The Contract Labour Act does not provide for the regularization of contract labour and does not create a direct relationship between the management and the contract labour.

( 1 ) THE question referred by the division bench for our consideration is:"whether the failure of the contractor through whom contract labour is engaged to obtain a licence under Section 12 of the contract labour (regulation and abolition) Act, 1970, ('the act' for short), will bring about the relationship of employer and employee between the said contract labour and the principal employer?"

( 2 ) THE appellant is engaged in the business of manufacturing iron and steel as well as the distribution and marketing of the said goods; for the purpose of its marketing activities it has stock-yards at various places. It is slated that in all these stock-yards the main activity concerned is of storage and distribution of iron and steel received from different steel plants. In the very nature of this activity, it is inevitable to have loading and unloading of these goods, which according to the appellant is an intermittent type of work. The volume of loading and unloading operations varies, depending upon the quantity of goods received and deliveries to be made. Therefore, according to the appellant it was impracticable to have a permanent labour force to carry out the said operations. In these circumstances, the appellant has been entrusting the work of carrying out the loading and unloading operations to the contractors by inviting lenders and selecting them on competitive basis. The contractor has to employ his own labour and has to supervise their working. The payments are made on the basis of tonnage handled by the contractor; the instruments necessary for carrying out the operations are to be of the contractor and the appellant was not responsible to provide them. The appellant is a government of India undertaking constituted by a legislation enacted by the parliament (act 16 of 1978 ). the appellant had a stock-yard in Bangalore at a place called byappanahally which has been shifted to a new stock-yard in channasandra. Earlier the appellant was known by the name hindusthan steel limited; however with effect from 1-5-1978 the earlier company stood merged with the appellant.

( 3 ) THE workmen through their union have been contending that, in itially there were about 40 workmen employed by the appellant through the contractors. Till 31st december, 1978 one jayarama reddi was shown as the contractor, earlier to him his father srinivasa reddi was the contractor. Before srinivasareddi was inducted as the contractor there was another person by name madhura muthu as the contractor. By 31st december, 1978 the number of workers came to be 80. However none of these workers were provided with any employment with effect from 1-1-1979 on the ground that the contract given to jayarama reddi stood terminated and these workmen were not the employees of the appellant. The workmen seriously questioned this stand of the appellant and asserted that they were the direct employees of the appellant and therefore entitled to be provided with the employment by the appellant.

( 4 ) IN the meanwhile 43 workmen who were earlier employed as contracl labour through one M/s. Shekar associates had raised a dispute which was referred by the slate government for consideration by the labour court under Section 10 of the Industrial Disputes Act. The said reference dated 2-12-1985 was as follows: ''are the management of the sail, m. g. road, Bangalore, justified in not absorbing the services and refusing work lo the following 43 workmen employed through i) shekhar associates, No. 29, grant road, Bangalore-560 001. Ii) contractor, channasandra stock-yard, doddabanasvadi post, Bangalore - 560 043; sriyuth saravanna ananthan and 42 others. If not, to what relief/s the said workmen are entitled?" the appellant contended that it was a "controlled industry" and therefore the state government was not competent to make the reference. Accordingly the appellant filed a writ petition (w. p. 5766/1987) challenging the said reference.

( 5 ) BY that time ther