AI Structured Summary
Not yet generated for this judgment
Judgment
R. Balasubramanian, J.—The appellant in this appeal is the respondent in E.S.I.O.P. No. 41 of 1987 on the file of the District Judge,
Coimbatore (Employees State Insurance Court). The respondent in this appeal is the petitioner in that proceedings. In this judgment, the parties to
this appeal are referred to in the same rank in which they are described in the original proceedings before the Employees State Insurance Court. 2.
The dispute relating to payment of contribution arose in respect of payments made to carpenters, cartman, persons entrusted with the work of
stitching the materials given by the petitioner and the amount paid to Sampathkumar and Krishnakumar. The petitioner is a partnership concern
engaged in the business of manufacture of hosiery items. The dispute raised by the petitioner in the above proceedings was opposed by the
respondent. The Insurance Court, after going through the materials placed before it found that the petitioner is liable to contribute in respect of
payments made to carpenters and cart man. No appeal has been filed by the petitioner before the lower court against that finding of the Insurance
Court. Therefore, it had become final. 3. The only surviving dispute in this appeal is with reference to the payments made to the persons who were
entrusted with the work of stitching and the payments made to Sampathkumar and Krishnakumar. As far as the payments made to the persons
entrusted with the work of stitching, it would be useful to refer to the relevant allegations made in the petition filed u/s 75 of the Employee''s State
Insurance Act (hereinafter referred to as ""the Act"") before the Insurance Court.
The petitioner incurred certain expenses towards stitching the hosiery products. The petitioner, entrusted the materials to some outside independent
agencies to carry out stitching work. Those agencies after completing the work of stitching in their own premises, returned the stitched items and
submitted their bills for the charges therefor. These amounts are not wages paid to the employees of the petitioner concern and hence do not
constitute wages for contribution. The petitioner accounted these charges and expenses incurred towards stitching work under the head ""Stitching
Charges"" in its books of accounts. "" It is seen from the allegations made in the petition as extracted above, that there is no whisper at all that they
had no supervision of the work entrusted by them to the outside agencies for stitching. The fact that the petitioner entrusted the materials to outside
agencies for the purpose of stitching and made payments to those people in regard thereto, is not at all disputed by the respondent. However their
case, is even then in respect of those payments as well, the petitioner, being the employer, is bound to make the contributions. In this connection,
my attention is drawn to Section 2(9) of the E.S.I. Act which defines the term ""employee"". Sub-clause (i) of Sub-section (9) of Section 2 of the
Act is not attracted to the facts of this case since it is established not only from the exhibits produced by the petitioner but also from Ex. B-1
inspection report that this stitching work is entrusted by the petitioner to the outside agency. Therefore, the question whether the persons who were
entrusted with the work of stitching would come within the definition of the word ""employee"" would have to be decided in the context of Sub-
clause (ii) of Sub-section (9) of Section 2 of the Act. The above referred to sub-clause is extracted here-under:
employee"" means any person employed for wages in or in connection with the work of a factory or establishment to which this Act applies and-
(i)....
(ii) who is employed by or through an immediate employer on the premises of the factory or establishment or under the supervision of the principal
employer or his agent on work which is ordinarily part of the work of the factory or establishment or which is preliminary to the work carried on in
or incidental to the purpose of the factory or establishment.
A reading of the above extracted sub-clause would show that persons who are not covered under Sub-clause (i) of Sub-section (9) of Section 2
of the Act can be brought within the definition of ''employee'' only when, the following things are established viz.,
(a) The person should be employed by or through an immediate employer on the premises of the factory or establishment. Or
(b) Under the supervision of the principal employer or his agent on work which is ordinarily part of the work of the factory or establishment or
which is preliminary to the work carried on in or incidental to the purpose of the factory or establishment.
Stitching the materials, which in this case are banians and vests is definitely, ordinarily part of the work of the petitioner''s establishment and there
cannot be any dispute about it. There is no material in this case to hold that the outside agencies are doing the stitching work in the premises of the
petitioner''s establishment. Therefore, requirement (a) above referred to is also not attracted. Then, one has to consider whether the work of
stitching is under the supervision of the principal employer or his agent. What is meant by the word ""supervision"" would vary from industry to
industry and it will also vary according to the nature of the work. In this context, learned Counsel appearing for the respondent did not dispute and
is not in a position to dispute that the petitioner had a right of rejection of the completed material once it comes to them. In fact Ex. P-11 is a bill
stated to be made on the petitioner by an outside stitching agency. This bill is raised for Rs. 5,870.10. It is seen in this bill itself that a sum of Rs.
2,902.74 is deducted from the bill amount and only a sum of Rs. 2,967.36 was passed. Therefore, this amply establishes the fact that the petitioner
has a right of rejection.
Learned Counsel appearing for the respondent in this appeal would argue that from the mere fact that the petitioner has a right of rejection, it
would not by itself amount to the work being carried out under the supervision of the principal employer or his agent on work.
Miss. Radha Srinivasan, learned Counsel appearing for the appellant in this appeal brought to my notice a judgment of the Hon''ble Supreme
Court of India in the case of P.M. Patel and Sons and Others Vs. Union of India (UOI) and Others, . The Supreme Court in the said judgment,
while dealing with the term ""employee"" as defined u/s 2(f) of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 held as
follows:
To be an employee it is necessary that the relationship of master and servant should exist with the employer. In the context of the conditions and
the circumstances in which the home workers of a single manufacturer go about their work, including the receiving of raw material, rolling the
beedies at home and delivering them to the manufacturer subject to the right of rejection there is sufficient evidence of the requisite degree of
control and supervision for establishing the relationship of master and servant between the manufacturer and the home worker. The work of rolling
beedies is a simple operation which is performed by thousands of illiterate workers, by young and old, men and women, with equal facility and it
does not require a high order of skill. In the circumstances, the right of rejection can constitute in itself an effective degree of supervision and
control. The fact that the rejection takes place in the presence of the home workers plays a merely supportive role in determining the existence of
the relationship of master and servant. Though it is open to home worker to get the work done by one or the other member of his family at home,
the absence of the element of personal service is of little significance when the test of control and supervision lies in the right of rejection.
As against the judgment of the Hon''ble Supreme Court of India referred to above, learned Counsel for the respondent brought to my notice
another judgment of the Hon''ble Supreme Court of India in C.E.S.C. Ltd, etc. v. S.C. Bose and Ors. (1992) 1 L.L.J. 475 decided under the
provisions of E.S.I. Act. This case had considered the earlier judgment of that court reported in P.M. Patel and Sons and Others Vs. Union of
India (UOI) and Others, . The facts available in the last referred to judgment of the Supreme Court is that the Calcutta Electricity Supply
Corporation engaged various contractors to carry out the work of excavation, conversion of overhead electric lines and laying of underground
cables under public roads, as well as for repair and maintenance of the aforesaid works. There are written contracts between the C.E.S.C. and
various electrical contractors to whom the works above referred to were entrusted. These electrical contractors got the work done by engaging
their own men. The question that arose for consideration was whether the workers employed by the electrical contractors would come within the
definition of ""employee"" as provided for under. Sub-section (9) of Section 2 of the E.S.I. Act. It was proceeded on the basis that C.E.S.C. had a
right of supervision, and therefore, the workers employed by the electrical contractors could be brought under Sub-clause (ii) of Sub-section (9) of
Section 2 of the Act. Considering the written contract between the parties the Hon''ble Supreme Court of India held that the work completed by
the electrical contractors have to be carried out under the direct supervision of a person holding a valid certificate of competency and the holder of
that licence shall maintain a register of supervision and workmen in the prescribed form and shall produce the register for inspection on demand by
an electrical inspector or other person authorised in this behalf by the licensing Board. The contract also provides that on the completion of any
electrical installation work within the purview of Rule 45(1) of the Indian Electricity Rules, 1956, a test report in that form prescribed by the Board
shall be submitted by the holder of this licence to the Secretary. On those facts the Hon''ble Judges of the S.C. held after referring to P.M. Patel
and Sons and Others Vs. Union of India (UOI) and Others, : as follows:
In whatever manner the word ''employee'' u/s 2(9) be construed, liberally or restrictedly, the construction cannot go to the extent of ruling out the
function and role of the immediate employer or obliterating the distance between the principal employer and the immediate employer. In some
situations he is the cutoff. He is the one who stumbles in the way of direct nexus being established, unless statutorily fictioned, between the
employee and the principal employer. He is the one who is a given situation is the principal employer to the employee, directly employed under
him. If the work by the employee is conducted under the immediate gaze or overseeing of the principal employer, or his agent, subject to other
conditions as envisaged being fulfilled, he would be an employee for the purpose of Section 2(9). Thus, besides the question aforeposed with
regard to supervision of the principal employer, the subsidiary question is whether instantly the contractual supervision exercised by the immediate
employer (the electrical contractors) over his employee was exercised, on the terms of the contract, towards fulfilling a self-obligation or in
discharge of duty as an agent of the principal employer.
P.M. Patel and Sons and Others Vs. Union of India (UOI) and Others, : can also be of no help to interpret the word ''supervision'' herein. The
word ""as such"" is not found employed in Section 2(f) of the Employees'' Provident Fund and Miscellaneous Provisions Act, 1952, but found used
in the text of the judgment. It appears to have been used as a means to establish connection between the employer and the employee, having
regard to the nature of work performed. But what has been done in Patel''s case cannot ipso facto be imported in the instant case since the word
''supervision'' in the textual context required independent construction. In the ordinary dictionary sense ''to supervise'' means to direct or oversee
the performance or operation of an activity and to oversee it, watch over and direct. It is work under eye and gaze of someone who can
immediately direct a corrective and tender advice. In the textual sense ''supervision'' of the principal employer or his agent is on ''work'' at the
places envisaged and the word ''work'' can neither be construed so broadly to be the final act of acceptance or rejection of work nor so narrowly
so as to be supervision at all times and at each and every step of the work. A harmonious constructions alone would help carry out the purpose of
the Act, which would mean moderating the two extremes. When the employee is put to work under the eye and gaze of the principal employer, or
his agent, where he can be watched secretly, accidentally, or occasionally, while the work is in progress, so as to scrutinise the quality thereof and
to detect faults therein, as also put to timely remedial measures by directions given, finally leading to the satisfactory completion and acceptance of
the work, that would in our view be supervision for the purpose of Section 2(9) of the Act. It is the consistency of vigil. The proverbial ''a stitch in
time saves nine. '' The standards of vigil would of course depend on the facts of each case.
Therefore, it is clear that the judgment of the Hon''ble Supreme Court of India reported in C.E.S.C. Ltd., etc. v. S.C. Bose and Ors. (1992) 1
L.L.J. 475 and referred to above alone would be the guiding factor in this case to find out the question whether the payments made by the
petitioner to the outside agencies, to whom the stitching work was entrusted to, could be taken as wages for the purpose of demanding
contribution. I have already extracted the relevant portion of a pleading in this case with reference to the payment made by the petitioner to the
outside agencies. To reiterate I would like to point out that there is no whisper at all anywhere in the entire length and breadth of the petition that in
respect of stitching work entrusted to outside agencies the petitioner had no supervision over the work. It is not as though the petitioner is not
aware as to what is meant by ""supervision"". Why I say this is, because the dispute was also raised by them with reference to the payments made to
the carpenters. In that context, the pleading raised is extracted hereunder:
The carpenters in their workshop carry out the work with their own men over whom the petitioner had no control of supervision (Italics applied
may be) and as such these expenses towards wooden boxes purchased are not wages within Section 2(22) of the Act.
In the grounds raised in the petition relating to stitching charges, it is raised in the following terms:
The respondent ought to have held that the work of stitching of hosiery items was entrusted to outside independent agencies over whom the
petitioner has no control (Italics applied may be) and the charges paid to them are not wages paid to the employees of the petitioner and hence
does not attract the contribution under the Act.
No other material whatsoever had been placed before the E.S.I. Court to decide the issue one way or the other. The documentary evidence
produced by the petitioner also does not throw any light on this aspect: No witnesses were examined on the side of the petitioner to establish the
fact whether the petitioner had any supervision or not over the work done by the outside agencies. Neither a written; contract is pleaded not any
terms in respect thereof are mentioned. Therefore, the E.S.I. Court is left only with the bare pleading alone without any further proof on that
aspect. Hon''ble Supreme Court of India in the judgment reported in C.E.S. E Ltd. v. S.C. Bose (1992) 1 L.L.J. 475 had discussed at length
while elaborating on the word ""supervision"" as found in the Act itself. It is useful to once again extract here the relevant portion of what is said by
the Hon''ble Judges of the Supreme Court in that judgment:
In the textual sense ''supervision'' of the principal employer or his agent is on ''work'' at the places envisaged and the word ''work'' can neither be
construed so broadly to be the final act of acceptance or rejection of work, nor so narrowly so as to be supervision at all times and at each and
every step of the work. A harmonious construction alone would help carry out the purpose of the Act, which would mean moderating the two
extremes.
If the facts available in the case on hand are looked into, I am unable to find any circumstances which may lead to the conclusion that the petitioner
before the E.S.I., Court had no right of supervision in the work entrusted by them to the outside agencies. However, the E.S.I. Court had come to
the conclusion that when the work is done by the outside agencies, neither the petitioner nor his servants were supervising, it is a mystery. This
observation, which led to allowing the dispute in favour of the petitioner on this point, is without any evidence, and therefore perverse. As already
stated by me, the judgment in P.M. Patel''s case (1936) 1 S.C.C. 32 : (1986) 2 L.L.J. 88 referred to supra and relied on by the learned Counsel
for the appellant, may not be of any use at all to decide the issue in this case. But, however, the later judgment of the Supreme Court cited before
me by the learned Counsel for the respondent had helped me a lot in understanding what meaning I should attach to the word ""supervision"" as
found in Sub-clause (ii) of Sub-section (9) of Section 2 of the Act. Under these circumstances, I am of the opinion that the finding rendered by the
tribunal answering the question whether the payment made by them to the outside agencies for work entrusted to them would not be taken as
wages appears to be illegal on the face of it, as there is absolutely no evidence to support such a finding. Therefore, I have no hesitation in
accepting the arguments advanced by the learned Counsel for the appellant and accordingly this appeal is allowed. There is no order as to costs.