Maize Products vs Regional Director on 12 April, 2018

[Cites 9, Cited by 0]

Gujarat High Court

Maize Products vs Regional Director on 12 April, 2018

Bench: Bela M. Trivedi

          C/FA/956/1991                                        JUDGMENT




            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                          R/FIRST APPEAL NO. 956 of 1991


FOR APPROVAL AND SIGNATURE:


HONOURABLE MS.JUSTICE BELA M. TRIVEDI                           Sd/-

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1     Whether Reporters of Local Papers may be allowed to
      see the judgment ?                                               YES

2     To be referred to the Reporter or not ?
                                                                       YES
3     Whether their Lordships wish to see the fair copy of the
      judgment ?                                                       YES

4     Whether this case involves a substantial question of law
      as to the interpretation of the Constitution of India or any        NO
      order made thereunder ?

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                                MAIZE PRODUCTS
                                     Versus
                               REGIONAL DIRECTOR
==========================================================
Appearance:
MR DEEPAK V PATEL(606) for the PETITIONER(s) No. 1
MR HEMANT S SHAH(756) for the RESPONDENT(s) No. 1
==========================================================

    CORAM: HONOURABLE MS.JUSTICE BELA M. TRIVEDI

                                 Date : 12/04/2018

                                ORAL JUDGMENT

1. The present appeal is filed by the appellant (original applicant) under Section 82 of the Employees' State Insurance Act, 1948 (hereinafter referred to as "the said Act"), challenging the order dated 9.7.1991 passed by Page 1 of 9 C/FA/956/1991 JUDGMENT the E.S.I. Court, Ahmedabad in Application (ESI) No.28/1984, whereby the E.S.I. Court has dismissed the said application filed by the appellant under Section 75 read with Section 77 of the said Act.

2. The short facts giving rise to the present appeal are that the appellant is an industrial establishment manufacturing starch and its bi- products. The appellant had given a contract to an independent contractor for the construction of additional buildings for Anhydrens Department, Boiler Building, etc. The work contract comprised of material to be used in the construction of the buildings, labour and services. The contractor on his own employed certain workers for the said purpose. The work of the construction was being supervised by and the wages were paid by the contractor only for the said work.

3. The Deputy Regional Director, however, issued a communication dated 24.12.1983 calling upon the appellant to pay ESI dues of Rs.63,358/-, after bifurcating the amount in two heads i.e. "Cost of material" and "Labour charges", and pay ESI dues on the labour charges on the ground that the construction of new buildings within the factory premises of the appellant was covered under Section 2(22) of the ESI Act. It appears that thereafter the notice dated 23.2.1984 was issued on behalf of the Regional Director of ESI Page 2 of 9 C/FA/956/1991 JUDGMENT calling upon the appellant to show cause as to why the amount of Rs.1,42,753 should not be recovered from the appellant. The appellant, therefore, raised the dispute under Section 75 of the said Act before the E.S.I. Court to the effect that the employees of the contract could not be treated as the employees of the appellant and that the appellant was not liable to pay any contribution under the said Act. The said application was registered as Application (ESI) No.28 of 1984, which has been rejected by the E.S.I. Court vide the impugned order. The respondent also called upon the appellant to pay the said amount of Rs.1,42,753/- plus interest amount of Rs.30,954/- and surcharge of Rs.8,685/- vide the communication dated 22.8.1991. By the said communication the appellant was also called upon to pay further interest at the rate of 6%/12% up to the date of payment and damage at the rate of 100%.

4. It is sought to be submitted by the learned Advocate for the appellant that the notice issued by the respondent calling upon the appellant to pay the contribution was arbitrary as the provisions of the said Act did not apply to the appellant, the appellant being not the principal employer within the definition of Section 270 of the said Act, nor the persons employed by the contractor were the employees of the appellant within the definition of Section 2(9) of the said Act. According to Mr.Patel, Page 3 of 9 C/FA/956/1991 JUDGMENT the contribution could be levied on the basis defined under the Act, and the respondent Authority could not take up any other basis as per their own choice for the purpose of ascertaining the wages.

5. However, the learned Advocate Mr.Shah for the respondent Corporation placing reliance on the decision of the Supreme Court in case of Regional Director, Employees State Insurance Corporation, Madras Vs. South India Flour Mills Pvt. Ltd., reported in (1986) 3 SCC 238 submitted that if the work in question was incidental or preliminary to or connected with the work of factory or establishment, the workers working at the premises would fall within the definition of Section 2(9) of the said Act. Mr.Shah has also placed reliance on the revenue manual of ESI for Inspector and submitted that where the employer has difficulty in segregating the wage element out of the total expenditure, the contribution could be determined at 25% of the total amount as an exceptional case and one-time measure.

6. In order to appreciate the rival contentions raised by the learned Advocates for the parties, it would be beneficial to refer to some of the definitions contained in the said Act. Section 2(4) defines "contribution" as under:-

"(4) "contribution" means the sum of money payable to the Corporation by the principal Page 4 of 9 C/FA/956/1991 JUDGMENT employer in respect of an employee and includes any amount payable by or on behalf of the employee in accordance with the provisions of this Act;"

7. Section 2(9) defines "employee" the relevant part thereof as under:-

(9) "employee" means any person employed for wages in or in connection with the work of a factory or establishment to which this Act applies and

(i) who is directly employed by the principal employer on any work of, or incidental or preliminary to of connected with the work of, the factory or establishment whether such work is done by the employee in the factory or establishment or elsewhere; or

(ii) who is employed by or through an immediate employer on the premises of the factory or establishment or under the supervision of the principal employer or his agent on work which is ordinarily part of the work of the factory or establishment or which is preliminary to the work carried on in or incidental to the purpose of the factory or establishment; or

(iii) xxx"

8. Section 2(17) defines "principal employer" as under:-

(17) "principal employer " means --

(i) in a factory, the owner or occupier of the factory and includes the managing agent of such owner or occupier, the legal representative of a deceased owner or occupier, and where a person has been named as the manager of the factory under 3[the Page 5 of 9 C/FA/956/1991 JUDGMENT Factories Act, 1948] (63 of 1948), the person so named ;

(ii) in any establishment under the control of any department of any Government in India, the authority appointed by such Government in this behalf or where no authority is so appointed, the head of the department ;

(iii) in any other establishment, any person responsible for the supervision and control of the establishment;

9. Section 2(22) defines "wages" as under:-

"(22) "wages" means all remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled and includes 1[any payment to an employee in respect of any period of authorised leave, lockout, strike which is not illegal or layoff and] other additional remuneration, if any, 2[paid at intervals not exceeding two months], but does not include --

(a) any contribution paid by the employer to any pension fund or provident fund, or under this Act ;

(b) any travelling allowance or the value of any travelling concession ;

(c) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment ;

(d) any gratuity payable on discharge;"

10. Having regard to the submissions made by the learned Advocate for the parties and to the documents on record, more particularly the Page 6 of 9 C/FA/956/1991 JUDGMENT impugned order passed by the E.S.I. Court, it appears that it was not disputed that the construction work in question was awarded by the appellant to the contractor for carrying out construction of additional buildings to be used as "Boiler building" and "Anhydrens Department", whereas the appellant was an industrial establishment manufacturing starch and its bi-products. Therefore, the said work of construction could not be said to be the work incidental or preliminary or connected with the work of the establishment of the appellant. There is nothing on record to suggest that the persons employed by the contractor were directly or indirectly employed by the appellant or that the appellant was paying them the wages. The appellant had awarded the contract to the contractor, which included the cost of material and labour. The Contractor had to supervise the work and pay the wages to the workers employed by him. Under the circumstances, it could not be said by any stretch of imagination that the persons working with the contractor were the employees of the appellant so as to fall within the definition contained in Section 2(9) of the said Act.

11. Mr.Shah had also failed to point out as to how the appellant could be said to be the principal employer within the definition of Section 2(17) of the said Act, so as to make the appellant liable to pay the contribution under the said Page 7 of 9 C/FA/956/1991 JUDGMENT Act. In absence of any material on record, the notice issued by the respondent making the provisions of the Act applicable to the appellant and calling upon the appellant to pay the contribution on the lump sum basis calculated at 25% of the total amount paid to the contractor by the appellant, was absolutely arbitrary and illegal. If the appellant was not the principal employer and the persons working with the contractor were not proved to be the employees of the appellant as per Section 2(9) of the said Act, the provisions of the said Act could not be made applicable to the appellant. The decision of the Supreme Court relied upon by Mr.Shah is not applicable to the facts of the present case, inasmuch as in the said case, casual workers concerned were directly employed by the principal employer, and therefore, the Court had held them the employees of the principal employer within the meaning of first clause of Section 2(9) of the said Act, whereas in the instant case there is nothing on record to show that the workers of the contractor were employed by the appellant.

12. In that view of the matter, the impugned order passed by the E.S.I. Court is erroneous and dehors the provisions of the said Act. The said order dated 9.7.1991, therefore, is quashed and set aside. The communication dated 22.8.1991 issued by the respondent pursuant to the impugned order is also quashed and set Page 8 of 9 C/FA/956/1991 JUDGMENT aside. The amount, if any, deposited by the appellant shall be refunded to the appellant within eight weeks from today.

13. The appeal stands allowed accordingly.

Sd/-

(BELA M. TRIVEDI, J) V.V.P. PODUVAL Page 9 of 9

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