Jharkhand High Court
M/S Shiv Sales & Services vs Employees State Insurance ... on 11 August, 2022
Author: Anil Kumar Choudhary
Bench: Anil Kumar Choudhary
1 M.A. 161 of 2009
IN THE HIGH COURT OF JHARKHAND AT RANCHI
M.A. No. 161 of 2009
(Against the order dated 30.04.2009 passed by Presiding Officer, Labour
Court, Ranchi in ESI case no. 16 of 2002 and ESI Case no. 05 of 2005)
M/s Shiv Sales & Services, partnership firm though its partner Jitendra
Kumar Sahu @ Jitendra Kumar, son of Shiv Prasad Sahu, carrying on
business at Harmu, Ratu Road, P.S.- Sukhdeonagar, P.O. & Dist.- Ranchi
and permanent and present resident of Harmu Road, P.S.-
Sukhdeonagar, P.O. & Dist.- Ranchi
..... Petitioner /Appellant
Versus
Employees State Insurance Corporation through its Deputy
Director, ESIC Bhawan, Bailey Raod, P.O. & Dist.- Patna- 800001
The Manager, Employees State Insurance Corporation, Kokar
P.S.- Sadar, P.O. - District - Ranchi
The ESI Inspector, ESI Corporation, Kokar, P.S.- Sadar, P.O. &
Dist.- Ranchi
Employees State Insurance Corporation through its Director,
Panchdeep Bhawan, J.L. Nehru Marg, P.O. & P.S.- Patna
..... Opp. Parties / Respondents
For the Appellants : Mr. Nipun Bakshi , Adv.
For the Respondents : Mr. Ashutosh Anand, Adv.
PRESENT
HON'BLE MR. JUSTICE ANIL KUMAR CHOUDHARY
By the Court :- Heard the parties.
2. This appeal has been preferred against the order dated 30.04.2009
passed by Presiding Officer, Labour Court, Ranchi in ESI case no. 16
of 2002 and ESI Case no. 05 of 2005 whereby and where under, the
ESI Court has dismissed the application filed under Section 75 (1) (g)
of the ESI Act, 1948.
3. The brief facts of this case are that the petitioner-appellant at the
relevant time was an authorized dealer of TVS Suzuki two wheelers
and spare parts. It is the case of the petitioner-appellant that it had
engaged maximum 09 employees in its said establishment. On
04.02.2000, the respondent no. 3 visited the establishment of the
petitioner-appellant and found 10 persons employed by the said
2 M.A. 161 of 2009
establishment of the petitioner-appellant. The respondent no. 3 gave
a memo called "Observation and on Inspection of Records" where he
recorded the name of the ten persons who were said to be working
in the establishment of the petitioner-appellant and since the power
was used in the said establishment of the petitioner-appellant, it was
observed by respondent no. 3 that the establishment is covered
under ESI Act with effect from 04.02.2020. It is the further case of the
petitioner-appellant that out of ten employees mentioned in the said
memo of the respondent no. 3, one person namely Pradeep Kumar
Pramanik was not actually an employee of the petitioner-appellant
and that he was a professional accountant and he used to do
accounting jobs of several establishments including the
establishment of the petitioner-appellant on payment of the charges.
The said Pradeep Kumar Pramanik is not a qualified accountant but
is B.Com by qualification. It the case of the petitioner-appellant that
after the said inspection the petitioner-appellant sent a letter dated
23.02.2000, enclosing therewith the affidavit of Pradeep Kumar
Pramanik, in which he has stated on oath that he was professional
accountant and not an employee of the petitioner-appellant and he
used to do the accounting work on professional basis for several
establishments but even after that, the respondent no. 2 passed an
order on 08.08.2000 finding the said Pradeep Kumar Pramanik to be
an employee under section 2 (9) of the Employees State Insurance
Act, 1948. Thereafter, the respondent no. 3 sent letter dated
18.08.2000 to the petitioner-appellant informing petitioner-appellant
about the coverage of his establishment under the Employees State
Insurance Act, 1948 and directing the petitioner-appellant to fill-up
the prescribed form for this purpose. Against the letter dated
08.08.2000, the petitioner-appellant filed a petition under Section 75
of the Employees State Insurance Act, 1948 before the then ESI Court
at Patna and the same was registered as ESI case no. 20 of 2000 but
the respondent thereafter, during pendency of the said case, issued
notice dated 20/23.04.2002 to show-cause as to why the contribution
mentioned therein, be not recovered from the petitioner-appellant.
Thereafter, the respondent no. 2 dispatched to the petitioner a
purported order dated 26.08.2002/ 20.09.2002 under Section 45A of
3 M.A. 161 of 2009
the Employees State Insurance Act, 1948 by the registered post with
A/D from Patna which was received by the petitioner at Ranchi on
08.09.2002 and by the said order under Section 45 A of the
Employees State Insurance Act, 1948, the respondent no. 2 asked for
contributions totaling to Rs. 32,293/- for the period from 04.02.2000
to 31.03.2002.
4. In their show-cause filed by the respondents, they opposed the
petition under Section 75 of the Employees State Insurance Act, 1948
on the technical grounds. Besides they pleaded that at the time of
visit of the respondent no. 3, the petitioner Sri J.K. Sahu was present
and the respondent no. 3 - the Inspector asked for the records such
as attendance register, wages register or any other records relating to
the employment but the petitioner did not produce any record on the
plea that he did not maintain the same, so the respondent no. 3- the
Inspector counted the employees present and noted the names of the
employees who were ten in numbers and handed over the same to
the partner namely Jitendra Kumar Sahu of the establishment being
M/s Sheo Sale and Service. Though the respondent no. 3- the
Inspector in his observation sheet bearing number 11409, mentioned
the name of the ten persons and also requested the establishment to
arrange the maintained attendance register, cash book and it was
also mentioned that the establishment stands covered with effect
from 04.02.2000 being a power using unit, so the coverage of the
establishment of the petitioner unit was established. It was also
pleaded by the respondents that the petitioner, at the time of serving
of the copy of the said observation sheet, had not raised any dispute
regarding engagement of ten persons but subsequently, as an after-
thought, with an intention to escape the liability under the Act, took
the plea that the said Pradeep Kumar Pramanik was not an employee
of the establishment. It was also contended by the respondent that in
the absence of production of any records of the establishment and
the admission of the petition that he did not maintain such records,
before the respondent no. 3- the inspector at the time of inspection of
his establishment on 04.02.2000 and the fact that the petitioner
received the observation sheet without demur and without objection,
4 M.A. 161 of 2009
the same amounts to acceptance of the record, hence, it was
submitted that the petition be rejected.
5. On the basis of the rival pleadings of the parties, learned ESI Court
settled the following four issues:-
(I) Whether the petitioner has got valid cause of action to
maintain the petition under Section 75 (1) (g) of the ESI
Act?
(II) Whether the petition filed by the petitioner is barred by
limitation?
(III) Whether the ESI Corporation has rightly covered the
petitioner's firm under the purview of ESI Act?
(IV) Whether the petitioner is entitled to get any relief?
6. In support of its case, the petitioner-appellant examined two
witnesses being Jitendra Kumar Sahu- PW1 and Pradeep Kumar
Pramanik- PW2 and besides the oral testimony, the petitioner proved
documents which have been marked as Exhibit 1 to 6/a. On the
other hand from the side of the opposite party-respondents- the
Inspector, Jaglal Choudhary, was examined as OPW 1 and opposite
parties also proved the four documents, which have been marked as
Exhibit A to D.
7. The ESI Court after taking into consideration both oral and
documentary evidence in the record, came to the conclusion that, as
the evidence in the record establishes that Pradeep Kumar Pramanik
was being paid remuneration for the work of part-time job the same
comes within the definition of the employee under Section 2(9) of the
Employees State Insurance Act, 1948. Regarding the other plea that
one of employees was paid more than Rs. 6,500/-, it was not
considered by the ESI Court as the said plea was not taken in the
petition filed under Section 75 (1) (g) of the ESI Act, 1948.
8. At the time of the admission of this appeal, following three
substantial questions of law were framed vide order dated
31.03.2010:-
(i) Whether the professional accountant will be included
among the list of employees?
5 M.A. 161 of 2009
(ii) Whether the impugned order (Annexure-3) passed by the
Dy. Director is legal under Section 45 of the ESIC Act or
not?
(iii) Whether the Manager is drawing the salary as fixed by the
ESIC?
9. Mr. Nipun Bakshi, learned counsel for the petitioner-appellant
submits that since Pradeep Kumar Pramanik was a professional
accountant and he was working not only under the establishment of
the petitioner-appellant but under several other establishments as
well and there was no supervision or control of his work by the
petitioner-appellant hence, the said Pradeep Kumar Pramanik
cannot be treated to be an employee of the establishment of the
petitioner-appellant and if he is excluded from the list of employees
then the number of remaining employees will come down to nine,
hence, the establishment of the petitioner-appellant is not covered
under the Employees State Insurance Act, 1948.
10. In support of his contention, Mr. Bakshi relies upon the judgment of
Hon'ble Supreme Court of India in the case of Muir Mills Unit of
NTC (U.P.) Ltd. Vs. Swayam Prakash Srivastava and Another
reported in 2007 (1) SCC 491 wherein the issue before the Hon'ble
Supreme Court was 'whether the Legal Assistant falls under the
definition of workmen, under the Industrial Dispute Act', the
Hon'ble Supreme Court observed in paragraph 38 to 40, as under :
"38. Furthermore, if we draw a distinction between occupation and
profession we can see that an occupation is a principal activity (job, work or
calling) that earns money (regular wage or salary) for a person and a
profession is an occupation that requires extensive training and the study
and mastery of specialised knowledge and usually has a professional
association, ethical code and process of certification or licensing. Classically,
there were only three professions: ministry, medicine and law. These three
professions each hold to a specific code of ethics and members are almost
universally required to swear to some form of oath to uphold those ethics,
therefore "professing" to a higher standard of accountability. Each of these
professions also provides and requires extensive training in the meaning,
value and importance of its particular oath in the practise of that profession.
39. A member of a profession is termed a professional. However,
professional is also used for the acceptance of payment for an activity. Also a
profession can also refer to any activity from which one earns one's living, so
in that sense sport is a profession.
40. Therefore, it is clear that Respondent 1 herein is a professional
and never can a professional be termed as a workman under any law."
(Emphasis supplied)
11. Mr. Bakshi next relies upon the judgment of the Hon'ble Supreme
Court of India in the case of Managing Director, Hassan
6 M.A. 161 of 2009
Cooperative. Milk Producer's Society Union Ltd. vs. Assistant
Regional Director, Employee's State Insurance Corporation reported
in 2010 (11) SCC 537, in that case the issue before the Hon'ble
Supreme Court of India was 'as to whether the workers engaged by
contractors in performance of contract awarded by the appellants
for transportation of milk were employees of the principal
employer', it was held by Hon'ble Supreme Court of India that they
were not employees of the principal employer under Section 2 (9) of
the Employees State Insurance Act, 1948 by observing thus in
paragraph 28 to 33, which reads as under :-
"28. The decision in CESC Ltd. [(1992) 1 SCC 441 : 1992 SCC
(L&S) 313] also referred to the definition of "agent" drawn in Halsbury's
Laws of England (Hailsham Edn.) Vol. 1 at pp. 145-46, para 350 which is as
follows:
"350. Agent distinct from servant and independent contractor.--
***
An agent is to be distinguished on the one hand from a servant, and on the other from an independent contractor. A servant acts under the direct control and supervision of his master, and is bound to conform to all reasonable orders given to him in the course of his work; an independent contractor, on the other hand, is entirely independent of any control or interference, and merely undertakes to produce a specified result, employing his own means to produce that result. An agent, though bound to exercise his authority in accordance with all lawful instructions which may be given to him from time to time by his principal, is not subject in its exercise to the direct control or supervision of the principal."
29. After taking into consideration Section 182 of the Contract Act, 1872 that defines "agent", the majority view recorded its conclusion thus:
(CESC Ltd. Case [(1992) 1 SCC 441 : 1992 SCC (L&S) 313] , SCC p. 458, para 20) "20. Thus on both counts, the principal question as well as the subsidiary question must be answered against the ESIC holding that the employees of the electrical contractors, on the facts and circumstances, established before the Division Bench of the High Court, do not come in the grip of the Act and thus all demands made towards ESI contribution made against the CESC and the electrical contractors were invalid. We affirm the view of the High Court in that regard."
30. Although the ESI Court in respect of the appellants in separate orders has recorded a finding that such workers work under the supervision of the principal employer and the said finding has not been interfered with by the High Court but we find it difficult to accept the said finding. The ordinary meaning of the word "supervision" is "authority to direct" or "supervise" i.e. to oversee. The expression "supervision of the principal employer" under Section 2(9) means something more than mere exercise of some remote or indirect control over the activities or the work of the workers.
31. As held in CESC Ltd [(1992) 1 SCC 441 : 1992 SCC (L&S) 313] that supervision for the purposes of Section 2(9) is "consistency of vigil" by the principal employer so that if need be, remedial measures may be taken or suitable directions given for satisfactory completion of work. A direct disciplinary control by the principal employer over the workers engaged by the contractors may also be covered by the expression "supervision of the principal employer".
32. The circumstances, as in the case of Hcmpsu Ltd., that the authorised representatives of the principal employer are entitled to travel in the vehicle of the contractor free of charge or in the case of Burdcmps Union, that the principal employer has the right to ask for removal of such workers 7 M.A. 161 of 2009 who misbehave with their staff are not the circumstances which may even remotely suggest the control or interference exercised by the appellants over the workers engaged by the contractor for transportation of milk. From the agreements entered into by the appellants with the contractors, it does not transpire that the appellants have arrogated to themselves any supervisory control over the workers employed by the contractors. The said workers were under the direct control of the contractor.
33. Exercise of supervision and issue of some direction by the principal employer over the activities of the contractor and his employees is inevitable in contracts of this nature and that by itself is not sufficient to make the principal employer liable. That the contractor is not an agent of the principal employer under Section 2(9)(ii) admits of no ambiguity. This aspect has been succinctly explained in CESC Ltd. [(1992) 1 SCC 441 : 1992 SCC (L&S) 313] with which we respectfully agree." (Emphasis supplied) hence, it is submitted by Mr. Bakshi that the professional accountants cannot be included among the list of employees, hence, Pradeep Kumar Pramanik, the professional accountant in this case, cannot be included in the list of employees.
12. So far as the 2nd substantial question of law, as to whether the Annexure 3 passed by the Deputy Director is legal under Section 45 of the ESI Act is concerned, Mr. Bakshi fairly submits that in view of the notification in this respect, he does not dispute the competence of the Deputy Director to issue order under Annexure 3 under Section 45 of the ESI Act.
13. Regarding 3rd substantial question of law, as to whether the Manager was drawing salary, as fixed by the Employees State Insurance Act, 1948 is concerned, Mr. Bakshi fairly submits that in the petition there is no averment regarding the wage earned by anyone of the employees but since in the oral testimony of PW1 as well as Exhibit 3, which is the attendance register with salary slip, it has been mentioned that Mr. Vikash Kumar Gupta was earning monthly salary of Rs. 6,600/- and the OPW1 in paragraph 22 has admitted that at the relevant time, the ceiling for the employees to be exempted from the definition under Section 2(9) of the ESI Act was Rs. 6,500/- and as the principle of pleadings as enumerated in the Code of Civil Procedure is not specifically applicable to the ESI Court in view of Section 78 of the ESI Act, 1948, the ESI Court ought not have precluded the contention of the petitioner-appellant to exclude Vikash Kumar Gupta from the list of the employees who can be counted as an employee of the petitioner-appellant establishment concerned, for bringing the establishment within the ambit of ESI 8 M.A. 161 of 2009 Act, 1948 is fallacious, hence, it is submitted that the impugned order of the ESI Court be set aside and the petition filed under Section 75(1) (g) of the ESI Act, 1948 filed by the petitioner-appellant be allowed.
14. Mr. Ashutosh Anand, learned counsel for the respondents on the other hand, defended the impugned order and submits that undisputedly the establishment of the petitioner-appellant was an authorized dealer for sale of the TVS motorcycle as well as spare parts and for servicing of the vehicles and such a big establishment, cannot run without a regular accountant. It is further submitted by Mr. Anand that admittedly, Pradeep Kr. Pramanik was not a qualified accountant but just has a B.Com degree and by no stretch of imagination he can be termed as a professional but at best he is a mere accounts Assistant; who is also known as accountants and such accountants are employees, even if, they are paid on work rendered by them on daily basis. It is further submitted by Mr. Anand that the fact that Pradeep Kr. Pramanik was an employee of the establishment, is a finding of fact given by the ESI Court after considering the evidence put forth by the rival parties and there is absolutely, no perversity in the said finding of the ESI Court hence, this Court ought not interfere with the finding of fact in exercise of its limited appellate jurisdiction under Section 82 of the ESI Act, 1948, which power can be exercised by this court if and only if there is a substantial question of law involved. It is further submitted by Mr. Anand that such finding of fact by the ESI Court based on sound principles of law of evidence do not involve any substantial question of law.
15. Mr. Anand further submits that the undisputed fact remains that the petitioner was not maintaining the records of the employees like the attendance register, wage register and the said fact is not disputed. So in the absence of the same, the acceptance of the observation memo by the establishment of appellant -petitioner, without demur amounts to admission of the contents of the observation memo and the plea that Pradeep Kumar Pramanik was not an employee, even after assuming the pleadings of the claimants to be true, for the first time, taken after 20 days from the date of the inspection and the 9 M.A. 161 of 2009 notice of the same was served, is an out and out after-thought, on the part of the petitioner-appellant establishment and the learned ESI Court having considered the said fact while arriving at the finding of the fact, hence the same is proper.
16. Mr. Anand next submitted that as no procedure has been prescribed by any Rule made by the State Government, a procedure akin to the Code of Civil Procedure is followed by the ESI Court, since basically the proceeding in respect of petition filed under Section 75 (1) (g) of the ESI Act, 1948, is proceeding of civil nature and otherwise also, it is a fair practice that unless a party knows the contention of the other party without any pleading and if evidence is permitted to be straightway brought into the record, the same cannot be effectively responded to by the respondent, hence, the adherence of the procedure akin to the Civil Procedure Code, by the ESI Court and basing upon that, excluding the claim of the appellant-petitioner establishment that Mr.Vikash Kumar Gupta was drawing a salary of Rs. 6,600/- as the said averment was not made in the petition filed under Section 75 (1) (g) of the ESI Act. More so because as undisputedly the petitioner-appellant did not produce the wage register or the attendance register of his employees to the respondent no. 3 on the date of his visit to the establishment of the petitioner- appellant, the only evidence regarding the said Mr.Vikash Kumar Gupta, drawing salary of ₹ 6600/- per month, that is the wage register, prima facie shows that the said register is a manufactured one as had it been a genuine one, there is no rhyme or reason for the petitioner-appellant not to produce the same before the respondent no.3 when the respondent no.3 inspected his establishment. So otherwise also the said wage register about which there is no pleading in the petition of the petitioner-appellant is neither admissible in evidence nor a trustworthy or reliable piece of evidence. Thus this act of ESI Court cannot be termed as perverse as well, hence, it is submitted that this petition being without any merit be dismissed.
17. Having heard the submissions made at the Bar and after going through the evidence in the record, so far as the first substantial question of law as to whether the professional accountant will be 10 M.A. 161 of 2009 included among the list of employees is concerned, the existing definition of professional accountant is an individual, who is member of International Federation of Accountants, member body. The accountants are basically of two types, first, who do the accounting work and second, who do the auditing work. So the professional accountants in view of the judgment in the case of Muir Mills Unit of NTC (U.P.) Ltd. Vs. Swayam Prakash Srivastava and Another (supra), is one who has extensive training and the study and mastery of specialised knowledge and usually is a member of professional association having ethical code and process of certification or licensing. Thus in the considered view of this Court, Pradeep Kumar Pramanik was not having any professional qualification as he was having only B.Com degree cannot be termed to be a professional within the parameters enunciated in the case of Muir Mills Unit of NTC (U.P.) Ltd. Vs. Swayam Prakash Srivastava and Another (supra), and the evidence in the record suggests that he was doing the work of the petitioner-appellant establishment and was paid remuneration for the part time job, this Court does not find any perversity in the finding of the ESI Court that Pradeep Kumar Pramanik was an employee of the petitioner-appellant establishment. From the discussions made above it is crystal clear that if a person is a professional accountant being member of International Federation of Accountants like a Chartered Accountant or a professional from the field of medicine and law who has extensive training and the study and mastery of specialised knowledge will not be included among the list of employees but certainly a person who has read up to B.Com cannot be bracketed with the professional accountant like a Chartered Accountant, to be excluded from the list of employees. The first substantial question of law is answered accordingly.
18. So far as the 2nd substantial question of law is concerned, as Mr. Bakshi has fairly submitted that since the Deputy Director is competent to pass an order vide Annexure 3 under Section 45 of the ESI Act, 1948, hence, the same is answered in the negative.
19. So far as the 3rd substantial question of law is concerned, it is a settled principle of law that "employee" would include not only 11 M.A. 161 of 2009 persons employed in the factory but also person connected with the work of the factory. The employee may be working within the factory or outside the factory or may be employed for administrative purposes or for purchase of raw materials or for sale of the finished goods all such employees are included within the definition of "employee", as has been held by the Hon'ble Supreme Court of India in the case of Hyderabad Asbestos Cement Products Ltd vs Employees Insurance Court and another reported in AIR 1978 SC 356, paragraph 13 of which reads as under :-
"13. It was submitted that the test as to whether an employee is an employee "in a factory" is the test of not physical presence or absence outside the precincts of the factory but the test is whether he is under the control of the factory and is on the factory wage roll, or other similar tests. We are unable to accept the contention for on a reading of the relevant sections it is clear that the word "employee" would include not only persons employed in the factory but also person connected with the work of the factory. The employee may be working within the factory or outside the factory or may be employed for administrative purposes or for purchase of raw materials or for sale of the finished goods all such employees are included within the definition of "employee". A recent decision of the Bench of the Madras High Court in W.Ps. 144-149 and 331 of 1971 dated 14th October, 1976 (Mad) has also taken a similar view. We agree with the view taken by the judgments of the Andhra High Court and of the Calcutta High Court and dismiss these appeals with costs." (Emphasis supplied) So to find out whether a person employed is an employee or not within the meaning of section 2 (9) of the ESI Act, 1948, the designation does not matter, what matters whether the person is connected with the work of the factory and obviously his salary. If the salary of an employee is more than the ceiling fixed from time to time under Rule 50 ESI (Central) Rules, 1950, so such employees are to be excluded from being treated as an employee of the establishment concerned so far as the applicability of ESI Act, 1948 is concerned. Now coming to the facts of this case, as the petitioner has not pleaded in his petition under Section 75(1) (g) of the ESI Act, that Vikash Kumar Gupta was drawing salary of Rs. 6,600/-, I do not find any fault with the ESI Court for adopting the procedure akin to the Code of Civil Procedure and applying such procedure excluding the said contention regarding which, there is no pleadings, from consideration of the same and certainly, if such things are allowed, the adverse party will be taken by surprise and cannot respond to such new pleas, in respect of which, there is no pleading. Hence, the impugned order passed by learned Labour Court cannot be termed
12 M.A. 161 of 2009 as perverse. Otherwise also the wage register which is the only evidence placed by the petitioner-appellant to claim that Mr. Gupta, who was one of his employee was drawing salary of more than ₹ 6600/- per month, was undisputedly not placed before the respondent no.3 when he visited the establishment of the petitioner- appellant. So it is not difficult to fathom that obviously the same was the document manufactured for the purpose of the case, as even at the stage of filing the petition, there is no reference to the same in the petition filed under Section 75(1) (g) of the ESI Act, 1948. Thus this Court has no hesitation in holding that there is no credible evidence in the record to suggest that there was any manager in the petitioner- appellant establishment and such Manager was drawing the salary of ₹ 6600/-per month. The 3rd substantial question of law is answered accordingly.
20. Because of the discussions made above, this Court does not find any merit in this appeal, accordingly the same is dismissed on contest but in the circumstances, without any cost.
21. Let a copy this Judgment along with the Lower Court Records be sent back to the Court concerned forthwith.
(Anil Kumar Choudhary, J.) High Court of Jharkhand, Ranchi Dated, the 11th August, 2022 Smita /AFR