Andhra HC (Pre-Telangana)
Employees' State Insurance ... vs Chirala Co-Operative Spinning Mills ... on 29 September, 2004
Equivalent citations: 2004(6)ALD629, (2005)ILLJ910AP
Author: L. Narasimha Reddy
Bench: L. Narasimha Reddy
JUDGMENT L. Narasimha Reddy, J.
1. This civil miscellaneous appeal is filed by the Employees' State Insurance Corporation assailing the order, dated 1.6.2001 passed in E.I.C. No. 27 of 1999 on the file of the Employees' State Insurance Court at Hyderabad (for short 'the Trial Court').
2. The Insurance Inspector of the appellant visited the factory of the respondent, a Co-operative Spinning Mill, on 22.5.1998 and verified various records, for the purpose of ascertaining whether the respondent was making the contributions properly for the period from 1.4.1997 to 31.3.1998. He found that contribution to an extent of Rs. 1,09,213/- remained unpaid. Accordingly, a demand notice dated 20.9.1998 was issued to the respondent. The correspondence that ensued between the respondent and the appellant did not materialize. Therefore, the respondent filed E.I.C. No. 27 of 1999 before the Trial Court, under Section 75 of the Employees' State Insurance Act, 1948 (for short 'the Act') challenging the notice issued to it. The main area of controversy was, the contribution to be made in respect of 163 persons. While the respondent pleaded that those persons were trainees from a Polytechnic Institute sent for training under a scheme introduced by the Ministry of Human Resources and Development, the appellant treated them as employees. The respondent pleaded that the trainees were paid only conveyance charges and that no wages of any form were paid to them. The appellant treated the said amount as wages to those persons and sought to justify the levy of the contribution. Through the order under appeal, the Trial Court observed that the respondent is not liable to make contribution for the trainees. However, it sustained some of the items and issued necessary directions, for recovery of the contribution, on other items.
3. Learned Counsel for the appellant submits that the trainees, who are working in the respondent mill, are workmen1 within the definition of Section 2(9) of the Act, and that the liability under the Act gets attracted. She submits that though the respondent called the amount paid to those persons as conveyance charges, in reality, it is nothing but wages. She further contends that even assuming that they are trainees or apprentices, as long as they are not covered by the Apprentices Act, 1961, they come within the definition of 'employees' and that the Trial Court erred in holding that the first respondent is not liable to make contribution. She placed reliance upon the judgments rendered by this Court, Madras High Court and Bombay High Court.
4. Learned Counsel for the respondent, on the other hand, submits that the trainees were only students of a Polytechnic Institute, sent for training, and by no stretch of imagination, they can be treated as employees. He submits that this fact was proved beyond doubt by examining a lecturer from the Polytechnic Institute and that no interference is called for, with the finding recorded by the Trial Court. He further submits that the judgments relied upon by the appellant are distinguishable on facts and that they do not apply to the instant case.
5. On the basis of an inspection caused by the Insurance Inspector of the appellant in the premises of the respondent, a demand notice was issued calling upon the respondent to pay a sum of Rs.1,09,213/- towards contribution under the Act. That notice was challenged by the respondent before the Trial Court. The controversy was much about the manner in which 163 individuals said to have been paid certain amounts by it, were to be treated. While the respondent contended that they are only trainees of a local institute of polytechnic, the appellant pleaded that they come within the definition of 'employees' under sub-section (9) of Section 2 of the Act. On behalf of the respondent, PW1, a lecturer in Textile Technological Institute at Guntur was examined. He stated that the Government of India, Ministry of Human Resources and Development sponsored a scheme for 54 2004(6) ALD Dec. 15 imparting training for polytechnic students in the local industrial undertakings so as to motivate them for self-employment. His assertion remained uncontroverted. R.Ws.l and 2 were examined on behalf of the appellant herein, touching mostly, on other aspects of the notice. No material was placed before the Trial Court, or relied upon to establish that 163 persons, for whom the contribution was demanded, were employed in one manner or the other.
6. An employee is defined under Section 2(9) of the Act as under:
"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 or 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) whose services are temporarily lent or let on hire to the principal employer by the person with whom the person whose services are so lent or let on hire has entered into a contract of service; and includes any person employed for wages on any work connected with the administration of the factory or establishment or any part, department or branch thereof or with the purchase of raw materials for, or the distribution or sale of the products of, the factory or establishment or any person engaged as an apprentice, not being an apprentice engaged under the apprentices Act, 1961, or under the standing orders of the establishment; but does not include-
(a) any member of the Indian naval, military or air forces; or
(b) any person so employed whose wages (excluding remuneration for overtime work) exceed such wages as may be prescribed by the Central Government:
Provided that an employee whose wages (excluding remuneration for overtime work) exceed such wages as may be prescribed by the Central Government at any time after (and not before) the beginning of the contribution period, shall continue to be an employee until the end of that period.
7. It is true that the definition of 'employee' under sub-section (9) of Section 2 of the Act is too wide and takes in its fold, even such of the apprentices, as are not engaged under the Apprentices Act, 1961. However, it may be noted that basically it is a person employed for wages in, or in connection with the work of a factory or establishment, that is included in the definition. The other part of the definition relates to the method and tenure of employment. The important factor, which cuts across all categories of employment, is payment of wages.
8. The term 'wages' is defined under sub-section (22) of Section 2 of the Act, as under:
"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 any payment to an employee in respect of any period of authorized leave, lock-out, strike which is not illegal or lay-off and other additional remuneration, if any, 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; or
(d) any gratuity payable on discharge;
The definition provides for inclusion of various items of payment. Here again, the principal factor is the remuneration, paid, or payable. Therefore, it needs to be seen as to whether the submissions made by the appellant fit into these parameters. It was not even alleged that the respondent paid any wages to 163 persons, referred to above. The contention of the appellant was that the transport charges paid to those persons have to be treated as wages.
9. The word 'remuneration' occurring in the definition of the wages, has its own significance. Remuneration is almost in the form of consideration for doing the work by a person which it employed or otherwise. An amount paid towards transport charges or for ancillary charges cannot be treated as wages. It may be that, if a person is paid remuneration, the other amounts payable towards overtime allowance or any authorized leave is to be taken as part of wages. The exclusion of travelling allowance, or the value of any travelling concession from the definition of wages under Section 22 of the Act, is significant. When the Act itself excludes travelling allowance from the scope of wages, the amount paid to an individual as transport allowance alone, in the absence of any remuneration, cannot be treated as wages.
10. In R. v. Postmaster General, 1 QBD 663, 664, Blackburn, J., described 'remuneration' as under:
"Remuneration", means, a quid pro quo. Whatever consideration a person gets for giving his 'services, seems to me a 'Remuneration' for them. Consequently, if a person was in receipt of a payment or of a percentage, or any kind of payment which would not be an actual money payment, the amount he would receive annually in respect of this would be 'Remuneration'.
11. Therefore, an amount paid towards conveyance, cannot be treated as remuneration, much less wages, within the meaning of Section 2(22) of the Act.
12. Now, it needs to be seen as to whether a trainee can be treated as apprentice. Apprentice stands on a footing different from a trainee. Learned Counsel for the appellant placed reliance upon the judgment of Madras High Court in Balasaraswathi Motor Works v. E.S.I., 1970 (21) FLR 281. There, the nature of employment of an apprentice was considered in the context of counting the total number of employees in the factory. Dealing with the plea that the apprentice working in the factory was not paid any wages at all, the learned Judge observed as under;
"He may be an apprentice, paid or otherwise. He may be one who works inside the factory for love of labour or he may be a person who is receiving consideration therefore. Nevertheless, he satisfies the literary meaning of the words employed by the Legislature in Section 2(12), namely, a person working in the precincts of the factory".
13. With great respect to the learned Judge, such an approach runs contrary to the specific provisions of the Act. The definition of 'employee' under subsection (9) and that of wages under subsection (22) of Section 2 of the Act, were not at all taken into account. The definition of factory under sub-section (12) of Section 2 of the Act cannot be read in isolation. Sub-section (9) specifically refers to the persons "Employed for wages" and treating a person who was found in the factory even if working, but without wages, as employee runs contrary to the letter and spirit of the Act.
14. Another judgment of Bombay High Court relied upon by the learned Counsel is Regional Director, E.S.I.C. v. Golden Gate Restaurant, 2002 (1) LLJ 972, wherein the liability of the restaurant to make contribution under the Act, for 37 persons was in question. The respondent therein pleaded that no wages were paid to such persons and that they were being provided with free boarding and lodging. This contention was repelled mainly on the ground that their names were found in the Attendance Register, along with the other regular employees. Such a situation does not exist in the present case. It was not even urged that the names of 163 trainees are entered in the Attendance Register of the respondent-Mill.
15. Learned Counsel for the appellant has also relied upon the judgment rendered by the Division Bench of this Court in Andhra Prabha (P) Ltd. v. E.S.I. Corporation, Hyderabad, 1996 (2) LLJ 389. In that case, the dispute was, as to payment of contribution in respect of apprentices/trainees. The appellant therein was held liable to pay contribution, since it was found by the Trial Court that such apprentices/trainees were being paid basic wages and other allowances. Once a person is found to have been engaged on payment of wages, he answers the description of an 'employee' and that in turn requires the employer to make contribution under the Act. There was no allegation in the present case that the respondent paid any basic wages to the trainees. Therefore, the ratio laid down in the said decision does not apply to the facts of this case.
16. For the foregoing reasons, this Court does not find any basis to interfere with the order under appeal. The civil miscellaneous appeal is accordingly dismissed. There shall be no order as to costs.