Karnataka High Court
Welcomgroup Windsor Manor, Bangalore vs The Deputy Regional Director, ... on 29 March, 2001
Equivalent citations: [2002(93)FLR1192], ILR2002KAR2145, 2001(4)KARLJ422, (2001)IILLJ978KANT, 2001 AIR - KANT. H. C. R. 1810, (2002) 93 FACLR 1192, (2001) 4 KANT LJ 422, (2001) 2 LABLJ 978
JUDGMENT
1. The appellant is an hotel industry. The officer of the respondent-Corporation, issued a notice under Section 45-A of the Employees' State Insurance Act, 1948 (hereinafter referred to as 'the Act' for short) demanding payment of Rs. 52,815/- payable as contribution for the period from April 1987 to March 1988. The said demand was challenged by the appellant by filing an application before the Employees' State Insurance Court at Bangalore under Section 75 of the Act. The said application was dismissed by the ESI Court, by order dated 27-3-1989. This order is under challenge in this appeal.
2. Sri Kasturi, learned Senior Counsel appearing for the appellant submits that the contribution so demanded is in respect of the employees of Woodkraft (India) Limited and Blue Star Limited, in respect of whom contribution has also been paid by the respective employers and therefore the ESI Authorities are not right in demanding the contribution twice over from the appellant.
3. Admittedly, the appellant is a principal employer of the employees in respect of whom the contribution was demanded and the Woodkraft and Blue Star are the immediate employers. In order to ascertain the liability to pay the contribution by the appellant, it is just and necessary to refer to certain provisions of the Act.
4. Section 2(9) of the Act, defines an employee as follows:
"2(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 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 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 apprentice, not being an apprentice engaged under the Apprentices Act, 1961 (52 of 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 a month:
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".
Section 2(13) of the Act, defines an immediate employer as follows.-
"2(13) "Immediate employer", in relation to employees employed by or through him, means a person who has undertaken the execution, on the premises of a factory or an establishment to which this Act applies or under the supervision of the principal" employer or his agent, of the whole or any part of any work which is ordinarily part of the work of the factory or establishment of the principal employer or is preliminary to the work carried on in, or incidental to the purpose of, any such factory or establishment, and includes a person by whom the services of an employee who has entered into a contract of service with him are temporarily lent or let on hire to the principal employer and includes a contractor".
Section 2(17) of the Act defines "principal employer" as follows:
"2(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 the 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".
Sections 40 and 41 read as follows.-
"40. Principal employer to pay contribution in the first instance.--(1) The principal employer shall pay in respect of every employee, whether directly employed by him or by or through an immediate employer, both the employer's contribution and the employee's contribution.
(2) Notwithstanding anything contained in any other enactment but subject to the provisions of this Act and the regulations, if any, made thereunder, the principal employer shall, in the case of an employee directly employed by him (not being an exempted employee), be entitled to recover from the employee the employee's contribution by deduction from his wages and not otherwise:
Provided that no such deduction shall be made from any wages other than such as relate to the period or part of the period in respect of which the contribution is payable, or in excess of the sum representing the employee's contribution for the period.
(3) Notwithstanding any contract to the contrary, neither the principal employer nor the immediate employer shall be entitled to deduct the employer's contribution from any wages payable to an employee or otherwise to recover it from him.
(4) Any sum deducted by the principal employer from wages under this Act shall be deemed to have been entrusted to him by the employee for the purpose of paying the contribution in respect of which it was deducted.
(5) The principal employer shall bear the expenses of remitting the contributions to the Corporation.
41. Recovery of contribution from immediate employer.--(1) A principal employer, who has paid contribution in respect of an employee employed by or through an immediate employer, shall be entitled to recover the amount of the contribution so paid (that is to say the employer's contribution, as well as the employee's contribution, if any) from the immediate employer, either by deduction from any amount payable to him by the principal employer under any contract, or as a debt payable by the immediate employer.
(1-A) The immediate employer shall maintain a register of employees employed by or through him as provided in the regulations and submit the same to the principal employer before the settlement of any amount payable under sub-section (1).
(2) In the case referred to in sub-section (1), the immediate employer shall be entitled to recover the employer's contribution from the employee employed by or through him by deduction from wages and not otherwise, subject to the conditions specified in the proviso to sub- section (2) of Section 40".
5. Under Section 40 of the Act, the principal employer shall pay in respect of every employee whether directly employed by him or by an immediate employer both the employer's and employees' contribution. In the case on hand no doubt, the Woodkraft and Blue Star, are the immediate employers as they have made their employees to work in the establishment of the appellant who is the principal employer.
6. Section 41 of the Act, provides for recovery of contribution from the immediate employer. Regulation 32(1-A) provides that every immediate employer shall maintain a register in Form 7, in respect of every employee engaged by him and submit the same to the principal employer before the settlement of any amount payable under sub-section (1) of Section 41 of the Act. Section 41(1) authorises the principal employer to recover any contribution paid by him from the immediate employer. Section 40 of the Act, imposes an obligation on the principal employer to pay the contribution in respect of employees whether directly employed by him or through an immediate employer. From the facts of the case, I find the appellant has not produced any register in Form 7 maintained by the immediate employer and produced before it. In the absence of such register, it is not possible for the ESI Authority to accept the case of the appellant that they are not liable to pay any contribution on the ground that the contribution has already been paid by the immediate employer in respect of the employees who were asked to work in the premises of the appellant.
7. The appellant has produced Exs. A. 3 and A. 4 issued by the Woodkraft and Blue Star furnishing the names of the employees who are covered under the Act. Further, Exs. A. 3 and A. 4 also disclose that contribution has been paid by the Woodkraft and Blue Star. From this it is not possible to know whether the said persons were made to work in the appellant's premises by the Wood Kraft and Blue Star in order to demand contribution.
8. After going through the entire impugned order, I find that neither the appellant nor the ESI Authorities have taken any steps to ascertain whether in fact register in Form 7 which is required to be maintained as provided under Regulation 32(1-A), has been looked into for the purpose of demanding payment of contribution. Under the scheme of the Act, the liability to pay contribution is on the principal employer, Therefore, an opportunity should have been given to the principal employer to produce the register in Form 7 submitted by the immediate employer to the principal employer. It is also not known whether the immediate employer has paid contribution which should have been paid by the principal employer. Therefore, I am of the view that the matter requires reconsideration by the ESI Court.
9. In the result, I pass the following order:
The appeal is allowed;
The impugned order is set aside;
The matter is remitted to the ESI Court, Bangalore, to dispose of the matter afresh after due notice to both the parties and after affording opportunity to both the parties to lead evidence.
No costs.