Employees'' State Insurance Corporation vs Garden Cafe, Tikka, Nandyal

This appeal was filed against the order dated 28-1-1993 in EI Case No.29 of 1991 on the file of the Employees Insurance Court at Hyderabad allowing the above said case filed by the respondent herein M/s. Garden Cafe, Tikke, Nandyal, disbelieving the report of the Inspector of Employees'' State Insurance Corporation, who stated in his evidence that he visited the hotel in question and found the grinder which was being used with the aid of power. The Inspector in his report and also in his evidence stated that he witnessed the electrical grinder was being used at the time of his visit in the hotel in question and he did not state the size of the electrical grinder, which was being used for manufacturing purpose, and whether it was running. As such the lower Court came to the conclusion that the petitioner-hotel is not being run with the aid of electrical grinder and as such the provisions of Employees'' State Insurance Act does not attracted. Aggrieved by the abovesaid finding of the lower Court, the Employees State Insurance Corporation filed this appeal.

To appreciate the above said finding of the Employees'' Insurance Court, it is necessary to record few facts of this case, which are as follows:

The petitioner in the EI Case No.29 of 1991 i.e., M/s. Garden Cafe, Tikke, Nandyal, is a registered firm under the Partnership Act and it is registered under A.P. Shops and Establishments Act, 1964 and the said establishment was not registered under the Factories Act. But the Corporation issued a notice dated 3-9-1991 demanding the petitioner Garden Cafe to pay an amount of Rs.7,656/- being the amount of contribution for the period from 1-4-1990 to 31-3-1991. It was further mentioned in the said notice that the petitioner should pay the amount within 15 days from the date of receipt of the abovesaid notice. It was further stated by the petitioner Garden Cafe that the said notice is not maintainable as its establishment does not come under the provisions of the Act as the employees are only 9 or 10 in all. It was also stated in the petition by the petitioner Garden Cafe that copies of attendance and acquittance roll for the months of April, 1990 and March, 1991 are filed in support of the abovesaid contention. It was further stated that to bring the petitioner Cafe under the provisions of Employees State Insurance Act, the Cafe should have appointed ten or more employees, and therefore, it does not come within the meaning of Section 2(12) of the Employees State Insurance Act.

In reply to the averments made by the petitioner Cafe, the Corporation has filed written statement, wherein it is stated that infact the Inspector of the respondent Corporation visited the petitioner Cafe on 23-7-1990 for the purpose of survey and verified the attendance register for the period from April, 1990 to June, 1990 and found that ten persons were employed for wages by the petitioner Cafe from April, 1990 to June, 1990. Except the attendance register for the said period, no other record was produced for inspection before the Inspector. The Inspector witnessed using the grinder with the aid of power. That grinder was useful for grinding dhals, preparation of Chutneys, pickles and juices etc., and it is an essential item for a hotel. The manufacturing process is being carried on with the aid of power in the petitioner hotel. Therefore, the contention of the petitioner that the provisions of Employees State Insurance Act are not attracted is not valid. On the basis of the Inspector''s report, the petitioner hotel was covered under the Act with effect from 1-4-1990. Therefore, the petitioner is liable to pay the abovesaid amount demanded under the notice.

Before going to consider the submissions made by the learned Counsel for the appellant, it is necessary to go through the relevant provisions of the Factories Act, covering the above said subject-matter of the case.

Section 2(k) of the Factories Act defines ''manufacturing process''.

''Manufacturing process'' means any process for-

(i) making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing or otherwise treating or adapting any article or substance with a view to its use, sale transport, delivery or disposal; or

(ii) pumping oil, water, sewage or any other substance; or

(iii) generating, transforming or transmitting power; or

(iv) composing types of printing, printing by letter press, lithograph, photogravure or other similar process or book binding; or

(v) constructing, reconstructing, repairing refitting, finishing or breaking up ships or vessels; or

(vi) preserving or storing any article in cold storage.

According to Section 2(k) of the Factories Act, ''Manufacturing process'' means any process for making any product for sale to the public. Therefore, the case of the respondent-petitioner conies within the definition of Employees State Insurance Act, as it is making chutneys, pickles, dhals for the sale to the public.

Coming to the provisions of Employees State Insurance Act, Section 2(12) of the Act defines ''factory''.

As per Section 2(12) ''factory'' means any premises including the precincts thereof,

(a) Whereon ten or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power or is ordinarily so carried on, or

(b) Whereon twenty or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power or is ordinarily so carried on, but does not include a mine subject to the operation of the Mines Act, 1952 or a railway running shed.

Therefore, as admitted by the owner of the Cafe that they have employed ten persons for a particular period, the Establishment of the Cafe of the respondent-petitioner comes under the provisions of the Employees State Insurance Act.

Further Section 44 of the Act contemplates a duty on the owner of the Establishment to furnish returns and maintain registers in certain cases:

(1) Every principal and immediate employer shall submit to the Corporation or to such officer of the Corporation as it may direct such return in such form and containing such particulars relating to persons employed by him or to any factory or establishment in respect of which he is the principal or immediate employer as may be specified in regulations made in this behalf.

Section 45 of the Act deals with appointment of Inspectors, their functions and duties. As per Section 45(1), the Corporation may appoint such persons as Inspectors, as it thinks fit, for the purpose of this Act, within such local limits as it may assign to them.

Sub-section (2) of the Act empowers the Inspectors appointed u/s 45(1) to enquire into the correctness of the particulars submitted by the employers.

Section 45(2): Any Inspector appointed by the Corporation under sub-section (1), may for the purpose of enquiring into the correctness of any of the particulars stated in any return referred to in Section 44 for the purpose of ascertaining whether any of the provisions of the Act has been complied with-

(a) require any principal or immediate employer to furnish to him such information as he may consider necessary for the purpose of this Act; or

(b) at any reasonable time enter any office, establishment, factory or other premises occupied by such principal or immediate employer and require any person found incharge thereof to produce to such Inspector or other official and allow him to examine such accounts, books and other documents relating to the employment of persons and payment of wages or to furnish to him such information as he may consider necessary; or

(c) examine with respect to any matter relevant to the purpose aforesaid, the principal or immediate employer, his agent, or servant, or any person found in such factory, establishment, office or other premises, or any person whom the said Inspector or other official has reasonable cause to believe to be or to have been an employee;

(d) make copies of, or take extracts from, any register, account book or other document maintained in such factory, establishment, office or other premises; and

(e) exercise such other powers as may be prescribed.

An inspector shall exercise such functions and perform such duties as may be authorised by the Corporation or as may be specified in the regulations.

8, From a reading of the provisions of Section 45 of the Act, the Inspectors are authorised to discharge the following functions:

(a) call for information from the employers as deemed necessary for the purpose of the Act;

(b) enter any office, establishment, factory or other premises occupied by such an employer;

(c) require, employer or any person incharge to produce the accounts, books or other documents relating to the employment of persons and payment of wages;

(d) examine such documents stated in clause (c) above and to call for any other information from-

(i) principal employer, or

(ii) immediate employer, or

(iii) agent of (i) or (ii), or

(iv) servant of (i) or (ii), or

(v) any person found in factory, etc. or,

(vi) any person believed to be an employee.

Not satisfied with the entrustment of the above said functions, the Legislature by the Amendment Act 53 of 1951, authorised the Inspectors to:

(e) makes copies or extracts from registers, etc. The inspectors are authorised to exercise such other powers as may be prescribed. The Rules do not lay down any such powers.

The Inspectors are further required to exercise such functions and perform such duties:

(i) as may be authorised by the Corporation; or

(ii) as may be specified in the regulations.

The Nagpur High Court in a decision Alibhai Alias All Mohatnad S/o. Tar Mohammad Khoja, Prorieior. Alibhai Shakoor Bhai Rice Mill Gondia v. Emperor, AIR 1943 Nagpur 79, has held that failure to produce a register by employer on demand is a breach and is punishable.

It is further held by this Court in a judgment Employees'' Stale Insurance Corporation, Hyderabad v. M/s Ajantha Transport (Regd), Hyderabad and another, 1983 Labour & Industrial Cases 1066, that failure of compliance on the part of the accused with each demand made by the Inspector either under clause (a) or under clause (b) of Section 45(2) constitute an independant offence. But the Inspector has to launch the prosecution within six months from the date of offence i.e., from the date of failure of the accused to comply with the demand made by the Inspector either under clause (a) or under clause (b), it cannot, therefore, be said that the question of limitation does not arise if there is delay in filing prosecution. Therefore, as seen from the decisions referred to above, the Inspector was entrusted with enormous powers to inspect the premises and verify the records and require not only the principal employer of the factory, establishment, office or other premises, but his agent to furnish to him such information, as he may consider necessary, to submit his report. Basing on the said report and after giving opportunity to the employer, the corporation shall act to determine the contributions in certain cases, if the demand contributions are not made by the principal employer or immediate employer, or agent, the amount shall be recovered as dues of land revenue under the Revenue Recovery Act.

The Supreme Court in a decision B.M. Lakshmanamurthy Vs. The Employees'' State Insurance Corporation, Bangalore, , has held that the Act, as it appears from the preamble is passed to provide for certain benefits to employees in case of sickness, maternity and employment injury and to make provisions for certain other matters inrelation thereto. The Act is thus a beneficial piece of social security Legislation in the interest of labour in the factory at the first instance and with a power to extend to other establishments. The provisions of the Act will have to be construed with that end in view to promote the scheme and avoid the mischief. But in the present case, without bearing in mind the above observation of the Supreme Court and the report submitted by the Inspector which was submitted after verifying the records maintained by the employer, the respondent, failed to appreciate the report submitted by the Inspector, but accepted the version of the respondent contrary to the aims and objects of the Act, which is promulgated for the benefit of the employees. Therefore, as seen from the report of the Inspector, who inspected the premises of the respondent Cafe on 23-7-1990 found that ten persons were employed for wages by the petitioner from April, 1990 to June, 1990 and he verified the attendance register for the period from April, 1990 to June, 1990. The Inspector also found that a grinder was being used with the aid of power for manufacturing pickles, chumeys, dhalls, etc. Therefore, the petitioner-respondent Cafe comes u/s 2(k) of the Factories Act and covered by Section 2(12) of the ESI Act. Taking any view from any angle, the cafe of the respondent-petitioner is a factory as per Section 2(k) of the Factories Act and its establishment covers under Employees State Insurance Act. Instead of accepting the report of the Inspector, the Tribunal on erroneous grounds allowed the petition filed by the respondent-petitioner Cafe that the Inspector has failed to see the size of the grinder used by the respondent-petitioner/ Cafe. Section 45 of the Act nowhere obligates the Inspector to give the size, width and height of the grinder used by any hotelier or any establishment. Therefore, the finding of the lower Court is erroneous, uncalled for and accordingly set aside.

Therefore, in view of the above said reasons, the order of the lower Court is set aside, holding that the cafe of the respondent-petitioner comes within the meaning of Section 2(k) of the Factories Act and covered u/s 2(12) of the Employees State Insurance Act.

Therefore, the appeal is allowed, but in the circumstances of the case without costs.