Karnataka High Court
Employees State Insurance Corporation vs M/S Vivek Engineering Corporation on 11 June, 2024
-1-
NC: 2024:KHC:20560
MFA No. 7971 of 2011
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 11TH DAY OF JUNE, 2024
BEFORE
THE HON'BLE MR JUSTICE R. NATARAJ
MISCELLANEOUS FIRST APPEAL NO.7971 OF 2011 (ESI)
BETWEEN:
EMPLOYEES STATE INSURANCE CORPORATION,
NO. 10, BINNY FIELDS,
BINNYPET, BANGALORE-560023,
REP. BY ITS DEPUTY DIRECTOR.
...APPELLANT
(BY SMT. GEETHA DEVI M P., ADVOCATE)
AND:
1. M/S VIVEK ENGINEERING CORPORATION,
KAVOOR, MANGALORE-575015,
A REGISTERED PARTNERSHIP FIRM,
REP. BY ITS PARTNER, SHRI. U R ACHAR
2. SRI. V. R. NAGARAJ,
ASSISTANT DIRECTOR,
ESIC CORPORATION, NO.10,
BINNY FIELDS,
Digitally signed
by BINNYPET, BANGALORE-560023.
MARKONAHALLI
RAMU PRIYA
Location: HIGH
3. RECOVERY OFFICER,
COURT OF ESIC CORPORATION, NO.10, BINNY FIELDS,
KARNATAKA
BINNYPET, BANGALORE-560023.
...RESPONDENTS
(BY SRI. NATARAJA BALLAL A., ADVOCATE FOR R1;
R-2 AND R3 ARE SERVED)
THIS MISCELLANEOUS FIRST APPEAL IS FILED U/S 82(2) OF
THE EMPLOYEES STATE INSURANCE ACT, AGAINST THE ORDER
DT.17.06.2011 PASSED IN E.S.I.NO.4/2008 ON THE FILE OF THE
PRESIDING OFFICER, LABOUR COURT-CUM-E.S.I. COURT,
MANGALORE, D.K., ALLOWING THE APPLICATION FILED U/S 75(1)
R/W 77(1) OF E.S.I. ACT.
-2-
NC: 2024:KHC:20560
MFA No. 7971 of 2011
THIS APPEAL, COMING ON FOR DICTATING JUDGMENT THIS
DAY, THE COURT DELIVERED THE FOLLOWING:
JUDGMENT
The Employees State Insurance Corporation (henceforth referred to as 'Corporation') has filed this appeal under Section 82(2) of the Employees' State Insurance Act, 1948 (henceforth referred to as 'Act of 1948') challenging an Order dated 17.06.2011 passed by the Presiding Officer, Labour Court-cum- E.S.I. Court, Dakshina Kannada, Mangaluru (henceforth referred to as 'E.S.I. Court') in E.S.I.No.4/2008 by which, it set aside the Order passed under Section 45A of the Act of 1948 by the respondent No.2 as well as demand notice issued by the respondent No.3 under Section 45C of the Act of 1948.
2. The Establishment of respondent No.1 was covered under the provisions of the Act of 1948 with effect from 31.01.1986 and was allotted distinctive ESI Code No.53-8361-
67. The Establishment was engaged in the business of fabrication and structuring of mechanical equipments/machinery. The Establishment was inspected by the Inspector of the Corporation in May 2006. An observation note was prepared by the Inspector and a show-cause notice -3- NC: 2024:KHC:20560 MFA No. 7971 of 2011 dated 24.08.2006 was issued to the Establishment calling upon it to pay contribution on the omitted wages under various heads mentioned in the observation slip. The Establishment replied to the notice and contended that the security charges claimed by the Corporation, were unsustainable since the security was provided by another registered Establishment namely, M/s. Vab Services and that the security personnel deployed by M/s. Vab Services were used for the purpose of security services only. It also contended that in so far as fabrication charges were concerned, they were paid to independent contractors engaged to execute the work outside the Establishment and therefore, the Establishment was exempt from payment of any contribution. In so far as loading and unloading charges are concerned, it contended that the loading and unloading charges were done by mechanical equipments and some labour, who were not connected with the work of Establishment and were not directly employed by the Establishment and therefore, the Establishment was exempt from paying any contribution. With these and other contentions, the Establishment contended that it had submitted its returns and paid contribution in respect of its regular -4- NC: 2024:KHC:20560 MFA No. 7971 of 2011 employees and therefore, the demand notice issued by the respondent No.3 was without any basis.
3. Based on these contentions, the respondent No.2 passed an order under Section 45A of the Act of 1948 followed by a certificate under Section 45C of the Act of 1948 resulting in a demand for a sum of Rs.3,17,470/- being contribution on the omitted wages.
4. The Establishment being aggrieved by the said order, filed an application under Section 75(1) read with Section 77(1) of the Act of 1948 before the E.S.I. Court to declare that the Order under Section 45A of the Act of 1948 was null and void and the certificate under Section 45C of the Act of 1948 and the demand notice issued, were all illegal and to declare that the applicant was not liable to pay contribution as claimed. Besides this, it also contended that the demand made by the Corporation was for the period prior to 16.10.2002, which was barred by time.
5. The application was contested by the Corporation contending that the Inspector of the Corporation, who inspected the Establishment came to the conclusion that there -5- NC: 2024:KHC:20560 MFA No. 7971 of 2011 were omitted wages and despite being informed, the Establishment failed to avail the opportunities and therefore, the respondent No.2 was perforced to pass an order under Section 45A of the Act of 1948.
6. The ESI Court based on the contention urged by the Establishment and the Corporation, framed the following points for consideration:-
1) Whether the Applicant proves that the Order at Annexure-21 passed under Sec.45-A by the respondent, is null and void?
2) Whether the certificate at Annexure-22 issued by the 2nd respondent to the 3rd respondent, is illegal?
3) Whether the Applicant proves that the demand notice at Annexure-23 issued by the 3rd respondent to him, is illegal?
4) Whether the Applicant proves that he is not liable to pay Rs.2,65,183/- towards contribution as demanded by the 2nd respondent ?
5) Whether the Applicant proves that he is not liable to pay interest of Rs.51,787/- as demanded in Annexure-22, the certificate issued by the 3rd respondent?-6-
NC: 2024:KHC:20560 MFA No. 7971 of 2011
6) Whether the Applicant proves that the claim made by the respondents for the period prior to 16.10.2002, is barred by time?
7) What order?
7. In support of the case of the Establishment, one of the partners of the Establishment was examined as AW.1 and three contractors, who were engaged by the Establishment were examined as AW.2 to AW.4. EXs.A1 to A79 were marked. On behalf of the Corporation, Inspector was examined as RW.1 and Exs.R1 to R8 were marked.
8. The ESI Court after considering the oral and documentary evidence, held that there was nothing wrong in passing an order under Section 45A of the Act of 1948 even if the Establishment had not restrained the entry of the Officials of the Corporation to inspect the records of the Establishment. However, on perusing Ex.A13, which was the observation slip of the Inspector of the Corporation and the show-cause notice at Ex.A14, it noticed that the Establishment had availed the services of M/s. Vab Services to provide security personnel. It also noticed that M/s. Vab Services had filed returns for the period 30.09.1999 to 31.03.2003. Therefore, it held that M/s. -7-
NC: 2024:KHC:20560 MFA No. 7971 of 2011 Vab Services was an independent Establishment, which had provided services to the Establishment. It also found that M/s. Vab Services had paid contribution under the Act of 1948 to its employees separately. Therefore, it held that the demand to pay contribution on the security charges paid to M/s. Vab Services was improper.
9. In so far as fabrication charges claimed by the Corporation is concerned, it perused the evidence of AW.2 to AW.4, who were the three contractors, who had executed part of the work entrusted by the Establishment and Exs.A54 to A57, which were documents to show that expenditure was incurred by the Establishment to pay independent contractors, who had executed work outside the applicant - Establishment. It held that the employees engaged by the independent contractors cannot be termed as employees of the Establishment and held that the liability to pay the contribution is on such independent contractors and not on the Establishment in question.
10. In so far as loading and unloading charges is concerned, the ESI Court held that the principal business of the -8- NC: 2024:KHC:20560 MFA No. 7971 of 2011 Establishment is to do fabrication work at its Establishment and also at the customers site and at times, the Establishment used to engage the independent contractors, who executed work in their own Establishment independently or at the site of the customers. It held that the loading and unloading was not the main business of the applicant - Establishment but was only incidental to its business. Consequently, it held that the payment made for loading and unloading charges cannot attract contribution under the provisions of the Act of 1948.
11. In so far as painting and carpentry charges were concerned, ESI Court held that they were occasionally engaged at the factory of the Establishment or by the independent contractors as and when occasion arose. It held that the services of these painters and carpenters were not of a permanent nature and therefore, cannot be termed as employees of the Establishment and consequently, held that the demand made by the Corporation against the Establishment, are all illegal and hence, held that the Establishment is not liable to pay a sum of Rs.2,65,183/- being contribution demanded by the respondent No.2. It also ordered -9- NC: 2024:KHC:20560 MFA No. 7971 of 2011 that the Establishment is not liable to pay interest of Rs.51,787/- demanded by the respondent No.3.
12. Being aggrieved by the said order, the Corporation is in appeal.
13. The Corporation has contended that there was no proof of the payment of contribution by the immediate employer, who deployed the services of security personnel at the Establishment. It also contended that the contribution was liable to be made on the fabrication work done by the independent contractor as they were doing work of the Establishment and as per the specification of the Establishment and therefore, they would fall within the definition of the "employee" under the Act of 1948. Likewise, in so far as loading and unloading charges are concerned, it contended that ESI Court committed an error in holding that the contributions are not payable even though the work was done at the premises of the Establishment as well as at the site of the customer of the Establishment. It also contended that ESI Court committed an error in holding that the contributions were
- 10 -
NC: 2024:KHC:20560 MFA No. 7971 of 2011 not payable on the painting charges and carpentry work as the work was casual in nature.
14. The learned counsel for the Corporation has suggested the following substantial questions of law for consideration in this appeal:-
a) Whether the contributions are liable to be paid on casual employees viz., coolies doing loading and unloading work, painting and carpentry work?
b) Whether is it necessary of the employees to be permanent or the nature of job to be regular one in order to bring them under the coverage of the ESI Act?
c) Whether the independent contractors who are doing work as per the specification directly by the Principal employer is not liable to be covered under the ESI Act?
15. Learned counsel for the Corporation at the time of arguments, restricted the appeal to the questions;
(i) Whether the Establishment was liable to pay contribution on the painting and carpentry charges as found in the observation note of the inspector (Ex.A13)?
- 11 -
NC: 2024:KHC:20560 MFA No. 7971 of 2011
(ii) Whether Establishment was liable to pay contribution on the loading and unloading charges?
(iii) Whether Establishment was liable to pay contribution on payment made to the independent contractors, who were doing work as per the specification of the Establishment?
16. Learned counsel for the Corporation vehemently contended that the definition of the word "employee" as found under Section 2(9) of the Act of 1948 not only included the regular employees of the Establishment but also such other employees, who are engaged by the Establishment in relation to the work carried out by the Establishment. She submits that even if the independent contractors were engaged by the Establishment to execute the work outside the Establishment but at the specification and direction of the Establishment, employees of such independent contractors would also fall within the definition of the "employees" under Section 2(9) of the Act of 1948 and therefore, the contribution also had to be paid by the Establishment. She further contends that since the independent contractors executed the project under the
- 12 -
NC: 2024:KHC:20560 MFA No. 7971 of 2011 supervision of the Establishment, the employees engaged by the said independent contractors also would be "employees" for the purpose of Section 2(9) of the Act of 1948 and therefore, contribution also had to be paid on the amount paid to these independent contractors. In so far as loading and unloading, painting and carpentry work is concerned, she contends that since the wages were paid for loading and unloading work as well as painting and carpentry work which related to the work of the Establishment, contribution ought to have been paid on the wages by treating those employees as "employees" under Section 2(9) of the Act of 1948.
17. In support of the contention that even the casual employees or temporary employees would fall within the definition of the "employees", the learned counsel for the Corporation relied upon the judgment of this Court in the case of M/s. Escorts Ltd., vs. Regional Director, ESIC [ILR 1986 KAR 3595]. As regards power of the Corporation under Section 45A of the Act of 1948, learned counsel relied upon the judgment of the Hon'ble Apex Court in the case of Employees' State Insurance Corporation vs. M/s. F. Fibre Bangalore (P) Ltd., [(1997) 1 SCC 625]. In so far as contentions that
- 13 -
NC: 2024:KHC:20560 MFA No. 7971 of 2011 the burden of proof to establish that the Establishment was not liable to pay contribution was upon it, the learned counsel relied upon the judgment of the Hon'ble Apex Court in the case of Modella Woollens Ltd., vs. Employees' State Insurance Corporation and another [1994 Supp. (3) SCC 580]. In support of the claim that Hamalis, who were engaged for carrying loading and unloading work would fall within the definition of "employees", the Corporation relied upon the judgment of the Hon'ble Apex Court in the case of Rajakamal Transport and another vs. Employees' State Insurance Corporation, Hyderabad [(1996) 9 SCC 644]. Likewise, it relied upon the judgment of the Coordinate Bench of this Court in the case of Siddeshwara and company vs. Employees' State Insurance [(1996) SCC Online Kar 614].
18. Per contra, learned counsel for the Establishment has submitted a detailed written arguments contending that the contractors engaged by the Establishment had raised bills and vouchers at Ex.A54 to A56 and the contractors were examined before the ESI Court. It stated that ESI Court was convinced that the claim made towards payment made to these contractors did not attract any contribution as they were all
- 14 -
NC: 2024:KHC:20560 MFA No. 7971 of 2011 independent contractors, who executed work for the Establishment. In so far as loading and unloading charges is concerned, it is contended that the activity of loading and unloading was with cranes at the Establishment and at the site of the customers of the Establishment and was not the main business of the Establishment but was only incidental to it. It also contended that there was no proof regarding engagement of any manual labour and hence, claimed that contribution on these grounds was not justified. He relied upon the judgment of the Hon'ble Apex Court in the case of The Managing Director, Hassan Cooperative Milk Producer's Society Union Limited vs. The Assistant Regional Director Employees State Insurance Corporation [(2010) 11 SCC 537] and contended that the casual employment not under the supervision of the principal employer does not attract the contribution on payment made to them. In so far as painting and carpentry work is concerned, it is contended that they were done by independent contractors and occasionally when the need arose. It contended that this was established by Exs.A57 to A79. The ESI Court after being satisfied that there was no
- 15 -
NC: 2024:KHC:20560 MFA No. 7971 of 2011 liability to pay contribution on the said charges, disallowed the claim of the Corporation.
19. I have considered the submissions made by the learned counsel for the Corporation and the learned counsel for the Establishment. I have also perused the records produced before the E.S.I. Court as well as its order, which is impugned in this appeal.
20. Before going to the questions raised in this appeal, it is appropriate to notice that the Act of 1948 is a legislation that provides certain benefits to the employees in case of sickness, maternity and employment injuries. It is in the light of this, that the word 'employee' is obliviously defined under Section 2(9) of the Act of 1948 to not only include employees who are directly employed by the principal employer, but also those employees, who were employed through an immediate employer, either 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
- 16 -
NC: 2024:KHC:20560 MFA No. 7971 of 2011 factory or establishment. It also includes those employees 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. The word 'wages' is also defined under Section 2(22) of the Act of 1948 to include 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 all such payments in respect of any period of authorised leave, lock-out, strike etc. In the present case, we are concerned with the definition of the word 'employee' as found in Section 2(9)
(ii) of the Act of 1948. The Hon'ble Apex Court in the case of The Managing Director, Hassan Co-operative Milk Producer's Society Union Limited, supra, while considering the purport of the word "employee" as found in Section 2(9)(ii) held as follows:
"17. ...... But as stated in Royal Talkies that merely being employed in connection with the 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
- 17 -
NC: 2024:KHC:20560 MFA No. 7971 of 2011 one or other of the three categories mentioned in Section 2(9). Are these workers covered by any of these categories?
18. It is not the case of any of the parties nor there is any evidence to show that the persons who did loading and unloading were directly employed by the appellants. Section 2(9)(i) is, therefore clearly not attracted as it covers the workers who are directly employed by the principal employer. As a matter of fact, the thrust of the arguments centred round clause (ii) of Section 2(9). This clause, requires either (a) that the person to be an employee should be employed on the premises of the factory or establishment, or (b) that the work is done by the person employed under the supervision of the principal employer or his agent on work which is ordinarily part 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. The expression "on the premises of the factory or establishment"
comprehends presence of the persons on the premises of the factory or establishment for execution of the principal activity of the industrial establishment and not casual or occasional presence. We shall again assume in favour of the E.S.I. Corporation that for the purposes of loading
- 18 -
NC: 2024:KHC:20560 MFA No. 7971 of 2011 and unloading the milk cans, the truck driver and loaders enter the premises of the appellants but mere entry for such purpose cannot be treated as an employment of those persons on the premises of the factory or establishment. We are afraid, the said expression does not comprehend every person who enters the factory for whatever purpose. This is not and can never be said to be the purpose of the expression. It has to be held that the persons employed by the contractor for loading and unloading of milk cans are not the persons employed on the premises of the appellants' establishment."
21. Further, for an employee to be brought within a sweep of Section 2(9)(ii) of the Act of 1948, it is necessary that he/she must be ordinarily part of the Establishment and the work of the Establishment carried on by the employee must be preliminary or incidental to the purpose of the Establishment. A perusal of Section 2(9) (ii) of the Act of 1948 shows that the employee must be under the supervision of the principal employer or his agent on work, which is ordinarily part of the work of the factory or establishment. The word supervision of the principal employer fell for consideration before the Hon'ble Apex Court in the case of Culcutta Electric Supply
- 19 -
NC: 2024:KHC:20560 MFA No. 7971 of 2011 Corporation Limited., and others Vs. Subhash Chandra Bose and others reported in AIR 1992 SC 573 where the Apex Court held in paragraph No.14 as follows:
"14. ......In the textual sense `supervision' of the principal employer or his agent is on `work' at the places envisaged and the word `work' can neither be construed so broadly to be the final act of acceptance or rejection of work, nor so narrowly so as to be supervision at all times and at each and every step of the work. A harmonious construction alone would help carry out the purpose of the Act, which would mean moderating the two extremes. When the employee is put to work under the eye and gaze of the principal employer, or his agent, where he can be watched secretly, accidentally, or occasionally, while the work is in progress, so as to scrutinise the quality thereof and to detect faults therein, as also put to timely remedial measures by directions given, finally leading to the satisfactory completion and acceptance of the work, that would in our view be supervision for the purposes of Section 2(9) of the Act. It is the consistency of vigil, the proverbial `a stich in time saves nine'. The standards of vigil would of course depend on the facts of each case. Now this function, the principal employer, no doubt can delegate to his agent who in the eye of law is his second self, i.e., a substitute of
- 20 -
NC: 2024:KHC:20560 MFA No. 7971 of 2011 the principal employer. The immediate employer, instantly, the electrical contractors, can by statutory compulsion never be the agent of the principal employer. If such a relationship is permitted to be established it would not only obliterate the distinction between the two, but would violate the provisions of the Act as well as the contractual principle that a contractor and a contractee cannot be the same person..........".
22. In the case on hand, the order under Section 45(A) of the Act of 1948 is passed based on the ledger extracts of the Establishment that were inspected by the inspector of the Corporation. In so far as the security charges demanded by the Corporation is concerned, the observation note, did not bear any reference to the agency which provided the security services. On the contrary, Ex.A.25, is a Form No.6 filed by the M/s. Vab Services, which shows that the security guards deputed at the Establishment were all covered under the provisions of the Act of 1948. Therefore, the Establishment was exempt from payment of any contribution on the security charges paid to M/s. Vab Services. RW.1 who was cross- examined, specifically admitted the fact that the Establishment
- 21 -
NC: 2024:KHC:20560 MFA No. 7971 of 2011 had availed the services of M/s. Vab Services in the following words:
"ªÉÄÃ¯É ºÉýzÀ ªÉĸÀ¸ïð ªÁå¨ï ¸À«ð¸À¸ï JA§ÄzÀÄ E E¸ï L PÁAiÉÄÝAiÀÄr ¸ÀévÀAvÀæªÁV £ÉÆÃAzÁ¬ÄvÀªÁV ¯ÁUÀÄ DVgÀĪÀ ¸ÀA¸ÉÜ DVzÉ ¤d. ¸À¢æ ¸ÀA¸ÉÜUÉ E J¸ï L PÁ¥ÉÆÃðgÉõÀ£ï£ÀªÀgÀÄ PÉÆÃqÀ£ÀA§æ PÉÆnÖzÁÝgÉ CAzÀgÉ ¤d. D jÃw PÉÆlÖAvÀ PÉÆÃqï £ÀA§æªÀ£ÀÄß ¤Dgï 3 gÀ°è £ÀªÀÄÆ¢¹zÉÝãÉ.
£Á£ÀÄ ¤Dgï 3 gÀ°è ªÉ¨ïì ¸ÀA¸ÉÜ ¥ÀgÀªÁV ªÀAwUÉ ºÀtªÀ£ÀÄß PÉÆqÀ¨ÉÃPÉAzÀÄ PÉüÀzÉà EzÀÝgÀÆ PÀÆqÁ ¤Dgï 3 gÀ°è ªÉ¨ï ¸ÀA¸ÉܨÁ§ÄÛ ªÀAwUÉ ºÀt PÉÆqÀ¨ÉÃPÉAzÀÄ vÉÆÃj¹zÁÝgÉ CAzÀgÉ ¤d."
The said M/s. Vab Services was also registered under the provisions of the Act of 1948. Thus, the demand for contribution on the security charges paid by the Establishment was not justified. The E.S.I. Court was therefore, justified in not allowing the contribution demanded on the security charges.
23. In so far as the fabrication charges are concerned, the contribution is demanded based on the ledger extracts maintained by the Establishment, which are marked at Exs.A.30 to 35 for the years 1999-2000, 2001-02, 2001-02, 2002-03, 2003-04 and 2004-05. There are references in these
- 22 -
NC: 2024:KHC:20560 MFA No. 7971 of 2011 ledger extracts that payments were made to K. Madhu, Sri Ganesh Construction, Souza Engineering Service, Murali, P.K. Mukesh, Indian Engineering Works, B.C. Bangera. The Corporation has proceeded on the assumption that these fabrication expenses were paid to fabricators, who had fabricated equipments at the various worksites of the Establishment and that those persons were under the supervision of the Establishment and therefore, the fabrication charges paid to these persons were also to be accounted for the purpose of contribution. The Establishment has examined AW.2 - Mr. Madhu K., who admitted that a sum of Rs.31,81,534/- was paid to him towards fabrication charges. AW.3 was the Manager of Shanker Industries who had also provided services to the Establishment and he marked Ex.A.79 to show that the Shanker Industries was also an Establishment covered under the Act of 1948. AW.4 was another contractor who was engaged in Establishment who provided fabrication services at the worksite of the Establishment.
24. The Corporation did not suggest to any of these witnesses that the employees engaged by them were under the direct control or the supervision of the Establishment. A
- 23 -
NC: 2024:KHC:20560 MFA No. 7971 of 2011 solitary suggestion was put to AW.2 that the Establishment used to provide specific models which was admitted by him. It was also suggested that the work executed by him was verified by the engineers of the Establishment. Except this, there was nothing to show that the employees of the immediate employer worked under the direct supervision of the principal employer namely, the Establishment. Likewise, a suggestion was put to AW.3 that the officials of the Establishment were closely verifying the work executed by the employees of the immediate employer. However, he pleaded ignorance of the same. AW.4 was yet another immediate employer to whom no suggestion was made about the supervision of the work executed by the Establishment. Having regard to the nature of payments made to the immediate employers, namely, to persons such as AWs.2, 3 and 4, it appears that the job executed by such persons were on contract at the worksite of the Establishment. The design and specification were provided by the Establishment and were executed by independent contractors at the worksite. There is nothing on record to establish that the engineers of the Establishment were constantly supervising the fabrication work at the worksite. Mere having control over
- 24 -
NC: 2024:KHC:20560 MFA No. 7971 of 2011 the acceptance of the finished project, would not itself be sufficient to consider that these employees were under the supervision of the principal employer so as to fall within the definition of 'employee' as found in Section 2(9) (ii) of the Act of 1948. It is profitable to refer to the judgment of the High Court of Judicature at Madras in the case of Employees' State Insurance Corporation Vs. Bethall Engineering Company, where the full Bench of the Madras High Court held as under:
"6. xxxxx. ...... the word 'supervision' in the textual context required independent construction. In the ordinary dictional sense 'to supervise' means to direct or oversee the performance or operation of an activity and to oversee it, watch over and direct."
25. Therefore, in the absence of any material proof to show that the payment of fabrication charges also attracted contribution under the provisions of the Act of 1948, the demand made by the Corporation was not justified and therefore, the E.S.I. Court was right in refusing the claim of the Corporation.
- 25 -
NC: 2024:KHC:20560 MFA No. 7971 of 2011
26. Likewise, in so far as the painting and carpentry charges are concerned, the Corporation did not chose to either call upon the persons who had executed the work to ascertain whether there was any supervision by the principal employer over the works executed by them at the customers' site. There was not a shred of evidence to drive home the fact that such painting and carpentry charges were paid in respect of works that were done at the site or at the Establishment. The Corporation also did not call upon the Establishment to furnish the vouchers maintained for the aforesaid purpose to ascertain whether the payments made towards carpentry and painting charges were in respect of works executed at the customers site or at the site of the factory or Establishment. Therefore, without there being sufficient proof that these painting charges and carpentry charges were paid to the immediate employers whose employees were under the direct supervision of the Establishment, it was not justified in making a claim for contribution on the charges paid towards painting and carpentry charges. Besides this, carpentry and painting was neither the main nor incidental business of the Establishment. A perusal of the cross-examination of AW.1 also does not indicate
- 26 -
NC: 2024:KHC:20560 MFA No. 7971 of 2011 that these payments were made in respect of works that were either done at the customers site or at the Establishment itself.
27. In so far as the demand for contribution on loading and unloading charges are concerned, this demand too was predicated on the ledger extract of the Establishment at Exs.A.36 to 41. Several entries are found in these ledger extracts that payments were made towards crane charges, crane operator charges etc. There are certain entries where payments are made to the port workers who definitely were not employees under the direct supervision of the principal employer namely, Establishment. However, there are certain sundry entries in the ledger extracts which indicate that they were towards the loading and unloading expenses which obviously related to the work of the Establishment either at site or at the premises of the Establishment per se. Therefore, the Corporation was not entitled to claim any contribution for the expenses incurred towards crane charges, crane operator charges etc. The Corporation was only entitled to claim contribution on the loading and unloading charges that were paid by the Establishment to workers during the relevant time.
- 27 -
NC: 2024:KHC:20560 MFA No. 7971 of 2011
28. In view of the above, this appeal is allowed in part. The impugned order passed by the E.S.I. Court only insofar as it relates to claim for contribution on loading and unloading charges is set aside and the case is remitted back to the Corporation which shall take into account the loading and unloading expenses as found in Ex.A.36 to Ex.A.41 and claim contribution on loading and unloading charges excluding the charges paid towards crane charges, crane operator charges or charges paid to the port workers etc. Sd/-
JUDGE PMR - Para 1 to 18 RSP - Para 19 to end List No.: 19 Sl No.: 1