Gujarat High Court
Employee State Insurance Corporation vs H K Acharya And Company on 7 October, 2022
Author: A. S. Supehia
Bench: A.S. Supehia
C/FA/3001/2022 CAV JUDGMENT DATED: 23/09/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO.3001 of 2022
With
CIVIL APPLICATION (FOR STAY) NO.1 of 2020
In R/FIRST APPEAL NO. 3001 of 2022
With
CIVIL APPLICATION (FOR ADDITIONAL EVIDENCE) NO.1 of 2022
In R/FIRST APPEAL NO.3001 of 2022
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE A.S. SUPEHIA Sd/-
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ? YES
2 To be referred to the Reporter or not ?
YES
3 Whether their Lordships wish to see the fair copy
of the judgment ? NO
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution NO
of India or any order made thereunder ?
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EMPLOYEE STATE INSURANCE CORPORATION
Versus
H K ACHARYA AND COMPANY
================================================================
Appearance:
MS DIMPLE A THAKER (6838) for the Appellant(s) No. 1
MR SN SOPARKAR, SENIOR ADVOCATE, with MR YOGI K GADHIA (5913)
for the Defendant(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE A.S. SUPEHIA
Date : 07/10/2022
CAV JUDGMENT
(1) The present appeal emanates from the judgment and award dated 30.08.2019 passed by the Employee State Insurance Court, Ahmedabad in E.S.I. Application No.31 of 2009, filed under section 82 of the Employee State Insurance Corporation Act, 1948 (in Page 1 of 13 Downloaded on : Fri Oct 07 21:03:33 IST 2022 C/FA/3001/2022 CAV JUDGMENT DATED: 23/09/2022 short "the ESI Act"), by which the court below has partly allowed the application holding that the action of the Employee State Insurance Corporation of issuing C-11 notice to the opponent-Firm under the ESI Act, thereby covering it under the provisions of the ESI Act w.e.f. 01.01.2007 is illegal and unreasonable and also held that the ad hoc assessment notice dated 06.04.2009 issued by the appellate- Corporation under section 45 of the ESI Act against the Firm is illegal and unreasonable.
FACTS:
(2) The opponent-Firm filed ESI Application No.31 of 2009 along with interim application before the Employee State Insurance Court, Ahmedabad under section 75 of the ESI Act challenging the order dated 19.04.2007. The appellant-Corporation filed a written statement at Exh.8 and Exh.9, producing a Visit Note dated 03.04.2007, of the Inspector mentioning the details of the salary sheet and attendance sheet of 34 employees working in the firm, which are covered under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (in Page 2 of 13 Downloaded on : Fri Oct 07 21:03:33 IST 2022 C/FA/3001/2022 CAV JUDGMENT DATED: 23/09/2022 short "the EPF Act"). A C-11 notice was issued on 19.04.2007 covering the opponent-
Firm. It is the case of the appellant that the officers again visited the premises but the records were not given by the opponent- Firm on 29.08.2008. Finally, an ad hoc assessment was issued vide order dated 12.11.2008 by the appellate-Corporation based on the salary sheet and attendance sheet shown to the inspector on the first visit on 03.04.2007. A show-cause notice was issued by the appellant-Corporation on 26.12.2008 and finally an order came to be passed on 31.03.2009 under section 45A of the ESI Act.
SUBMISSIONS:
(3) Learned Advocate Ms.Dimple Thakker appearing for the appellant-Corporation has submitted that at the time of inspection, as mentioned in the visit note dated 03.04.2007, mentions that total 34 employees were working in the opponent-Firm and it was further admitted on their part that they are willingly registered under the EPF Act. Thus, it is submitted that the opponent-Firm is treating its employees as employees within one central legislation i.e. the Provident Fund Page 3 of 13 Downloaded on : Fri Oct 07 21:03:33 IST 2022 C/FA/3001/2022 CAV JUDGMENT DATED: 23/09/2022 Act and are willingly contributing towards their provident funds, however they are denying treating them, as an employee under the Insurance Act.
3.1) Learned Advocate Ms.Thakker has submitted that the learned Judge of ESI Court has failed to appreciate that at the time of passing the impugned judgment around 83 employees were working and the provident fund was contributed qua them. It is submitted that as on 16.09.2022 around 124 employees were employed and the provident fund was contributed by the opponent-Firm undisputedly. Hence, it is urged that the submission of the opponent-Firm that they are not an establishment qua the Employee State Insurance Act and their employees are not employees within the meaning of the said Act may not be accepted.
3.2) Finally, it is submitted that the opponent-
Firm is a "Commercial Establishment" as defined under section 2(6) of the Gujarat Shops and Establishment (Employees Life Insurance) Act, 1980, and as is required to be covered under section 1(5) of the Employees State Insurance Act.
Page 4 of 13 Downloaded on : Fri Oct 07 21:03:33 IST 2022C/FA/3001/2022 CAV JUDGMENT DATED: 23/09/2022 (4) Per Contra learned Senior Advocate Mr.Soparkar with learned Advocate Mr.Gadhia appearing for the opponent-Firm has submitted that, the opponent-Firm is an 'Office of an Advocate', which was covered under the ESI Act and the ESI Corporation also made an ad hoc assessment of Rs.3,28,900/-. It is submitted that the same was challenged by way of ESI Application No.31 of 2009.
4.1) Learned Senior Advocate Mr.Soparker has submitted that the ESI Act is applicable to all the "factories" as per section 1(4) of the ESI Act. It was submitted that the term "factory" is defined under section 2(12) of the ESI Act, and the opponent-Firm does not fall under the definition of "factory". It is submitted that as per section 1(5) of the ESI Act the appropriate Government can, after giving six months notice, extend the provisions of the said Act to any establishment by way of a Notification published in the Official Gazette, however no such Notification covering an "Office of an Advocate" is published under section 1(5) of the ESI Act till date.
Page 5 of 13 Downloaded on : Fri Oct 07 21:03:33 IST 2022C/FA/3001/2022 CAV JUDGMENT DATED: 23/09/2022 4.2) Learned Senior Advocate Mr.Soparker has submitted that the voluntary coverage of the opponent-under under the EPF Act does not in any manner make another central legislation automatically applicable. It is submitted that the opponent-Firm is neither a Shop nor "Commercial Establishment" or an "Establishment", as defined under the Bombay Shops and Establishment Act and the office of an advocate is not a Commercial Establishment.
CONCLUSION:
(5) In the present appeals, the substantial questions of law, which falls for consideration are as under:
"(a) Whether the opponent-Firm, which is engaged in the work of patent and trade mark and are engaging attorney and advocates can be encompassed under the provisions of the Employees' State Insurance Company Act, 1948 (for short "the ESIC Act") ? And
(b) Whether the employees of the opponent-
Firm can be termed as the employees under the Act merely because their contribution is being made under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (for short "the Act") ?"
(6) It is the case of the appellant-Corporation that the court below has fallen in error in Page 6 of 13 Downloaded on : Fri Oct 07 21:03:33 IST 2022 C/FA/3001/2022 CAV JUDGMENT DATED: 23/09/2022 appreciating the provisions of the the Employees' State Insurance Company Act, 1948 (for short "the ESIC Act") by holding that the provisions of the ESIC Act cannot be extended to the opponent-Firm in view of the fact that its employees, who are working in the opponent-Firm, are being extended the benefit of the EPF Act. It is the case of the appellant-Corporation that since the opponent-Firm is contributing towards the provident fund of its employee under the EPF Act, the provisions of the ESIC Act can be made applicable to the opponent-Firm, as it would be covered in the definition of "Commercial Establishment" under the provisions of Section 1(5) of the ESIC Act.
(7) It is asserted by the appellant-Corporation that the activities of the opponent-Firm can be said to be "commercial" and hence, it can be brought within the ambit of the ESIC Act by resorting to the provisions of Section 1(5) of the ESIC Act. The facts of the case suggest that the appellant-Corporation had issued C-11 notice to the opponent-Firm covering it under the ESIC Act w.e.f.
01.01.2007, which was subject matter of challenge before the court below. An ad hoc Page 7 of 13 Downloaded on : Fri Oct 07 21:03:33 IST 2022 C/FA/3001/2022 CAV JUDGMENT DATED: 23/09/2022 assessment notice dated 06.04.2009 was also issued by the appellant-Corporation under Section 45 of the ESI Act after hearing respective parties and examining the evidence on record. The ESI Court has partly allowed ESI Application No.31 of 2009 of the opponent-Firm by setting aside the notice issued under C-11 encompassing the opponent within the ambit of the ESIC Act. The ad hoc assessment notice dated 06.04.2009 to the opponent-Firm is also set aside. The ESI Court, after examining the evidence on record, has concluded that the opponent-Firm is doing the work of patent and trade mark attorney and advocates are engaged by the firm. The firm is not registered under any law and the advocates engaged by the firm appeared to have been filing their respective vakalatnama.
(8) It is the case of the appellant-Corporation that since the opponent-Firm is paying contribution of its employee under the EPF Act, and the employees of such firm are automatically treated as employees under the ESIC Act, hence they are covered under the ESIC Act. It is well settled proposition of law that the provisions of one statute Page 8 of 13 Downloaded on : Fri Oct 07 21:03:33 IST 2022 C/FA/3001/2022 CAV JUDGMENT DATED: 23/09/2022 cannot be made applicable to another statute until it is specifically provided in either of the statutes. Neither the EPF Act nor the ESIC Act stipulates any such provision, which extends the applicability of any provision of each Act to the workmen or the employees, who are governed under such Act. Thus, the contention raised by the opponent- Firm by seeking shelter under the definition of "employee" and the payment of contribution by the firm cannot rescue the Corporation and merely because the opponent- Firm is voluntarily paying the contribution under the EPF Act, the same will not ipso facto encompass the opponent-Firm under the ESIC Act.
(9) At this stage, it would be apposite to refer to Section 1 of the ESIC Act, which reads as under:-
"1. Short title, extent, commencement and application (1) This Act may be called the Employees' State Insurance Act,1948.
(2) It extends to the whole of India 1[***].
(3) It shall come into force on such 2 date or dates as the Central Government may, by notification in the Official Gazette, appoint, and different dates may be appointed for different provisions of this Act and 3 [ for different States or for different parts thereof]. (4) It shall apply, in the first instance, to all factories (including factories belonging to Page 9 of 13 Downloaded on : Fri Oct 07 21:03:33 IST 2022 C/FA/3001/2022 CAV JUDGMENT DATED: 23/09/2022 the government) other than seasonal factories:
4[PROVIDED that nothing contained in this sub-section shall apply to a factory or establishment belonging to or under the control of the government whose employees are otherwise in receipt of benefits substantially similar or superior to the benefits provided under this Act.] (5) The appropriate government may, in consultation with the Corporation and 5 [where the appropriate government is a State Government, with the approval of the Central Government], after giving six months' notice of its intention of so doing by notification in the Official Gazette, extend the provisions of this Act or any of them, to any other establishment or class of establishments, industrial, commercial, agricultural or otherwise 6[PROVIDED that where the provisions of this Act have been brought into force in any part of a State, the said provisions shall stand extended to any such establishment or class of establishments within that part if the provisions have already been extended to similar establishment or class of establishments in another part of that State.] 4[(6) A factory or an establishment to which this Act applies shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below the limit specified by or under this Act or the manufacturing process therein ceases to be carried on with the aid of power.]"
A plain and literal reading of the provision of Section 1, more particularly sub-Section (4) indicates that the Act applies to all factories or establishment belonging to or under control of the Government. The appellant has premised their submissions of sub-Section (5) of Section 1 of the ESIC Act. Sub-Section (5) of Section 1 of the Page 10 of 13 Downloaded on : Fri Oct 07 21:03:33 IST 2022 C/FA/3001/2022 CAV JUDGMENT DATED: 23/09/2022 ESIC Act unequivocally confers the powers on the appropriate Government to extend the provisions of the ESI Act to any other establishment or class of establishment, industrial, commercial, agricultural or otherwise, after giving one month's notice of its intention to do so and by issuing a notification in the Official Gazette. Unquestionably, in the present case, no such notification is issued under the provisions of sub-Section (5) of Section 1 of the ESIC Act encompassing the advocates' firm like the present opponent extending the provisions of the ESIC Act.
(10) Thus, until and unless such notification is issued by the appropriate government, the provisions of the ESIC Act cannot be made applicable to the opponent advocates' firm. The definition of "employee", as envisaged in sub-Section (9) of Section 2 of the ESIC Act also in no uncertain term applies to the employees of the opponent-Firm since it stipulates that the same pertains to such employees, who are employed for wages in connection with the working of factory or establishment.
Page 11 of 13 Downloaded on : Fri Oct 07 21:03:33 IST 2022C/FA/3001/2022 CAV JUDGMENT DATED: 23/09/2022 (11) Thus, the appellant-Corporation cannot be allowed to cover the opponent-Firm under the umbrella of EISC Act only for the reason that the Firm is voluntary contributing the fund of its employees under the EPF Act. Such an action is impermissible unless the statute permits.
(12) The appellant have also resorted to the provisions of the Bombay Shops and Establishment Act, 1948. It is the case of the appellant that in view of Section 2(4) of the Bombay Shops and Establishment Act, 1948, the opponent-Firm, which is an advocates' firm can be said to be engaged in a "profession", as defined under the "commercial establishment" and hence, the provisions of the ESIC Act are required to be extended to such firm. In the considered opinion of this Court, such a contention is misconceived since the applicability of the ESIC Act on the opponent-Firm cannot be extended on the definition of "commercial establishment" stipulated under the Bombay Shops and Establishment Act, 1948 in wake of the fact that neither the opponent-Firm falls under the definition of factory or any establishment industrial, commercial, Page 12 of 13 Downloaded on : Fri Oct 07 21:03:33 IST 2022 C/FA/3001/2022 CAV JUDGMENT DATED: 23/09/2022 agricultural or otherwise since no notification is issued by the State Government under the provisions of sub- Section(5) of Section 1 of the ESIC Act.
(13) In view of the aforesaid facts, the substantial questions of law are answered accordingly. The opponent-Firm, which is doing the work of patent and trade mark attorney and are engaging skilled advocates cannot be encompassed under the provisions of the ESIC Act. The contribution paid by the opponent-Firm of its employees under the EPF Act cannot make them liable of being covered under the provisions of ESIC Act.
(14) The first appeals fails legal scrutiny and hence, dismissed.
(15) As a sequel the Civil Applications filed by the appellant-Corporation for stay of the impugned order as well as placing additional evidence with regard to the details of salary of employees of the opponent-Firm respectively stands rejected.
(16) Record and proceedings be sent back to the concerned court forthwith.
(A. S. SUPEHIA, J) *** Bhavesh-[PPS]* Page 13 of 13 Downloaded on : Fri Oct 07 21:03:33 IST 2022