Kerala High Court
M/S Hotel Presidency vs The Regional Director on 18 February, 2010
Author: M.N.Krishnan
Bench: M.N.Krishnan
IN THE HIGH COURT OF KERALA AT ERNAKULAM
Ins.APP.No. 26 of 2008()
1. M/S HOTEL PRESIDENCY,
... Petitioner
Vs
1. THE REGIONAL DIRECTOR,
... Respondent
For Petitioner :SRI.PAULY MATHEW MURICKEN
For Respondent :SRI.T.V.AJAYAKUMAR, SC, ESI CORPN.
The Hon'ble MR. Justice M.N.KRISHNAN
Dated :18/02/2010
O R D E R
M.N. KRISHNAN, J.
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INS.APPEAL NO. 26 OF 2008
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Dated this the 18th day of February, 2010.
J U D G M E N T
This appeal is preferred against the order of the Employees Insurance Court, Alappuzha in I.C.76/02. The E.I.Court after consideration held that Ext.D5 order relating to the period of 1997-98 and 1998-90 is legal and proper. It also declared that the applicant is liable to pay interest in respect of the amount only from 23.6.2002 onwards, i.e. the date of determination and it is also held that the respondent shall adjust Rs.15,000/- paid by the applicant to the E.S.I.Corporation. It is challenging these points the applicant has come up in appeal before this Court. The learned counsel for the appellant had highlighted the following points for consideration before this Court as follows.
2. It was argued by him that (1) repair and maintenance amount cannot be booked for coverage under the E.S.I. Act, (2) the security charges cannot be booked for the purpose of coverage (3) the stipend paid to the trainees INS.APPEAL NO. 26 OF 2008 -:2:- cannot be booked (4) for the amount paid for the musical purpose cannot be considered and (5) the professional expenses and consultation charges also have to be excluded.
3. In the cross objection the counsel for the E.S.I. Corporation would contend that the interest is payable from the date when it has become due and only a grace period of 21 days is available and therefore the Court cannot exempt the payment of interest.
Point No.1:Repair and maintenance:
4. So far as repair and maintenance is concerned, it is a settled proposition that the amount if paid was incurred for repairs and maintenance to the building it would come within the ambit of the E.S.I.Act. The Division Bench of this Court in the decision reported in E.S.I.Corporation V. Standard Pottery Works (2001 (2) KLJ 258) held that, "Thus it is clear that the casual employees would come within the ambit of E.S.I Act and the repairs and maintenance of the INS.APPEAL NO. 26 OF 2008 -:3:- establishment would be the work incidental to the purpose of the establishment and as such the employer was liable to pay contribution for the expenditure met for the repair and maintenance of the building."
5. I had perused the order and the E.S.I.Corporation as well as the E.I.Court had only taken into account the wages part of the maintenance and repairs and had segregated it from the purchase of materials for the purpose of effecting repairs. Since only the wage part is taken into consideration and as held by the decision referred to above one cannot find fault with the E.I.Court in making such amount liable for coverage under the E.S.I.Act.
Point No.2:
6. Now the second point is regarding the security purpose. So far as the security guards are concerned it is stated in Saraswath Films v. Regional Director, E.S.I.Corporation (2003(1) KLT 886(SC) that security INS.APPEAL NO. 26 OF 2008 -:4:- guards will come within the purview of expression 'employee'. If therefore materials on record show that security guards engaged on premises of cinema hall discharge duty which work is directly and intrinsically a part of the work of establishment. In that reported case also it was security guards sent by an agency for duty at the premises of the cinema hall.
7. Here also the security guard is being entrusted even if by agency for safeguarding the premises of the hotel and there is no evidence or materials to show that the agency which sends them had booked them under the E.S.I.Act and contribution is paid on that regard. So in the light of the above judgment the security guards are also to be declared as covered under the E.S.I.Act. So the said finding does not suffer from any infirmity.
INS.APPEAL NO. 26 OF 2008 -:5:- Point No.3
8. The next point is regarding the stipend. Now the position is changed by virtue of the amendment to the definition of 'employee' u/s 2(9) of the E.S.I.Act. By virtue of the amendment which came into effect on 20.10.89 'employee' means any person engaged as apprentice, not being an apprentice engaged under the Apprentices Act of 1961 or under the standing orders of the establishment also becomes an employee for the purpose of the Act. Admittedly there are no materials before the Court or the authority to convince that the engagement of the trainees come within the purview of the Apprentices Act of 1961. When it is so it comes within the inclusive definition of 'Employee' as provided under the Act and therefore the finding of the E.I.Court that the trainees are also governed cannot be disturbed.
INS.APPEAL NO. 26 OF 2008 -:6:- Point No.4:
9. The next is regarding the musical purpose. The E.I.Court had dealt with this issue in paragraph 25 of the order. It is written therein that DW2 has verified the records of the applicant and reported that this amount is paid to Band Group members consisting of 4 or 5 members for conducting musical programme during night at their Bar hotel. So conducting of music programme at the bar hotel takes in, part and parcel of the business which the establishment is running and therefore it is also stated the said thing is a part and parcel for the promotion of the business.
10. The learned counsel for the E.S.I.Corporation had drawn my attention to a decision of the Hon'ble Supreme Court reported in M/s Hindu Jea Band, Jaipur v. Regional Director, E.S.I.Corporation, Jaipur (AIR 1987 SC 1166). In that case the Hon'ble Supreme Court held INS.APPEAL NO. 26 OF 2008 -:7:- that when band display is conducted and it is supplied outside in connection with social functions just because one is a shop, it will not debar the authorities from considering it as a part and parcel of the service rendered by the employer. So far as this case is concerned the hotel is conducting a bar and music is provided at the bar in the form of band display which strictly takes in for the promotion of the business and it is a main part of the promotion of the business in the hotel. Therefore inclusion of the said thing by the E.I.Court also under coverage cannot be said to be wrong. So it is also answered in favour of the Corporation.
Point No.5:
11. Now, lastly, it is with respect to professional and consultation charges. The professional and consultation charges in general are done for the purpose of maintenance of the establishment but it has to be stated that it cannot be called as a part and parcel or integral part of the running of INS.APPEAL NO. 26 OF 2008 -:8:- the business. Not only that the persons employed are professional who earn a large amount and certainly if we also consider them as employees then invariably in every case they will be going out of the coverage area as provided under the E.S.I.Act. Learned counsel had cited before me a decision of the Hon'ble Supreme Court in Kirloskar Consultants Ltd. v. Employees' State Insurance Corporation (2001(1) SCC 57). It has to be remembered that it was a case where consultancy services were provided to the customers in receipt of industrial, technical and management activities and it was a part and parcel of the business whereby these facilities were provided to the customers. So it became an integral part of the business and therefore the Hon'ble Supreme Court held it can be taken into consideration for coverage. So far as the case on hand is concerned it is not so. Professional fess or consultancy taken is in connection with the running of the establishment INS.APPEAL NO. 26 OF 2008 -:9:- but employment of professionally competent people who gives consultation to invariable number of establishments under any stretch of imagination will certainly go out even beyond the coverage fixed by the E.I.Court. Therefore the amount involved for professional and consultancy charges are concerned they have to be excluded and only the balance amount has to be assessed and realised. The point is answered accordingly.
12. Now coming to the cross objection. The learned counsel for the E.S.I.Corporation would contend before this Court that in view of the decision of a Division Bench of this Court reported in Cannanore Drug Lines v. E.S.I. Corporation (2007 (1) KLT 880) the liability to pay interest starts the day it becomes due and the statutory fixation is to pay at least within a period of 21 days. The Division Bench of this Court held that, INS.APPEAL NO. 26 OF 2008 -:10:- "The bona fide impression of the appellant that his establishment was not covered under the provisions of the E.S.I. Act or the pendency of a dispute before the E.S.I. Court regarding the appellant's liability to pay E.S.I. contribution cannot be a valid ground for exempting the appellant from paying interest in terms of S.39(5)(a) and Regulation 31A. When the statute does not provide for any such exemption the respondent cannot exclude the amount of interest from the demand made against the appellant."
It is true that there was a dispute between the Corporation and the establishment regarding inclusion of certain amount to be paid for wages for the purpose of calculating the contribution. Though the dispute has been resolved it does not permit the establishment to claim that since it was disputed interest will become payable only from the date of determination. The interest will become due from the date INS.APPEAL NO. 26 OF 2008 -:11:- when it became due and not from the date of determination. Therefore the finding of the E.I.Court that interest has to be paid only from the date of determination has to be set aside and it has to be held that interest has to be paid from the date when it became due and within the grace period of 21 days.
13. In the result, the appeal is partly allowed and the Cross Objection is allowed.
(1) In the appeal it is made clear that professional and consultancy charges included for the purpose of calculating the E.S.I. contribution has to be excluded and only for the balance amount contribution has to be paid.
(2) The E.S.I.Corporation is entitled to claim interest from the date when it became due and not from the date of determination and therefore interest has to be paid accordingly.
INS.APPEAL NO. 26 OF 2008 -:12:- (3) It is desirable that on the basis of this order the E.S.I.Corporation issue a revised notice, fix the quantum give a reasonable time and realise the amount from the establishment.
(4) It is also made clear that the Corporation shall adjust Rs.15,000/- paid by the applicant to the E.S.I.Corporation as directed by the E.I.Court.
M.N. KRISHNAN, JUDGE.
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