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Reference of gist :

Contract Labour Act

Section 2, "Principal Employer" means- (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 (63 of
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, (iv) in any other
establishment, any person responsible for the supervision and
control of the establishment.

Section 21. Responsibility for payment of wages.-(1) A

contractor shall be responsible for payment of wages to each
worker employed by him as contract labour and such wages
shall be paid before the expiry of such period as may be
(2) Every principal employer shall nominate a
representative duly authorised by him to be present at the time
of disbursement of wages by the contractor and it shall be the
duty of such representative to certify the amounts paid as
wages in such manner as may be prescribed.
(3) It shall be the duty of the contractor to ensure the
disbursement of wages in the presence of the authorised
representative of the principal employer.
(4) In case the contractor fails to make payment of wages
within the prescribed period or makes short payment, then the
principal employer shall be liable to make payment of wages in
full or the unpaid balance due, as the case may be, to the
contract labour employed by the contractor and recover the
amount so paid from the contractor either by deduction from
any amount payable to the contractor any contract as a debt

payable by the contractor. (Own drafting - Means Liability

for payment of wages is of contractor but if the
contractor doesnt make payment then principal
employer needs to make payment and get the same
recovered from contractor)
Wages is defined in Contract Labour(Regulation and
Abolition) Act as "wages" shall have the meaning assigned to it
in clause (vi) of Section 2 of the Payment of Wages Act, 1936 (4
of 1936);
Section2( 21) Payment of bonus act includes wages as
"salary or wage" means all remuneration (other than
remuneration in respect of overtime work) capable of being
expressed in terms of money, which would, if the terms of
employment, express or implied, were fulfilled, be payable to
an employee in respect of his employment or of work done in
such employment and includes dearness allowance (that is to
say, all cash payments, by whatever name called, paid to an
employee on account of a rise in the cost of living), but does
not include

any other allowance which the employee is for the time

being entitled to;
(ii) the value of any house accommodation or of supply of
light, water, medical attendance or other amenity or of
any service or of any concessional supply of foodgrains or
other articles;
(iii) any travelling concession;
(iv) any
bonus (including
attendance bonus); (for payment of bonus act link is

any contribution paid or payable by the employer to any

pension fund or provident fund or for the benefit of the
employee under any law for the time being in force; (vi)
any retrenchment compensation or any gratuity or other
retirement benefit payable to the employee or any ex
gratia payment made to him; (vii) any commission
payable to the employee. Explanation.--Where an
employee is given in lieu of the whole or part of the salary

or wage payable to him, free food allowance or free food

by his employer, such food allowance or the value of such
food shall, for the purpose of this clause, be deemed to
form part of the salary or wage of such employee;

The principles to be deduced from the above provisions of law

1) The principal employer is not liable to pay bonus under the
Payment of Bonus Act to the workers engaged through a
contractor, whether the contractor makes a default in the
payment of bonus or not.
2) If the terms of engagement of the workers by the
contractor(that is the appointment orders issued by the
contractor to his workers)stipulates that the contractor should
pay his employees bonus, then the principal employer becomes
liable to pay the bonus if there is default by the contractor.
3)If the bonus is payable to the workers of the contractor as a
result of an award or a settlement or orders of court, then the
principal employer is liable to pay bonus to the workers of the
contractor in case the contractor commits default in the
Of course in the case of items 2 and 3 the principal employer
can recover the payments made by him from the contractor.
With regards

So gist is principal employer is not liable for bonus unless

agreement specifies and even then liable for payment of bonus
will be recoverd from contactor so surplus will be of contactor
will be seen rather that co

Even, the SC upheld that the bonus should be paid on

contractor's profitability and allowcable surplus available with
the contractor's firm and not on par with the principal

S. 21 -Payment of wages including overtime wages etc. must

be made directly to the workers in full except with authorised
statutory deductions, if any. Payment through khatedars after
deducting any advance repayable by the workers to the
khatedars or any messing charges etc. was not proper. Due
amounts could be recovered from the workers after paying full
Labourers Working on Salal Hydro Project v.State of J. &.
K., (1983) 2 SCC 181: 1981 SCC (L & S) 289.