Indian Kanoon - Search engine for Indian Law

The appeal is filed against the order, dated 06.12.2021 in E.S.I.O.P.No. 53 of 2009 declaring the order of the Assistant Director, ESI in No.57-10388- II/INS.II/MEC/SRO/MDU/3/09 to the tune of Rs.4,62,070/- as null and void.

2.The ESI Corporation is the appellant in the appeal. The respondent is a public limited company registered under the Companies Act. According to the respondent company, it has certified standing orders under which the company engages apprentice employees for the purpose of learning any skilled works which do not exceed three years. The respondent is having its main factory at Nambi Nagar, Nagunari Tirunelveli District and open end unit at Therkkutheru, Melur Taluk, Madurai District. The respondent inspected the petitioner's concern on 24.07.2008, 25.07.2008 and on 30.07.2008 and found out the omission of contributions under certain heads. The second respondent on the basis of the inspection report, dated 30.07.2008 sent a notice in Form C-18, dated 12.08.2008 claiming contribution of Rs.4,62,070/- towards stipend paid to the apprentice claiming that the payment was not stipend but wages. The respondent therefore passed the impugned order on 30.04.2009 claiming contribution of Rs.4,62,070/- for the period 4/2002 to 3/2007 https://www.mhc.tn.gov.in/judis towards contribution on wages under Section 2 (22) of the ESI Act.

13.From the above extract of the standing orders of the respondent it is clear that the apprentice who were appointed by the respondent were not entitled to claim employment as a matter of right. The evidence of P.W.1 shows that they work only to learn the work and that there is no contract of employment. In the absence of a contract of employment, the remuneration paid to the apprentice as stipend would not qualify as wages and if a person was not receiving wages he could not be called an employee and if he was not an employee he would not be covered by the Act. In this regard the Judgment of the Hon'ble Supreme Court in the case of The Employees' State Insurance Corporation and Another Vs. The Tata Engineering & Locomotive Co. Ltd. and Another reported in (1975) 2 Supreme Court Cases 835 is referred. The Hon'ble Supreme Court held as follows at paragraph No.11:

14.Further reference is also made to the judgment of the Hon'ble Court in the case of Employees' State Insurance Corporation Vs. Kwality Spinning Mills (Private) Ltd., Coimbatore reported in 1975 (2) LLN 468. It is stated as follows in the said Judgment:

“11.The learned counsel for the Mills contended that ‘stipend’ paid to the apprentices is only a gratuitous payment and that therefore, in any event, the apprentices cannot be called employees as defined under the Act. https://www.mhc.tn.gov.in/judis Whether such a contention is correct or not, or, in other words, whether the stipend paid to the apprentices is a gratuitous payment or not for the reasons mentioned earlier, I am of the view that the apprentices are not employees as defined under the Act. Assuming stipend paid is remuneration for work done by the apprentices, that is not enough to bring them under the definition of the word ‘employee’ under the Act. Unless the remuneration for work is under a contract of employment, such remuneration would not be “wages” as defined under the Act. If a person is not receiving ‘wages’, he would not be an ‘employee’.

19.Confronted with both the factual as well as the legal position, the learned counsel submitted that the respondent company was camouflaging the regular empolyers as apprentice and therefore, the claim is unsustainable. According to the learned counsel, the payment shown as stipend to the apprentice were salaries paid to the employees which is evident from total wages paid by the employee to all categories of workers during the assessment period of Rs.2,87,84,848/- and stipend of Rs.85,95,592/-. This high ratio of payments made to the apprentice vis a vis the payments made to the reqular employees would show that the respondent company was engaging apprentice to discharge the work of regular employees.