A Landmark Contract Labour Case Every HR Must Know: BHEL vs Maheshwar Prasad Jakhmola

• June 10, 2025

In the landmark case of Bharat Heavy Electricals Ltd. Vs Maheshwar Prasad Jakhmola (February 20, 2019), the Supreme Court overturned a favorable ruling from the Labour Court and High Court for 64 contract workmen. This Apex Court ruling is significant, as labour courts often favour workmen – yet here, that trend was decisively reversed. 

This case is essential for HR professionals managing contract labour, as it highlights the importance of clear contractor agreements, proper documentation, regular compliance audits, and solid evidence to defend against employment claims and ensure legal compliance. Below is a detailed breakdown of the case, including an examination of the legal proceedings and judgments, along with key takeaways that HR professionals can use to fortify contractor agreements, improve documentation protocols, ensure ongoing compliance, and proactively manage legal risks tied to contract labour.

 

Case Overview: Bharat Heavy Electricals Ltd. Vs Maheshwar Prasad Jakhmola

In this case, 64 contract workmen, including Mr. Maheshwar Prasad Jakhmola, approached the Labour Court for reinstatement with back wages upon the termination of their employment. 

The workmen argued that they were directly employed by BHEL and were not employed to do any contract labour-related work, as was mentioned in a notification issued under the Contract Labour (R&A) Act, 1970. They supported their claims with gate passes issued to them during their tenure. 

The Labour Court held that even if the 64 workmen were contractor employees, BHEL fell within the extended definition of “employer” under the U.P. Industrial Disputes Act, 1947. Hence, it ordered their reinstatement, though without back wages.

 

Legal Proceedings and Key Issues

BHEL, in its written statement, stated that the workmen were only engaged by the contractor and were not their employees. BHEL’s plea was dismissed by the Labour Court, and the High Court upheld that decision. However, the Supreme Court identified several legal and factual errors.

 

Errors Identified by the Supreme Court

1. Misinterpretation of the Notification: The Supreme Court pointed out that BHEL’s Haridwar operations were specifically exempted from the notification under the Contract Labour Act, yet the Labour Court had applied it incorrectly. The court had overlooked the fact that gate passes were issued for safety and security reasons, not as evidence of direct employment.
2. Failure to Establish Direct Employment Relationship: The workmen were unable to establish key indicators of a direct employer-employee relationship. Crucial evidence, such as appointment letters, wage slips, proof of wage payment by BHEL, and continuity of service, was absent. The Court noted that BHEL had not paid the workmen directly, nor had it exercised any administrative or disciplinary control over them. 
3. Overreliance on Gate Passes: The Labour Court’s decision was based solely on the gate passes, which were inadequate to prove a direct employment relationship. The pass issuance was a procedural measure, not an indicator of employment.

 

Claim by Workmen	Evidence Gap Identified
Gate passes prove direct employment by BHEL	Gate passes were issued on request of contractors for administrative/security reasons—not evidence of employment
Performance of core functions of BHEL	No evidence provided to establish work parity or that the nature of work was core to BHEL’s operations
BHEL falls under the extended definition of ‘employer’ under UP Industrial Disputes Act, 194	Misapplied provision; BHEL Haridwar unit was specifically exempted under CLRA notification
Direct employment status	No documentary evidence (appointment letters, wage slips, PF records) linking them to BHEL as employer
Control and supervision were exercised by BHEL	No evidence of BHEL having authority to appoint, discipline, or dismiss the workmen

 

Evidence Gaps in Workmen’s Claims

The court also noted that the workmen had not provided sufficient evidence to support their claims of performing work that was part of BHEL’s core business. Although it was argued that continuous employment despite contractor changes implied a direct relationship with BHEL, neither the Labour Court nor the High Court made such a finding. This argument was raised for the first time before the Supreme Court and held no weight. Apart from this, the workmen have themselves admitted that there is no appointment letter, provident fund number, or wage slip from BHEL insofar as they are concerned. 

 

Supreme Court’s Reasoning

The Supreme Court ultimately ruled that the workmen were not BHEL employees. Key points from the court’s judgment include:

• There was no direct relationship of employer and employee between BHEL and the workmen.
• The workmen were employed by the contractors, not BHEL.
• No evidence was presented to suggest that the workmen’s duties were part of BHEL’s core business or that they had the same work conditions as regular employees.

 

Key Takeaways for HR Professionals

 

Ensure Robust Documentation

• Maintain clear records for all contract labour, including contractor agreements, payment records, and role assignments.
• Gate passes or ID badges should be appropriately labeled and not used as employment evidence.

Define Roles in Contractor Agreements 

• Clearly state that contract workers are under the control and supervision of the contractor.
• Avoid assigning tasks that resemble core functions of permanent employees unless legally permitted.

Conduct Regular Compliance Audits

• Periodically audit your contract labour engagements to ensure:
  • No misclassification of employees
  • Adherence to the terms outlined in the Contract Labour Act

Prepare for Disputes with Evidentiary Support

• • Keep a clear trail of documentation:

• Payment ledgers

• Attendance maintained by the contractor

• Scope of work and contractual obligations

 

Conclusion

This case underscores the importance of precise documentation, clear contracts, and proactive management of contract labour. For HR professionals, it is critical to understand the detailed legal requirements around contractor agreements and the evidence needed to support or defend an employment relationship. By applying the lessons from this ruling, HR professionals can better safeguard their organizations from similar disputes.

Now’s the time for HR to act – conduct audits, clarify contracts, review your contractor relationships, and build a defensible compliance framework to mitigate risk.