HSVP Not Liable for Wages of Outsourced Staff Post-Agency Contract Expiry; Can Recover Payments: Punjab & Haryana HC (LPA 3135/2024) - 2025-05-26

HSVP Not Liable for Wages of Outsourced Staff After Agency's Contract Ends, Rules Punjab & Haryana High Court

Chandigarh : In a significant ruling on the liabilities of principal employers towards outsourced staff, the Punjab and Haryana High Court has held that the Haryana Shehri Vikas Pradhikaran (HSVP) is not responsible for paying wages to workers who continued their services after the contract with their outsourcing agency had expired and without any direct engagement order from HSVP. The Court further clarified that HSVP is entitled to recover any such payments made to the workers during this unauthorized period.

The decision was delivered by a Division Bench comprising Justice Sanjeev Prakash Sharma and Justice Sudesh Bansal on May 7, 2024, while partly allowing a Letters Patent Appeal (LPA No. 3135 of 2024) filed by HSVP against an order of a Single Judge dated November 8, 2021.

Background of the Dispute

The case originated from a writ petition (CWP No. 5678 of 2019) filed by Sonu Ram and others (respondents/writ-petitioners), who were engaged with HSVP through an outsourcing agency. The core issue arose when the contract of the outsourcing agency was not renewed or extended by HSVP after January 1, 2020. Despite this, the writ-petitioners continued to work, particularly during the COVID-19 pandemic.

Later, when HSVP issued a letter stating their work was illegal, the petitioners approached the High Court seeking payment of wages for the intervening period. The Single Judge, in an order dated November 8, 2021, had recorded a statement from HSVP's counsel indicating that wages for the period March 1, 2020, to March 30, 2022, had been released to the petitioners. This statement became a point of contention.

Arguments Presented

HSVP (Appellants) , represented by Advocate Mr. Pardeep Singh Chauhan, argued that: * The statement made by their previous counsel before the Single Judge regarding the release of wages was incorrect and not based on official instructions. * HSVP had, in fact, filed a written statement explicitly denying liability as the outsourcing agency's contract had not been renewed for the employment of the petitioners beyond January 1, 2020. * An application to clarify this stance was dismissed by the Single Judge on December 2, 2023. * HSVP contended that if any payment was due, the liability rested solely with the concerned outsourcing agency, not HSVP, as the workers' continuation was unauthorized.

Sonu Ram and Ors (Respondents/Writ-Petitioners) , represented by Advocate Mr. Pawan Kumar Garg, submitted that: * They were appointed through an outsourcing agency, and after its contract was not renewed post-January 1, 2020 (due to COVID-19, no new agency was engaged), they continued their employment with HSVP. * The Single Judge had directed that payment be ensured, and subsequently, wages were released following contempt proceedings initiated by the petitioners.

High Court's Reasoning and Findings

The Division Bench meticulously examined the submissions and records. The Court noted: > "It is apparent that so far as the writ-petitioners are concerned, they were appointed through outsourcing agency and the outsourcing agency was not given the contract after 01.01.2020. In these circumstances, the continuous of the writ-petitioners in the Department is of course without any orders of any officer and therefore, so far as the Department is concerned, it cannot be held liable to make payment to them."

The Bench emphasized that any claim for wages by the petitioners could only be directed towards the outsourcing agency that had engaged them. While acknowledging the Single Judge's directions concerning the outsourcing agency's liability (referred to as directions in Para 3 of the Single Judge's order), the Division Bench firmly stated: > "...the Department [HSVP] itself, cannot be forced to make the payments."

Crucially, the Court addressed the payments made during the contempt proceedings: > "The payments, if any made in the interregnum of contempt, cannot create any right in favour of the writ-petitioners and the Department has right to recover the same from the concerned outsourcing agency or from the writ-petitioners as the case may be."

The Court found merit in HSVP's argument that the counsel's statement recorded by the Single Judge was contrary to HSVP's official written stance, which specifically mentioned that the contract with the outsourcing agency for the petitioners' employment had not been extended.

Final Decision and Implications

The High Court partly allowed HSVP's appeal, ordering the deletion of the contested statement (Para 2) from the Single Judge's order dated November 8, 2021.

The key takeaways from the judgment are:

1. A principal employer (like HSVP) is not liable for wages of outsourced workers if they continue to work without authorization after the contract with their outsourcing agency has ended.

2. The primary liability for wages in such scenarios rests with the outsourcing agency.

3. Any payments made by the principal employer under misrepresentation or interim court orders during contempt proceedings for such unauthorized periods do not create a right for the workers and can be recovered by the principal employer from either the outsourcing agency or the workers themselves.

This judgment provides important clarity on the demarcation of responsibilities between principal employers and outsourcing agencies, particularly in situations where workers continue service beyond contractual terms without explicit re-engagement by the principal employer. All pending miscellaneous applications were also disposed of.