Kerala High Court
E.S.I. Corporation vs Vattiyoorkavu H.W. Co-Operative ... on 16 December, 1996
Equivalent citations: (1999)IIILLJ452KER
Author: K.G. Balakrishnan
Bench: K.G. Balakrishnan
JUDGMENT Balakrishnan, J.
1. Appeal is preferred by the E.S.I. Corporation challenging the order passed by the Insurance Court, Quilon. First respondent herein is a Cooperative Society engaged in the manufacture of the handloom cloths. Its working capital was provided by the Reserve Bank of India and the Society supplies yarn to the members as loan and the members give the finished products and they are being sold through the Society. The profit was being shared by the members.
2. Appellant/E.S.I. Corporation initiated proceedings against the Society and contribution was sought from the society under the Employees' State Insurance Act. There was a revenue recovery proceeding against the Society and the Secretary of the Society filed Insurance Case No. 48/84 before the Insurance Court contending that the Society was not covered by the Employees' State Insurance Act. The Insurance Court held that there was no employer-employee relationship and hence, the E.S.I. Act has no application. This is challenged in this MFA.
3. In the appeal memorandum, it is contended that the looms were installed in the shed and the workers are working in the shed and they are all workers of the Society and therefore, it is not correct to say that they were not paid wages by the Society. Appellant contended that the Society was covered by the E.S.I. Act. Reliance was placed on the decisions reported in Regional Director, Employees' State Insurance Corporation v. Taj Textiles Industrial Co-operative Society Ltd. -1980 KLT 199 and P.M. Patel & Sons and Ors. v. Union of India and Ors. 1986 LAB.IC.1410.
4. In the instant case, PWs. 1 and 2 gave evidence to the effect that the members of the Society are being given yarn by the society and the finished products are supplied to the Society and they are being paid by paying the difference in the price of yarn and the finished products. There was no evidence to show that the members were being paid any wages. There was no evidence to show that the members were working within the premises of the Society using the looms owned by the Society. As per the definition of 'employee' given in Section 2(9) of the E.S.I Act, 'employee' means any person employed for wages in or in connection with the work of a factory or establishment to which this Act applies". So, the crucial question to be considered is whether any wages were paid to the members, of the Society. By the nature of the functioning of the Society, it appears that all the members of the Society share the profit according to the quantity of the finished products and the price of the yarn is collected from the members. It cannot be said that the members of the Society were working as employees and they were earning therefrom.
5. In Regional Director, Emloyees' State Insurance Corporation v. Taj Textiles Industrial Co-operative Society Ltd. 1980 KLT 199- it was held that a member of a Co-operative Society is distinct from the society as such which is a legal person. The property of a Co-operative Society does not belong to the members, but to the Society and therefore, they are covered by the E.S.I. Act. In that case, it was found that there was employer-employee relationship between the Co-operative Society and the members of the Society. The above decision was rendered in the background of the facts and circumstances of the case. There can be situation where the members of the Society work as the employees of the Society and the Society would certainly come within the purview of the E.S.I. Act. In a case, whether the members of the Society are not the workers of the Society, E.S.I. Act has no application.
6. The decision reported in P.M. Patel & Sons and Ors. v. Union of India and Ors. (supra) is a case where the employees are doing their work of beedi rolling in their own houses and they were working under a contractor. It was held that the work was not being supervised and controlled by the employer. Therefore, there was no employer-employee relationship. It was held that the rolling of beedies at home and delivering them to the manufacturer subject to the right of rejection create employer employee relationship and that the work of rolling beedies was not of a sophisticated nature of work requiring control and supervision at the time when the work is done. This decision has no application to the facts of the case in hand.
7. In the decision reported in Employees' State Insurance Corporation, Hyderabad v. Laxmi Power Loom Weavers Co-operative and Sales Society Ltd 1986 LAB IC 370, it was held that the Society gave employment to its members as part of its scheme for self employment and therefore, it was not covered by the E.S.I. Act. It was held that jural relationship of master and servant cannot be attributed by mere fact that members happened to work for remuneration.
In the instant case, we are of the view that the members of the Society are not workers of the Society and the members of the Society were self employed and they share the profits. It has rightly been held by the Insurance Court that the Society was not covered by the E.S.I. Act. Appeal is accordingly dismissed.