Andhra HC (Pre-Telangana)
Employees' State Insurance ... vs Raj Kamal Transport And Anr. on 29 April, 1994
Equivalent citations: 1994(2)ALT515, (1995)ILLJ94AP
JUDGMENT
1. This appeal is filed against the order of the Employees Insurance Court, Hyderabad, dated 10-10-1988 in E. I. Case No. 34 of 1986. The 1st respondent filed that petition under Section 75 of the Employees' State Insurance Act for a declaration that the independent contractors who transport the goods of the petitioner are not employees as defined under Section 2(9) of the E. S. I. Act and therefore, the petitioner is not liable to pay contribution in respect of them and to set aside the ad hoc assessment made by the Corporation on 6-12-1985. M/s. Rajkamal Transport, which is the petitioner in the lower Court is a transport Organisation engaged in transport of goods. For the purpose it owns some trucks and for driving the trucks it engages drivers. The case of the petitioner is that they have entered into contracts with various drivers, according to which the petitioner would engage drivers for each particular trip and the remunerations are paid to them for that trip and so they are independent contractors and not employees of the petitioner's organisation.
2. The learned Judge of the Employees Insurance Court after considering Ex. P-1 which is the proforma agreement which the transport company entered with the drivers held in paragraph 13 of his Judgment that the relationship between Raj Kamal Transport i.e., the petitioner and the contracting truck drivers is not one of master and servant, but it is only a contract between the principal and principal and there is no relationship of employer and employee between the parties. The learned Judge relied upon a decision of the Supreme Court reported in Ghatge and Patil Concern Employees Union v. Ghatge and Patil Transport Pvt. Ltd. and held that in view of that judgment the truck drivers who entered into contract with the company are not employees of the company. He therefore allowed the petition holding that the petitioner-transport company is not liable to pay contribution under E. S. I. Act in respect of those people and ad hoc assessment order dated 6-12-1985 is invalid and without jurisdiction.
3. In this appeal Mr. I. A. Naidu, learned Counsel for the appellant i.e., E. S. I. Corporation contended that the decision of the Supreme Court in Ghatge and Patil Concern Employees Union's case (supra) is not at all applicable to this case. He has contended that since the business of the 1st respondent-transport Corporation is to transport goods and as it owns a fleet of trucks it must necessarily employ drivers to ply the trucks and therefore they cannot be considered to be independent contractors, but are only employees of the transport corporation. He has referred to the various provisions of the Employees' State Insurance Act in support of his contention.
4. Section 2(9) of the Act defines 'employee' as 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 employees in 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 or, the factory or establishment, but does not include....."
5. Section 2(22) defines 'wages' as 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..."
6. Section 2(13) defines immediate employer' in relation to employees employed by or through his means "a person who has undertaken the execution, on the premises of a factory or on establishment to which this Act applies or under the supervision of the principal employer or his agent, or 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."
7. Section 2(17) defines 'principal employer' as -
" (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, 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."
8. He has argued that the expression 'employee' in the definition of 'wages' is wide enough to cover all persons employed in connection with the establishment to which this Act applies and therefore he contended that the person who is employed as a driver to drive a truck in connection with the business of the transport company cannot be held to be an independent contractor.
9. He has relied upon a decision of the Supreme Court reported in Royal Talkies, Hyderabad v. Employees' State Insurance Corporation, . In that case the contractors of the canteen and cycle stand attached to the theatre, which were leased out to them, employed certain persons. The question that arose in that case was whether the Cinema Theatre Manager can be held liable to pay contribution as the principal employer of the workers engaged in the canteen or cycle stand. The Supreme Court held that keeping a cycle stand and running a canteen are incidental or adjuncts to the primary purpose of the theatre within the meaning of clause (ii) of Section 2(9). While referring to the definition of 'employee' in Section 2(9) of the E. S. I. Act it was pointed out that -
"The reach and range of the definition is apparently wide and deliberately transcends pure contractual relationships. We are in the field of labour jurisprudence, welfare legislation and statutory construction which must have due regard to Part IV of the Constitution. A teleological approach and social perspective must play upon the interpretative process."
The Supreme Court also held that -
"Section 2(9) contains two substantive parts. Unless the person employed qualifies under both he is not an 'employee'. Firstly, he must be employed" in or in connection with the work of an establishment. The expression "in connection with the work of an establishment" ropes in a wide variety of workmen who may not be employed in the establishment but may be engaged only in connection with the work of the establishment.
Merely being employed in connection with a work of an establishment in itself does not entitle a person to be an employee. He must not only be employed in connection with the work of the establishment but also be shown to be employed in one or the other of the three categories mentioned in Section 2(9)."
10. In view of the wide definition of 'employee' in Section 2(9) of the Act and the interpretation laid down by the Supreme Court in Royal Talkies case (supra) referred to above, there can be no doubt that a driver who is employed by a transport corporation to drive its trucks in connection with its business comes within the definition of "employee" in Section 2(9) of the Act.
11. The learned Counsel for the 1st respondent i.e., the transport Corporation has referred to the decision of the Supreme Court in Ghatge and Patil's case (supra) which was relied upon by the Insurance Court. That was a case under the Motor Transport Workers Act and the Supreme Court while interpreting the definition of "motor transport worker" in Section 2(h) of the said Act held that -
"The word "employed" in the definition of 'Motor Transport Worker' is not used in the sense of using the services of a person but rather in the sense of keeping a person in one's service. The definition is, of course, made wide to take in all persons working in a professional capacity in an undertaking for running its affairs in any capacity and not only persons employed on wages. The word wages has the meaning given to the word in the Payment of Wages Act and takes in all paid employees and also persons who are employed in a professional capacity although not in receipt of wages. Persons who are independent and hire a vehicle for their own operation paying a fixed hire per mile from their earnings cannot be said to be persons employed in the Motor Transport Undertaking in the sense of persons kept in service."
12. In that case the Transport Company entered into agreements with the drivers who have resigned their services. According to the agreements the company let out to the former drivers a truck each on condition that they should pay to the company Re. 1/- per mile for its use.
13. Section 2(h) of the Motor Transport Workers Act defines "motor transport worker" means -
"a person who is employed in a motor transport undertaking directly or though an agency, whether for wages or not, to work in a professional capacity on a transport vehicle or to attend to duties in connection with the arrival, departure, loading or unloading of such transport vehicle and includes a driver, conductor, cleaner, station staff, line checking staff, booking clerk, cash clerk, depot clerk, time-keeper, watchman or attendant, but does not includes..."
14. The Supreme Court has pointed out in Para 8 that -
"The word "employed" in the definition of 'Motor Transport Worker' is not used in the sense of using the services of a person but rather in the sense of keeping a person in one's services. The definition is, of course, made wide to take in all persons working in a professional capacity in an undertaking for running its affairs in any capacity and not only persons employed on wages. The word wage has the meaning given to the word in the Payment of Wages Act and takes in all paid employees and also persons who are employed in a professional capacity although not in receipt of wages. Persons who are independent and hire a vehicle for their own operation paying a fixed hire per mile from their earnings cannot be said to be persons employed in the Motor Transport Undertaking in the sense of persons kept in service."
15. This applies to cases where persons hire vehicles by paying fixed hire per mile. But in the present case it is not the contention that the drivers have taken the trucks of the transport company on hire; but the contention of the petitioner - Transport Company is that they were paid remuneration for each trip. Therefore, this decision is not helpful to the petitioner Transport Company.
16. The learned Counsel for the 1st respondent has also referred to a decision of the Kerala High Court in ESIC, Trichur v. Pooppally Foods, Alleppey, 1985 (1) LLJ 10. In that case a firm carrying on business in export of prawns engaged a contractor for peeling and grading at the contractor's premises. It was held in those circumstances - exporting firm was not liable to pay any contribution under the Act in respect of peeling and grading charges, as none of the clauses of Section 2(9) is satisfied. That decision is also not helpful to the Transport Company because, the peeling and grading work has been entrusted to an independent contractor and he employed his own workers to do the work in his premises.
17. No doubt as pointed out by the learned Counsel for the 1st respondent a person must be considered free to so arrange his business so that he avoids a regulatory law and its penal consequences as pointed out by the Supreme Court in Ghatge and Patil Concern Employees Union's case (supra). But the relationship between the parties has to be considered with reference to the definition of "employee" in a particular enactment. Having regard to the definition of "employee" in Section 2(9) of the Employees' State Insurance Act and the decision of the Supreme Court in Royal Talkies's case (supra) I agree with the contention of the learned Counsel for the appellant that the Employees Insurance Court committed an error in holding that the drivers engaged by the Transport Company are independent contractors and in fact they come within the definition of "employee" under the Act.
18. The learned Counsel for the 1st respondent has contended that under Section 82 of the Employees' State Insurance Act, an appeal lies to the High Court only if it involves a substantial question of law and since the finding of the Employees Insurance Court that the drivers are independent contractors is a finding of fact, the High Court cannot interfere with the said finding.
19. He has relied on a decision reported in Employees' State Insurance Corporation v. Cheeran's Auto Agencies, 1992 (1) LLJ 704, in which it was held that -
"Section 82 makes it clear that an appeal lies to the High Court from an order of the Insurance Court only if it involves a substantial question of law. The question whether two persons are employees or not is a question which has to be decided on an assessment of facts and it is a question of fact. It cannot be treated as a substantial question of law."
20. He has also referred to a decision of a Full Bench of Patna High Court reported in Motijhari Devi v. Bindeshwari Prasad, , in which while dealing with the Workmen's Compensation Act, it was held that it is not open to the High Court to reverse a finding on pure fact arrived at by the Commissioner in the judgment under appeal.
21. In the present case, no doubt the Employees Insurance Court gave a finding that the drivers employed by the transport company are not employees having considered Ex. P-1 and following the decision of the Supreme Court in Ghatge and Patil Concern Employees Union's case (supra). But the contention of Mr. I. A. Naidu, learned Counsel for the appellant is that since the considered the relationship between the parties with reference to Section 2(9) of the E. S. I. Act which has been considered and discussed by the Supreme Court in Royal Talkies's case (supra) it amounts to a substantial question of law and therefore, the High Court can interfere in exercise of its jurisdiction under Section 82 of the Employees' State Insurance Act. I agree with the contention of the learned Counsel for the appellant that there is substantial question of law regarding interpretation of Section 2(9) of the E. S. I. Act with reference to the decision of the Supreme Court referred to above. Therefore, I am unable to agree with the contention of the learned Counsel for the 1st respondent that the High Court cannot interfere on the ground that the finding arrived at by the Employees Insurance Court is a pure finding of fact.
22. In view of my finding that the drivers engaged by the 1st respondent-Transport Corporation are employees within the meaning of Section 2(9) of the Employees' State Insurance Act, the appeal is allowed setting aside the order of the Employees Insurance Court. The parties are directed to bear their own costs.