provisions of the Act, petitioners who were engaged in construction business
approached the Court challenging the validity of the Act on various grounds.

Issues before the Supreme Court:


Following issues came before the court to determine and adjudicate upon:
1. Whether the petitioners come within the definition of contractors as mentioned
under section 2 (c) of the Act?
2. Whether the application of the Act to the pending contract imposes unreasonable
restrictions violating article 19 (1) (g) of the Constitution?
3. Whether the fees prescribed for registration, licences, or renewal of licences amount
to levy of a tax which are, therefore, beyond the rule-making powers of the Central
and State Government?
4. Whether the provisions (those contended by the petitioners) of Act are
unconstitutional and unreasonable?
5. Whether section 34 of the Act empowering the Central government to make any
provisions for removal of difficulty is excessive delegation thereby making it
unconstitutional?

Contentions of the Petitioners:


1. Petitioners contended that establishment means any place where any industry, trade,
business, manufacture or occupation is carried on and, therefore, the workmen
employed by the petitioners are not contract labour because they are not employed in
connection with the work of the establishment. The work of the establishment is,
according to the petitioners, not only at the place where the business, trade, industry
of the establishment is carried on but also the actual business or trade or industry of
the establishment. The entire emphasis is placed by the petitioners on the words "work
of any establishment." By way of illustration it is said that if a banking company
which is an establishment which carries on its business at Delhi employs the
petitioners to construct a building at Allahabad the building to be constructed is not
the work of the bank. It is said that the only work of the bank as an establishment is
banking work and, therefore, the work of construction is not the banking work of the
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establishment. Therefore, the petitioners contend that the workmen employed by the
petitioners are not workmen in connection with the work of the establishment and
petitioners are not contractors as defined in the Act.
2. The application of the Act to pending contracts amounts to unreasonable restrictions
on the right of contractors under article 19 (1) (g) of the constitution and is therefore,
unconstitutional.
3. The fees prescribed for registration, licenses and renewal of licenses amount to levy
of taxes which is essential legislative and cannot be delegated. Hence, such a
delegation goes beyond the rule making power of the Central and State government.
4. Following provisions were contended to be unconstitutional:
Provisions in regard to canteens, rest rooms, latrines and urinals as contemplated
by sections 16 to 18 of the Act read with Central Rules 40 to 56 and rule 25(2) (vi)
are incapable of implementation and enormously expensive as to amount to

unreasonable restrictions within the meaning of Article 19 (1) (g).


Central Rule 25 (2) (v) (b) were challenged to be unreasonable as it confers a
discretionary power on the Chief Labour Commissioner and there is no provision

of appeal regarding his decision.


Provisions in section 14 with regard to forfeiture of security are unconstitutional.
The validity of rule 24 which requires deposit of Rs. 30/- per workmen is
challenged as void under Articles 14 and 19 (1) (f) both on the ground that the
same is arbitrary and also because there is no obligation on the Government to pay
to the workmen or to utilise for the workmen any part of the security deposit so
forfeited.

5. It was also contended that section 34 of the Act which empowers the Central
Government to make any provision not inconsistent with the provisions of the Act for
removal of difficulty is unconstitutional on the ground of excessive delegation.

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Provisions of law in question:


1. Section 2 (c) which defines a "contractor" in relation to an establishment to mean a
person who undertakes to produce a given result for the establishment, other than a
mere supply of goods or articles of manufacture to such establishment, through
contract labour or who supplies contract labour for any work of the establishment and
includes a sub-contractor.
2. Section 2 (e) defines "Establishment" as (i) any office or department of the
Government or a local authority, or (ii) any place where any industry, trade, business,
manufacture or occupation is carried on.
3. Section 2 (g) defines "Principal employer" as (i) in relation to any office or
department of the Government or a local authority, the head of that office or
department or such other officer as the Government or the local authority, as the case
may be, may specify in this behalf, (ii) in a factory, the owner or occupier of the
factory and where a person has been named as the manager of the factory under the
Factories Act, 1948, the person so named, (iii) in a mine, the owner or agent of the
mine and where a person has been named as the manager of the mine, the person so
named, and (iv) in any other establishment, any person responsible for the supervision
and control of the establishment.
4. Section 2 (i) defines Workman" to mean, any person employed in or in connection
with the work of any establishment to do any skilled, semi-skilled or unskilled
manual, supervisory, technical or clerical work for hire or reward, whether the terms
of employment be express or implied.
5. Section 2 (b) of the Act states that a workman shall be deemed to be employed as
"contract labour" in or in connection with the work of an establishment, when he is
hired in or in connection with such work by or through a contractor, with or without
the knowledge of the principal employer.
6. Section 16 Canteens.(1) The appropriate Government may make rules requiring that in every
establishment-- (a) to which this Act applies, (b) wherein work requiring employment
of contract labour is likely to continue for such period as may be prescribed, and (c)
wherein contract labour numbering one hundred or more is ordinarily employed by a
contractor, one or more canteens shall be provided and maintained by the contractor
for the use of such contract labour.
(2) Without prejudice to the generality of the foregoing power, such rules may provide
for
(a) the date by which the canteens shall be provided;
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(b) the number of canteens that shall be provided, and the standards in respect of
construction, accommodation, furniture and other equipment of the canteens; and
(c) the foodstuffs which may be served therein and the charges which may be made
thereof.
7. Section 17 Rest-rooms.(1) In every place wherein contract labour is required to halt at night in connection
with the work of an establishment
(a) to which this Act applies, and
(b) in which work requiring employment of contract labour is likely to continue for
such period as may be prescribed, there shall be provided and maintained by the
contractor for the use of the contract labour such number of rest-rooms or such other
suitable alternative accommodation within such time as may be prescribed.
(2) The rest rooms or the alternative accommodation to be provided under subsection
(1) shall be sufficiently lighted and ventilated and shall be maintained in a clean and
comfortable condition.
8. Section 18 Other facilities- It shall be the duty of every contractor employing contract
labour in connection with the work of an establishment to which this Act applies, to
provide and maintain
(a) a sufficient supply of wholesome drinking water for the contract labour at
convenient places;
(b) a sufficient number of latrines and urinals of the prescribed types so situated as to
be convenient and accessible to the contract labour in the establishment; and
(c) washing facilities.
9. Rule 25 (2) (v) (a) In cases where the workmen employed by the contractor perform
the same or similar kind of work as the workmen directly employed by the principal
employer of the establishment, the wage rates, holidays, hours of work and other
conditions of service of the workmen of the contractor shall be the same as applicable
to the workman directly employed by the principal employer of the establishment on
the same or similar kind of work
Pleaded that in the case of any disagreement with regard to the type of work the same
shall be decided by the Chief Labour Commissioner (Central)
10. Rule 25 (2) (v) (b) in other cases the wage rates, holidays, hours of work and
conditions of service of the workmen of the contractor shall be such as may be
specified in this behalf by Chief Commissioner (Central).
11. Section 14 Revocation, suspension and amendment of licences.(1) If the licensing officer is satisfied, either on a reference made to him in this behalf
or otherwise, that
(a) a licence granted under section 12 has been obtained by misrepresentation or
suppression of any material fact, or
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(b) the holder of a licence has, without reasonable cause, failed to comply with the
conditions subject to which the licence has been granted or has contravened any of the
provisions of this Act or the rules made thereunder, then, without prejudice to any
other penalty to which the holder of the licence may be liable under this Act, the
licensing officer may, after giving the holder of the licence an opportunity of showing
cause, revoke or suspend the licence or forfeit the sum, if any, or any portion thereof
deposited as security for the due performance of the conditions subject to which the
licence has been granted.
(2) Subject to any rules that may be made in this behalf, the licensing officer may
vary or amend a licence granted under section 12.
12. Rule 24 of the Central Rules provides that the security amount of Rs. 30/- for each of
the workmen is to be deposited as security for the due performance of the conditions
of licence and compliance with the provisions of the Act or the rules made thereunder.
13. Section 34 Power to remove difficultiesIf any difficulty arises in giving effect to the provisions of this Act, the Central
Government may, by order published in the Official Gazette, make such provisions
not inconsistent with the provisions of this Act, as appears to it to be necessary or
expedient for removing the difficulty.

Judgement and analysis of Reasoning given by the Court:


Issue 1
The court rejected the contention of the petitioner with respect to them not been covered in
the definition of contractors as given in the Act. Petitioners gave two reasons for their
exclusion, first, the work of the petitioners is not any part of the work of the principal
employer nor is it the work "in connection with the work of the establishment", namely,
principal employer and second, the work of the petitioners is normally not done in the
premises of the "establishment" of the principal employer. While relying upon the definitions
provided in the Act the petitioner placed a great reliance on the words work of the
establishment and suggested that since the workmen employed by the petitioners are not
employed in connection with the work of establishment, they are not contract labours. The
work of the establishment is, according to the petitioners, not only at the place where the

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business, trade, industry of the establishment is carried on but also the actual business or
trade or industry of the establishment.
The contention of the petitioner was held to be unsound. The court held that when the
banking company employs the petitioners to construct a building, the petitioners are in
relation to the establishment, contractors who undertake to produce a given result for the
bank. The petitioners are also persons who undertake to produce the result through contract
labour. The petitioners may appoint sub-contractors to do the work. Hence, all the
requirements of section 2 (c) are fulfilled.
The court looked at the context and object of the words given the definition clauses of the Act
to interpret it in such a way as to include the work done on a work site away from the existing
premises of the business for the benefit of business or its expansion, as work of the
establishment. The harmonious meaning that arose out of the definitions of contractors,
workman, contract labour, establishment, principal employer all implied that the work of the
establishment includes the work site of the establishment where a building is constructed.
The work of construction was held to be the work of establishment. The expression
"employed in or in connection with the work of the establishment" does not mean that the
operation assigned to the workmen must be a part or incidental to the work performed by the
principal employer. According to the Act, the contractor is employed to produce the given
result for the benefit of the principal employer in fulfilment of the undertaking given to him.
Therefore, the employment of the contract labour, namely, the workmen by the contractor
was held to be in connection with the work of the establishment. The petitioners were
declared contractors within the meaning of the Act and their contentions were rejected.

Issue 2
With regard to second issue, the court observed that there is no unreasonableness in
application of the provisions contained in the impugned Act to pending contracts. In fact,
pendency of contract was held to be an irrelevant consideration by the court as the subject
matter of the Act is not the contract but the contract labourers. Hence, there is no question of
retrospective operation.
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Further, since the petitioners did not produce sufficient evidence to show that they will be
adversely affected by the provisions of the Act. Interest of the workmen were given the
utmost eminence and since they are remedied by the objects of Act, the court held that it
should be applied to all contract labourers with any prejudice of pendency contention. The
protection of labourers interests are minimum labour welfare and there is no
unreasonableness in its application.

Issue 3
While dealing with the third issue, the court looked into the merits of petitioners contention
and the object of the Act.
Power to impose tax is considered an essential legislative function and is recognized as
inherent power of State. Under Article 265 of the Constitution no tax can be levied or
collected save by authority of law, and here law means law enacted by the competent
legislature and not made by the executive. The Supreme Court has held in its various
judgment that though the power to levy tax is an essential legislative function and as such
cannot be delegated. However, some of it can still be delegated subject to limitation that the
essential legislative functions are performed by the legislative itself, which is to lay down the
policy and the guidelines for the imposition of taxes.
The court held that, the fees prescribed for registration, licence and renewal of licences do not
amount to a levy of tax. The Government has to bear expenses for the scheme of registration,
licence. The Government gives service in regard to licences and registration and the fees
charged for that service cannot be considered as imposition of tax.
Further it was held that there is no arbitrary power or excessive delegation of legislative
authority with regard to grant of licence. The Act and the Rules provide ample guideline as to
the grant and terms and conditions of licence. Section 15 of the Act confers a right of appeal
on any person who is aggrieved by any order refusing a licence or if there is revocation or
suspension of licence. Similarly, when there is revocation of registration of an establishment
or there is refusal to grant registration, there is a right of appeal.
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Hence, petitioners contentions with regard to this issue were also refuted by the apex court.

Issue 4
Various provisions of the Act were challenged by the petitioners on different grounds
thereunder, which were dealt by the court one by one.
Firstly, the provisions of section 16 to 18 read with Central Rules 40 to 56 were challenged
on the grounds that implementation of these provisions in impossible and impracticable.
These provisions mandates the contractor to provide reasonable working conditions to protect
the dignity of Contract Labourer. The court held that, condition of contract labour has been
engaging the attention of various committees for a long time. The benefits conferred by the
Act and the Rules are social welfare legislative measures. The various measures which are
challenged as unreasonable namely, the provisions for canteens, rest rooms, and facilities for
supply of drinking water, laterines, urinals, first aid facilities are amenities for the dignity of
human labour. The measure is in the interest of the public. There is a rational relation
between the impugned Act and the object to be achieved and the provision is not in excess of
that object. There is no violation of Article 14. The classification is not arbitrary. The
legislature has made uniform laws for all contractors.
These facilities are necessary to protect the labourer from exploitation and were held to be
reasonable.

Secondly, the provisions contained in Central Rule 25 (2) (v) (b) were challenged as
unreasonable. The contention against this Rule was that there is no provision of appeal and
the decision of Labour Commissioner is final. The court observed in this regard that it is not
difficult to determine and decide cases of this type. The Commissioner of Labour has special
knowledge. Further explaining, it was held that it will be a question from statute to statute,
from fact to fact as to whether absence of a provision for appeal makes the statute bad. The
provisions contained in Rule 25 (2) (v) (b) refer to wages, hours of work and conditions of
service in similar employment.
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Since the issue involved in these cases is simple, a long drawn procedure may, as the court
held, exceed the duration of employment of the workmen, thereby prejudicing the parties
involved. A proper standard is laid down in the explanation to Rule 25 (2) (v) (b). The
absence of a provision for appeal is not unreasonable in the context of provisions here. The
Commissioner can reasonably expected to have due regard to the wages of workmen in
similar employment. The parties are heard and the Commissioner of Labour who is
specifically acquainted with the conditions, applies the proper standards. Hence, it was held
that there is no unreasonableness in the Rules.
Thirdly, constitutional validity of section 14 was challenged by the petitioners. The court held
that section 14 of the impugned Act is constitutionally valid as it provides for forfeiture in the
case of non-compliance without any reasonable cause. Further, provision of giving an
opportunity of showing cause in contained the provisions of the section and hence there is no
arbitrary conferment of powers. Such forfeiture provision act as deterrent for compliance and
is constitutionally valid.
Finally, Rule 24 mandating deposition of Rs.30 per worker as a security was contented to be
unconstitutional as it offends article 14 and article 19 (1) (f). The court rejected this
contention citing reason that the classification is not arbitrary as it is relatable to big and
small contractors according to the number of workers employed by them. Further, the
argument that government is not under obligation to use this security for the benefit of
labourers makes it violative of the constitutional provisions is incorrect as the forfeiture of
this sum is an administrative penalty which is to ensure the compliance of the conditions
upon which the license was given. Hence, the said rule was held to be reasonable and
constitutionally valid.

Issue 5
Section 34 of the impugned Act relates to provision which is known as Henry VIII clause in
legal terminology. Henry VIII clause is basically delegation of power to remove difficulties to
the executive for smooth implementation of the Act. Section 34 empowers the Central

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Executive to make rules, which are not inconsistent to the provisions of the Act for removal
of difficulty.
Petitioner challenged Section 34 of the impugned Act as unconstitutional on ground of
excessive delegation. Reliance was placed by the petitioner on the Supreme Court ruling,
Jalan Trading Co. v Mazdoor Union13, whereby the Supreme Court was called upon to
decide the legality of such a clause. Section 37 (1) of the payment of Bonus Act 1965
empowered the central government to make such orders, not inconsistent with the purpose of
the act, is might be necessary or expedient for the removal of any doubts or difficulties.
Section 37 (2) made the order passed by the central government under sub section (1) final.
The court by a majority of 3:2 held section 37 ultra vires on the ground of excessive
delegation in as much as the government was made the sole judge of whether any difficulty
or doubt had arisen, whether it was necessary to remove such doubt or difficulties and
whether the order made was consistent with the provisions of the act. Again, the order passed
by the central government was 'final'. Thus, in substance, legislative power was delegated to
executive authority, which was not permissible.
The minority, however, took a liberal view and held that the functions to be exercised by the
central government was not legislative functions at all but were intended to advance the
purpose which the legislature had in mind. In the words of Hidayatullah, J. "Parliament has
not attempted to set up legislation. I have stated all that it wished in the subject of bonus in
the act. Apprehending, however, that in the application of the new act doubts and difficulty
might arrive and not leaving there solutions to the court with the attendant delays and
expense, parliament have chosen to give power to the central government to remove doubt
and difference by a suitable order."
It is submitted that the minority view is correct and after Jalan trading company 14, the
Supreme Court adopted the liberal approach in the present case where it held section 34 as
provision for giving effect to the Act. The refused to accept that such delegation amounts to
excessive delegation by interpreting it to be the provision for internal functioning of the

13 AIR 1967 SC 691


14 Ibid.
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administrative machinery. It was held that difficulties can only arise in implementing the
rules and hence, section 34 does not amount to excessive delegation.

Conclusion

Contract labour is a significant and growing form of employment. It exists in almost every
sphere of the employment, industries, allied operations and also prevalent in the service
sector. It generally refers to workers engaged by a contractor for other organisation. The
exploitation of contract labour in employment is one the biggest concern of the government
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as the contract labour have little bargaining power, social security and often engaged in the
hazardous industries with lesser facilities and security. To regulate this system the
government enacted the Contract Labour (Regulation & Prohibition) Act, 1970 to secure the
status of contract labourers and to abolish them from certain establishment.
In the case which is elaborately discussed and analysed in this paper, constitutional validity of
the abovementioned Contract Labour statute was challenged and the same was upheld by the
apex court.
Welfare of Public is most important job which is entrusted to the parliament and there is no
unreasonableness in setting up standards to protect dignity of the individuals. In the present
case, the provisions of the Act were a piece of welfare legislation enacted to improve the
appalling conditions of the Contract labourers. Hence, the obligations imposed by this Act
was held to be constitutionally valid and reasonable.
Doctrine of Permissible Limits under Delegated Legislation was invoked by the petitioners
with respect to prescription of fees for registration, grant of license, etc. and it was argued
that this amounts to levy of tax which is an essential legislative function which cannot be
delegated. However, since the object of such imposition of fees was to charge for the service
provided and compensate the cost incurred by the legislature in arranging the mechanisms for
registration and other such purposes, it was not held as imposition of tax and hence, was
within the permissible limits of delegated legislation. Further, with respect to grant of
licenses, detailed regulatory guidelines and policies were laid down in the Act to delegate this
power of granting license to the executive. Provision of appeal in a case where a party feels
aggrieved by any order refusing him/her the license is very strong regulatory tool to keep a
check on the executive power. Since, all these provisions were present in the Parent Act, such
delegation does not amount to excessive delegation as contended by the petitioners in this
case.
Power to remove difficulties which is also known as Henry VIII clause, with a restriction that
provisions made to remove difficulty must not be inconsistent with the provisions of the Act,
contained in section 34 of the impugned Act was held constitutionally valid and not
amounting to excessive delegation by the Court. Henry VIII clause is empowering clause in
any legislation to remove difficulties and facilitate effective implementation of the Parent
Act.

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However, in my opinion, such liberal approach towards Henry VIII clause haunts with the
possibility of misuse of power by the executive. Even according to Donoghue More
Committee, this power is a very wide power whereby the executive can change the character
or the basic intention of the legislature and thus it should be avoided.

Bibliography
Books referred

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H.W.R. Wade & C.F. Forsynth Administrative Law: ( New Delhi: Oxford University
Press, 2004)

I.P Massey, Administrative Law: (Lucknow: Eastern Book Company, 2008)

M.P Jain, Treatise on Administrative Law: (Nagpur: Wadhwa and Company, 1996)

Cases Referred

Jalan Trading Co. v Mazdoor Union, AIR 1967 SC 691

In Re Delhi Laws Act, AIR 1951 SC 332

Gwalior Rayon Co v. Asst. Commissioner of Sales Tax, AIR 1974 SC 1660

Registrar Cooperative Societies v. K. Kanjabmu, AIR 1980 SC 350


Rajnarain v. Chairman, Patna Administration, AIR 1954 SC 569
Devi Das v. State of Punjab, AIR 1967 SC 1895
Corp. of Calcutta v. Liberty Cinema, AIR 1965 SC 1107
Municipal Corporate of Delhi v. Birla Spinning and Weaving Mills Ltd., AIR 1968 SC

1232
Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha

Swamiar of Sri Shirur Mutt, AIR 1954 SC 282


Mathews v. Chicory Marketing Board, (1938) 60 CLR 263

Statutes/Rules Referred
Constitution of India
The Contract Labour (Regulation and Abolition) Act, 1970
Contract Labour (Regulation and Abolition) Central Rules, 1971.

Website Referred

http://www.manupatrafast.in/
http://indiankanoon.org
http://www.legalserviceindia.com/

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