Sham contract labour arrangements can be pierced where perennial work and control show a direct employment relationship.

A contract labour arrangement may be treated as a sham where the real working relationship shows perennial work under the principal establishment's effective control, so the contractual form can be disregarded and direct employment inferred. The discussion applies the doctrine of lifting the veil and treats the Contract Labour (Regulation and Abolition) Act, 1970 as a beneficial statute aimed at preventing exploitation and advancing social justice. It also notes that factual findings on the true nature of the relationship, once affirmed on review, are ordinarily not disturbed in writ jurisdiction absent perversity or apparent error. On that footing, the workmen were treated as employees in substance and reinstatement with continuity of service was maintained.

---

---

Issues: Whether the contract labour arrangement was a genuine contract system or a mere camouflage, and whether the workmen were entitled to reinstatement with continuity of service.

Analysis: The decision turned on the real nature of the working arrangement rather than its form. The Court applied the doctrine of lifting the veil and examined the surrounding facts, including the nature and continuity of the work, the Board's supervision and control, and the absence of material showing that the contractor was genuinely independent or duly licensed. The Contract Labour (Regulation and Abolition) Act, 1970 was treated as a beneficial statute meant to prevent exploitation and to promote social justice. The Court held that where contract labour is used for perennial work under effective control of the principal establishment, the arrangement may be treated as a sham and the true employer-employee relationship may be inferred. The Court also held that the Labour Court's findings of fact, having been affirmed by the High Court, were not liable to be disturbed in writ jurisdiction absent perversity or an apparent error.

Conclusion: The workmen were held to be the employees of the Board in substance, and the award of reinstatement with continuity of service was upheld.

Final Conclusion: The appeals failed, and the relief granted to the workmen by the Labour Court and affirmed by the High Court was maintained.

Ratio Decidendi: In determining liability under contract labour arrangements, the Court may pierce the contractual form and, where the arrangement is a sham and the work is perennial under the principal establishment's control, treat the workmen as direct employees; such factual findings are ordinarily not interfered with in writ jurisdiction unless perverse.

---