Madras High Court
Management Of Jawahar Mills Ltd. vs Regional Director, Employees' State ... on 20 August, 1999
Equivalent citations: (2001)IILLJ793MAD
JUDGMENT P. Thangavel, J.
1. These are all appeals against order dated April 30, 1991, on the file of the Employees' State Insurance Court (District Court), Salem, in E.S.I.O.P. Nos. 14 of 1987 and 16 of 1989 filed against the order, dated January 29, 1987, in TN/INS/IX 51.5613-11 and order, dated February 17, 1989, in TN/INS./IX/ 51.5613-11 on the file of the Regional Office (Tamil Nadu) Employees' State Insurance Corporation, Madras 34, respectively.
2. The petitioner in both the petitions is textile mill engaged in manufacture of yarn, etc., with workmen numbering about 800 which includes permanent and temporary employees, apart from apprentices, badlis, etc. The petitioner mill is covered under the provisions of the Employees' State Insurance Act (hereinafter referred to as the Act). The management of the petitioner's company was remitting both the employees' and employer's contributions regularly in respect of employees, who are all covered under the Act. The respondents issued a notice, dated May 7, 1986, directing the petitioner to show cause as to why assessment should not be made under Section 45-A of the Act and the sum of Rs. 2,22,545.64 should not be recovered for the period from July 1982 to December 1984. For effecting such recovery 11 items were shown by the respondents.
3. Likewise, a similar notice was issued to the petitioner by the respondents for the period from January 1985 to March 1986. In that notice 11 items were shown as liable for payment of ESI contribution and the contribution to be paid for the abovesaid period was shown as Rs. 1,73,535.75. The petitioner after receiving the abovesaid notices made representation to the respondents and after considering the representation made by the. petitioner, the contribution payable to the respondents for July 1982 to December 1984 and January 1985 to March 1986 were determined as Rs. 1,61,637.30 and Rs. 1,73,535.75 respectively.
4. Aggrieved at the amounts determined as mentioned above payable to the respondents as ESI contribution, the petitioner has filed petitions before the Employees' State Insurance Court (District Court) Salem (hereinafter referred to as Court). After considering the material evidence placed before it, the said Court has decided that 25 per cent of the amounts shown as spent for building repairs, electrical repairs, machinery repairs and. payments made to lay off compensation and wages paid to employees designated as apprentices are liable to be considered for a payment of contribution for the period from July 1982 to December 1984. Likewise, the Special Court has decided 25 per cent of the amount shown towards building repair, machinery repair, generator repair and electrical repair are to be considered for payment of contribution under the Act, apart from the amounts shown as wages paid to employees designated as apprentices and interim relief paid to employees from April 1985 to March 1986. Aggrieved at the common order of the Special Court in E.S.I. O.P. Nos. 14 of 1987 and 6 of 1989, dated April 30, 1991, the petitioner as appellant has come forward with these appeals.
5. Admittedly the petitioner-mill is engaged in manufacture of yarn, etc., and there are 800 workmen including permanent and temporary employees, apprentices, badlis, etc., are working in the said mills. The fact remains that the abovesaid petitioner-mill is covered under the Act and the petitioner is paying contributions both for the employees and employers regularly in respect of the employees covered under the Act. Though amounts were claimed under various heads by the respondent under the Act at the initial stage, now this Court is concerned only with regard to the items relating to payment of amount to apprentices, interim reliefs paid to the employees and amount spent for effecting repairs to building, machineries, electrical equipments including generator.
6. The fact remains that stipend was paid by the petitioner to the persons, who were undergoing training with designation as apprentice in the petitioner-mill. Section 2(9) of the Act defines "employee" means any person employed for wages in or in connection with the work of a factory or, establishment to which this Act applies or any person engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 (52 of 1961), or under the Standing Orders of the establishment. It is not in dispute that the following clause "any person engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 (52 of 1961), or under the Standing Orders of the establishment" was inserted to the definition of "employee" in Sub-clause (9) of Section 2 of the Act on October 20, 1989 and that the addition was not available under the Act prior to such insertion by means of an amendment under the amended Act 29 of 1989. Admittedly the period for which ESI contribution was sought for by the respondents relates to the period prior to October 20, 1989, when the amended Act 29 of 1989 had come into force.
7. In Employees' State Insurance Corporation and another v. Tata Engineering and Locomotive Company Ltd. and Anr. the Apex Court held thus:
"While considering the question whether an apprentice is an 'employee' prior to the amended Act 29/89 came into force, under the Employees' State Insurance Act, 1948, has held as follows in Paras 5, 69 at pp. 84, 85, 86 of LLJ:
"5. The heart of the matter in apprenticeship is, therefore, the dominant object and intent to impart on the part of the employer and to accept on the part of the other person learning under certain agreed terms. That certain payment is made during the apprenticeship, by whatever name called, and that the apprentice has to be under certain rules of discipline do not convert the apprentice to a regular employee under the employer. Such a person remains a learner and is not an employee....
6. It is, therefore, inherent in the word 'apprentice' that there is no element of employment as such in a trade or industry but only an adequate well-guarded provision for training to enable the trainee after completion of his course to be suitably absorbed in earning employment as a regular worker. The fact that a trainee may have been absorbed in the company where he is undergoing the training, is not relevant for the purpose of comprehending the content of the term.
9. During the apprenticeship they cannot be said to be employed in the work of the company or in connection with work of the company. We are, therefore, unable to hold that an apprentice is an employee within the meaning of Section 2(9) of the Act."
8. The evidence of PW1 Sri Muthusamy Spinning Master and PW2 Sri Sundaresan Labour Welfare Officer would disclose that the petitioner mills is having class room for taking classes to the apprentices and PW1 is taking classes for the abovesaid apprentices. It is also evident from the evidence of PW2 that the apprentices were given training for six months, in each department by taking classes as mentioned above and RW1 Sri Krishnamoorthy, on behalf of the respondent had also inspected such classes being taken by the petitioner's-mill. Sri Krishnamoorthy, who was examined as RW1 would also admit that he had gone through the agreement between the apprentice and the petitioner-mill, inspected the class rooms and had also seen the classes being taken by the petitioner's- mill to the above said apprentices. The abovesaid evidence would disclose that the petitioner's-mill should have given intensive training in all fields to the apprentices engaged in the said mill and for that they should have paid stipend during the course of training. If the abovesaid evidence on record is taken into consideration, in the light of the decision of the Apex Court cited above, the apprentice, who have undergone training in the petitioner-mill cannot be treated as employee within the meaning Section 2(9) of the Act. If the apprentices cannot be treated as employees under the Act referred to above the respondents'-Corporation is not justified in asking for payment of contribution towards the amount spent as stipend for the apprentices. In view of the said position, the impugned order passed by the Court, below cannot be sustained.
9. The fact remains that there was a dispute with regard to the revision of wages to the workmen and therefore the Textile Trade Unions in Tamil Nadu raised a dispute against all the Textile managements in the State numbering more than 600. On failure of conciliation, the Government of Tamil Nadu referred the dispute for adjudication by a Special Industrial Tribunal, Madras. At the same time, the Government of Tamil Nadu invoked Section 10-B of the (Tamil Nadu Act 36 of 1982) Industrial Disputes Act and passed G.O.Ms. No. 1399, dated July 15, 1985, and G.O.Ms. No. 1546, dated July 29, 1985, directing the managements to make an interim lump sum payment of Rs. 500 and a monthly payment of Rs; 75 for six months from July/August 1985. It is also mentioned in the G.Os. that any money paid by the employer to the workmen in pursuance of the said G. O. may be deducted by the employer from and out of the monetary benefit to which such workmen become entitled under the provisions of the award that may be passed by the Special Industrial Tribunal. It is not in dispute that the Tribunal has finally held in the award that the interim payments made to the employees by the employers should be treated as ex-gratia and not liable to be deducted from the payments to be made to the employees by the managements. The respondents haves sought for payment of contribution treating the same as wages from the 1 petitioner-mill. The petitioner, the appellant herein resisted the claim made by the respondents on the ground that the interim payments made by the petitioner under the G.Os. referred to above cannot be treated as wages to claim contributions, since the said payments were decided by the competent authority, while passing the award as ex-gratia payment.
10. The same dispute has arisen between the respondents Corporation and Gnanambigai Mills Ltd., Coimbatore before this Court and the decision rendered by this Court is reported in 1996-II-LLJ-149 (Mad). In that case, it was held that the incentive earnings and ad hoc allowances received by the employees must not be taken into account as part of the wages for the purposes of Employees' State Insurance Act Therefore, it was held in that case cited above by this Court mat the lump sum payment of Rs. 500 and the payment of Rs. 75 per month for a period of six months by the Gnanambigai Mills Ltd., Coimbatore, cannot be held as wages to claim contribution by the respondent-Corporation. Applying the principles laid down in the case cited above, the learned counsel appearing for the petitioner as appellant contends that the respondents Corporation is not entitled to claim contribution for the abovesaid payments. This Court is in agreement with the contention put forth by the learned counsel for the petitioner/appellant and therefore the respondent-Corporation is not entitled to claim contribution towards the amount paid as lump sum payment and interim amount at the rate of 75 per month for a period of six months, which were subsequently treated as ex-gratia payments. Therefore, this Court is not able to agree with the conclusion arrived at by the lower Court in this impugned order that the abovesaid payments attract the provisions of the Act.
11. The only other dispute that remains for consideration apart from the disputes referred to above is whether the petitioner is liable to pay contribution towards 25 per cent of the amount spent for repairs of building, electricals and machineries including generator. Admittedly the petitioner has spent considerable amount towards repairs of the abovesaid items. The amounts shown for repairs of the abovesaid items also include payment of the labour charges. It is not in dispute that break-up figures for payment of labour charges, materials, etc., were not shown by the petitioner. It is because of that the respondent-Corporation has adopted best judgment assessment to cull out 25 per cent out of the said amounts spent for repair charges as labour charges to collect contributions on such amounts. The learned counsel appearing for the petitioner, who is not questioning the correctness of the respondent-Corporation, to claim contribution towards labour charges contends that the respondent-Corporation has not shown as to how they have arrived at claim 25 per cent out of the abovesaid amounts as labour charges to claim contribution on such amount. It is under the said circumstances, the learned counsel for the petitioner contends that they have agreed to set apart 15 per cent of the abovesaid amount towards labour charges and to pay contribution for such amount. The question of adopting best judgment assessment had arisen in this case only because there was no break up figures for expenditure incurred by the petitioner towards the repair charges. The amount spent for labour charges have to be arrived at somehow or other. Taking into consideration of the plea raised on both sides and also the quantum of amount spent towards repair charges for the items mentioned above, this Court is of opinion that treating 20 per cent of the amount out of the abovesaid amounts spent for repair charges as labour charges, will meet the ends of justice and accordingly the percentage of the amount that may be taken for payment of contribution to the respondent can be fixed at 20 per cent out of repair charges. In view of the said position, this Court modifies the amount to be considered for payment of contribution at 20 per cent instead of 25 per cent fixed by Court below towards labour charges out of the repair charges shown by the petitioner.
12. In fine, appeals are allowed in part and the impugned order of the lower Court is set aside so far as it relates to payment of contributions to stipend paid to the apprentices and lump sum payment and interim payments paid and treated as ex gratia payment. The petitioner is hereby directed to pay contribution on 20 per cent of the repair charges instead of 25 per cent fixed by the lower Court. The petitioner is entitled to refund of the excess amount deposited as per the order of this Court, in view of this final order. Both the parties arc directed to bear their own costs.