Draft clear construction laws to lay foundation of a New India

It is advisible that terms of the agreement between principal employer, contractor, sub-contractors are clearly drafted.

If published statistics are anything to go by, then there are over eight million workers engaged in construction work across the country. These workers are the most vulnerable segment of unorganised labour. The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 has been promulgated for their benefit, but lack of clarity on provisions has led to several anomalies in implementation.

Since there are a number of parties involved in the construction business, such as the owner of the premises, vendor and sub-vendor, the first uncertainty involved is who should be abiding by the provisions of the Act. The most predominant compliance is the deposition of cess under the Building and Other Construction Workers’ Welfare Cess Act, 1996. As a common practice, parties involved in construction shift the burden on each other. In the last few years, however, catena of judgments have clarified that the authorities can impose penal consequences for non-compliances on any party.

It is advisable that the terms of the agreement between  the principal employer, contractor and sub-contractors are clearly drafted. It should be patently articulated as to who would be responsible for registration, cess and other compliances. Though the authorities can impose liability on any party regardless of the agreement, this would keep clarity as well as aid in recovery through civil court, if deposition is not made by the party responsible.

Cess needs to be deposited at a defined percentage on the cost of construction and excludes cost of land as well as any compensation paid to a worker or his kin under the Workmen Compensation Act, 1923. Authorities barely relying upon the provisions insist on deposition of complete amount, inclusive of all components in the contract, while construction companies argue  about rationale of including lease cost, material, supply, profits, insurance costs, advisory, consultancy etc. In the past few years, some of the judgments have held that the amount spent on material and supply should be included, but not elements such as profit, since cess is to be levied on the cost of construction and not on the entire value of work. Considering that the cost of land is excluded, there is no justification for including lease cost. Some state governments have brought out guidelines for including components such as consultancy and advisory, but these have no backing of legal precedents. There is an urgent need to bring clarity on components to be included for cess, so that inspector raj stops harassing the companies  with colossal liabilities. While it is important to collect a substantial amount for the welfare of workers, it is equally important to appreciate the financial burden caused.

The most critical issue is to meet the intention of the provisions. Thousands of crores of cess collected by authorities remains unutilised or misutilised, while the condition of construction workers continues to be deplorable. According to the Act, the amount goes to the welfare boards created to utilise funds for benefits such as pensions, loans, insurance, medical, maternity, education, etc. Immediate steps need to be taken to ensure that the reserves  are utilised appropriately. Apart from cess, the Act also refers to providing crèches, drinking water, toilets, first aid, accommodation and safety by the employers.  The most effective way to ensure that provisions are conformed to, is by directing companies to list compliances on their websites. To achieve harmony in economy, genuine implementation of the legislations is needed.

The writer is an advocate, Supreme Court of India

raavibirbal@gmail.com

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