Andhra HC (Pre-Telangana)
E.S.I. Corporation, Rep. By Its ... vs Prakash Paper Mart, Rep. By Its Partner, ... on 4 December, 2002
JUDGMENT Gopala Krishna Tamada, J.
1. The Employees' State Insurance Corporation filed this appeal under Section 82 of the Employees State Insurance Act, 1948, aggrieved by the order dated 9-9-1996 passed in E.I. Case No. 2 of 1995 on the file of the Employees' Insurance Court at Hyderabad, by which the demand pertaining to the conversion charges of the workers who attended to the work of binding the books was set aside.
2. The brief facts that led to the filing of this appeal are as follows: The respondent herein is a partnership firm carrying on the business in the manufacture and sale of students' note books, registers etc., since 1995 and it has been paying the contributions under the Employees' State Insurance Act, 1948 (for short, 'the Act') from the date of coverage. The respondent purchases paper from the dealers and entrusts the same to the bookbinders who will bind those papers into books. Payments to those binders were made on piece rate basis by the respondent, which are known as 'conversion charges'. According to the respondent, it has been paying the contributions regularly to those employees who are on its rolls.
3. While so, the Recovery Officer, E.S.I. Corporation, Hill Fort Road, Adarsh Nagar, Hyderabad, visited the respondent's factory on 25-11-1988 and during the course of verification of the ledgers, it was found that the respondent recorded an amount of Rs.1,23,243.27 paise towards conversion charges but failed to pay the contribution on the said conversion charges as well as the incentive, which is supposed to be paid to the employees who are already covered under the Act, and also on the wages paid to some other employees. Accordingly, he submitted a report pursuant to which a notice dated 9-1-1989 was given to the respondent calling upon him to pay the contribution. Having received the said notice, the respondent has not chosen to give any reply. Subsequently, another inspection was made by the same Recovery Officer on 4-12-1989 and during the course of his inspection, he again found that the respondent has not paid the contribution on conversion charges of Rs.55,652.12 paise and wages of Rs.2,890/- and accordingly he submitted a report.
4. As the respondent has not complied with the said demand, an order was passed under Section 45A of the Act directing the respondent to pay the contribution on conversion charges working out to Rs.13,695/- with interest calculated at Rs.6,272/-. As the amounts were not paid, the subject was entrusted by the appellant to its Recovery Officer, who in turn addressed a letter dated 22-11-1994 to the Branch Manager, Syndicate Bank, wherein the respondent is having account requesting him to freeze the account of the respondent. On information, the respondent woke up and gave a reply to the appellant on 15-12-1994 offering to produce all the relevant records. On verification of the records etc., the Recovery Officer of the appellant's Corporation issued a notice dated 16-12-1994 to the Branch Manager, Syndicate Bank attaching an amount of Rs.28,042/- belonging to the respondent which is lying to the credit of the respondent's bank account. Questioning the said action, the respondent filed a petition under Section 75 of the Act before the Employees' State Insurance Court, Hyderabad.
5. The main contention urged by the respondent-firm in the court below is that the respondent is neither the principal employer nor the binder to whom the work is entrusted got the work done in its premises and as such, the respondent-firm does not come within the meaning of the word 'employee', as defined in Section 2 (9) of the Act. It was, therefore, contended that the appellant ought not to have directed the respondent to pay the contribution on the conversion charges. After taking all the aspects into consideration, the Presiding Officer of the Employees Insurance Court while negativing the other contentions put forth by the respondent herein with regard to the amounts paid to the civil contractors etc., upheld the contention that the respondent is not entitled to pay the contribution towards the conversion charges. Questioning the said order, the present appeal is filed by the E.S.I. Corporation.
6. It is mainly contended by the learned counsel for the appellant-Corporation that the respondent-firm is the principal employer and it has got overall control over the workers who are employed by its immediate employer i.e., the binder. According to the learned counsel, when once it is accepted that the binder is the immediate employer and the respondent is the principal employer, the workers employed by the immediate employer shall also fall within the provisions of Section 2 (9) of the Act and as such the respondent herein is bound to pay the contribution towards conversion charges; but the court below misinterpreted the provisions of Section 2 (9) and disallowed the claim of the Corporation.
7. On the other hand, the learned counsel for the respondent-firm has brought to my notice the provisions of Section 2 (9) of the Act and submitted that if a principal employer employs any person directly, then only the question of payment of contribution towards conversion charges under the Act would arise irrespective of the fact whether the said work is done within the premises or outside the premises of the principal employer. Similarly, he contended that, if the workers are employed by the immediate employer and not the principal employer and if the said work is done within the campus or premises of the principal employer, then also such principal employer falls within the meaning of the definition of 'employee' occurring in Section 2 (9) of the Act. But, in the instant case, it is contended that, the respondent-firm entrusts the work to the binders for the purpose of binding the papers on piece rate basis and it is the job of the said binders to get the books bound at any place of their choice and that as the said work was not got done within the premises of the respondent, the respondent cannot be termed as principal employer within the meaning of Section 2 (9) of the Act.
8. In the light of the above contentions, the point that falls for consideration is whether the respondent comes within the meaning of Section 2 (9) of the Act and if so, whether it is liable to pay the contribution under the Act over the conversion charges.
9. To understand the case in its correct perspective, it is necessary to refer to Section 2 (9) of the Act, which reads as follows:
" (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 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 (Act No. 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 a month 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. "
10. From a reading of the above provision of law, it is clear that an 'employee' is a person who is directly employed by the principal employer irrespective of the fact whether the work is done within the premises of the principal employer or elsewhere and even if such employee is engaged through an immediate employer and not by the principal employer but if the work is done within the premises of the principal employer.
11. Similar question had also fallen for consideration before the apex court in a case reported in C.E.S.C. LIMITED v. S.C. BOSE, 1992 (64) F.L.R. 248, and the apex court interpreted the word 'employee' under Section 2 (9) of the Act. The relevant paragraph is as follows:
" In whatever manner the word 'employee' under Section 2 (9) be construed, liberally or restrictedly, the construction cannot go to the extent of ruling out the function and role of the immediate employer or obliterating the distance between the principal employer and the immediate employer. In some situations he is the cut-off. He is the one who stumbles in the way of direct nexus being established, unless statutorily fictioned, between the employee and the principal employer. He is the one who in a given situation is the principal employer to the employee, directly employed under him. If the work by the employee is conducted under the immediate gaze or overseeing of the principal employer, or his agent, subject to other conditions as envisaged being fulfilled, he would be an employee for the purpose of section 2 (9). Thus besides the question afore-posed with regard to supervision of the principal employer the subsidiary question is whether instantly the contractual supervision exercised by the immediate employer (the electrical contractors) over his employee was exercised, on the terms of the contract, toward fulfilling a self-obligation or in discharge of duty as an agent of the principal employer."
12. Now, it shall be seen whether the persons so employed by the immediate employer i.e., the binder, who is employed by the respondent herein, come within the meaning of the word 'employee' as envisaged under Section 2 (9) of the Act with reference to the evidence adduced on record. In order to prove their contention, one of the partners of the respondent-firm was examined as P.W.1 and the binder to whom they entrusted the work, is examined as P.W.2. According to their evidence, the respondent purchased papers from the dealers and entrusted the same to the binder who will be paid on piece rate basis and the binder in his turn engages his own workers and gets the work done through them. It is categorically asserted by P.Ws.1 and 2 that the work was got done elsewhere by the binder himself but no documentary evidence is produced on their behalf to prove the said contention. However, during the course of evidence, the Recovery Officers of the appellant's Corporation (who are examined as R.Ws.1 and 2) clearly stated that the respondent entrusted the work to the paid contractor and in that regard they have made a mention at column 7 of the notice (Ex.R-5) which was issued to the respondent. Further, R.Ws.1 and 2 admitted in the reports, which were marked as Exs.R-4 and R-6, that the respondent entrusted the work to a paid contractor. From the above evidence, it can safely be inferred that the respondent-firm is the principal employer and it entrusts the job of binding to various binders on piece rate basis and the said binder in turn gets the books bound with the workers of his choice and return the bound books to the respondent herein. Further, to attract the provisions of Section 2 (9) (ii) of the Act, no evidence was adduced by the Corporation to establish the fact that the workers employed by the binders work in the premises of the respondent herein. Similarly, there is also no proof that the respondent has got any control over the binder or his employees to come within the meaning of Section 2 (9) (i) of the Act. Therefore, in view of the above evidence, I am of the considered opinion that the respondent is neither the principal employer nor the binder to whom the work is entrusted got the work done in its premises and as such, the respondent-firm does not come within the meaning of the word 'employee', as defined in Section 2 (9) of the Act. In view of the above discussion, the contention advanced on behalf of the appellant-Corporation that the respondent-firm is the principal employer as defined in Section 2 (9), is liable to be rejected.
13. Another important contention which is raised on behalf of the respondent-firm is that this appeal is not maintainable in view of the wording of Section 82 of the Act as no substantial question of law is raised. Section 82 of the Act deals with appeals, which reads as follows:
" 82. Appeal: Save as expressly provided in this section, no appeal shall lie from an order of an Employees Insurance Court.
2) An appeal shall lie to the High Court from an order of an Employees' Insurance Court if it involves a substantial acquisition of law.
3) The period of limitation for an appeal under this section shall be sixty days.
4) The provisions of Sections 5 and 12 of the Limitation Act, 1963 (36 of 1963) shall apply to appeals under this Section."
14. From a reading of sub-section (2) of Section 82, it is clear that it is only when any substantial question of law is involved, the High Court shall entertain an appeal against the order passed by the Employees Insurance Court. From a perusal of the order, the court below, interpreting Section 2 (9) of the Act, had only given a finding on fact that the persons employed by the binder cannot be termed as employees within the meaning of Section 2 (9) of the Act. The said finding is a pure finding of fact. For the foregoing reasons, I am of the opinion that this appeal is misconceived as it does not raise any substantial question of law. There are no merits in this appeal and the appeal is therefore liable to be dismissed.
15. In the result, the C.M.A. is dismissed. No costs.