Employees States Insurance Corporation vs M.O. Tailors, Hyderabad

Heard the learned Counsel for the appellant. There is no representation on behalf of the respondent.

The Judgment of the Employees'' Insurance Court, Ramkote Hyderabad in E.I. Case No.28 of 1990 dated 15-10-1991 holding that the respondent is not liable to contribute towards the Employees State Insurance (for short ''the E.S.I.'') beyond September, 1988 is challenged.

The matter arose this way.

The respondent is having a tailoring shop situate at Chirag Ali Lane, Hyderabad. The Regional Director, E.S.I. Corporation demanded Rs.2,016/- towards the E.S.I. contribution and interest for the period of April 1988 to May 1989 and Rs.6,924/- towards the ESI contributions and interest for the period from June, 1989 to March, 1990 and in all Rs. 8,942/-. The respondent filed the petition before the E.S.I. Court u/s 75 of the E.S.I. Act, 1948 (for short ''the Act'') challenging the demand cm the ground that the provisions of the Act are not applicable to his shop and therefore, he is not liable to pay the amount, the reason being that only eight employees had been appointed during the said periods. It was resisted by the appellant. After hearing both the sides, the contention was partly accepted that the demand for the contribution upto September, 1988 was tenable but not beyond that period. Aggrieved by such an order, the appeal is filed.

It is not in dispute that the respondent had engaged more than 10 workers as on 28-5-1988 when inspected by the Inspector, the inspection report was prepared on 28-5-1988 and it was submitted to the Regional Director of the ESI Corporation. The report also disclose that different number of persons had been employed during different months. Ex.R5 disclose that 10 persons had been employed during the month of April and May, 1988 and 7 persons were employed in the months of June to December, 1988 and February and April, 1989 and 6 employees were there during the months of September 88 and March 1989.

The Tribunal considered the question whether the establishment of the respondent should be deemed to be covered for a period of 12 months from the month of May, 1988 when he last employed 10 persons and therefore he was liable to pay the contribution till the end of April, 1989. The E.S.I. Court relied upon a decision of the High Court of Madras in E.S.I Corporation, Selam v. Balaji Weaving Mills, 1975 Lab. 1C 134 and came to the conclusion that although the respondent had employed 10 persons in April and May, 1988, for subsequent months he had employed less persons than that and therefore barring such a period, the computation of 12 months cannot be made applicable to the subsequent months and therefore passed the impugned order as above.

Sri. E.G. Ravinder Reddy, the learned advocate has contended that the simple question involved in this case as above, is not in the manner examined and determined by the E.S.I. Court but has to be determined in the light of Section 1 sub-clause (5) and the notification issued thereunder and not by resorting to the definition of Factory u/s 2 sub-clause (12) of the Act. It is his contention that when once it is established that 10 persons and above were appointed on any day within 12 months, the law operates on the establishment to make the contribution. According to him, since admittedly 10 persons were employed in the month of April and May, 1988, the respondent is liable to pay the contribution for the whole 12 months ending with March and April 1989. The learned Advocate also submits with all his serious efforts said to have been made by him that there is no precedent on this question directly covering the area and therefore, this requires serious examination for guidance to such authorities of the Courts.

Notwithstanding the availability or otherwise of any precedent or precedents on the question involving a serious question of law as above, requires deep examination and settlement of law on the question.

There is no dispute that the respondent is an establishment of commercial nature or an establishment of any other kind (to be included in the expression ''otherwise''). Section 1 of the Act in the Chapter -1, concerns the Short Title and extent and commencement and application of the Act. Sub-clause (4) of Section 1 makes the Act applicable in the first instance to all the factories including factories belonging to the Government other than seasonal factories. The expression ''factory'' is defined u/s 2(12) of the Act. Therefore, the Act will be applicable to a factory within the definition of Section 2 sub-clause (12) read with Section 1 sub-clause (4) of the Act. In the present case, the question is not whether the respondent is a factory as nobody has raised such a contention. However, it must be hastened to add that if the respondent is a factory by virtue of the above provision, it is operatable within the provisions of the Act.

Section 1 sub-clause (5) of the Act reads as follows:

"The appropriate Government may, in consultation with the Corporation and (where the appropriate Government is a State Government with the approval of the Central Government), after giving six months'' notice of its intention of so doing by notification in the Official Gazette, extend the provisions of this Act or any of them, to any other establishment or class of establishments, industrial, commercial, agricultural or otherwise".

Mr. Ravinder Reddy, the learned advocate has also rightly depended upon the notification issued u/s 1 sub- clause (5) of the Act by the appropriate Government. Under G.O.Ms.No.292 dated 25-3-1997 (sic G.O. Ms. No.297, dated 25-3-1975) published in Part-I of the Extraordinary Gazette of Andhra Pradesh, under the title of "Notifications By Government''. Column No.1 of the notification deals with the description of the establishments. It may be proper to read the column as follows:

"Any premises including the precincts thereof whereon ten or more persons but in any case less than twenty persons, are employed or were employed for wages on any day of the preceding twelve months.... "

As rightly contended by Mr. Ravinder Reddy, the law to be discharged from the provisions supra are very clear that any premises or establishment notified by the appropriate Government u/s 1 sub-clause (5) as above are to be governed by the provisions of the Act. The parameters of the applicability of the provisions are to be read themselves from the very provision. The relevant portions of the provision including the notification influences any reasonable legal thinking person or the authority to understand that when once such a notification is made in regard to such premises or establishment where 10 or more persons and below twenty persons have been employed on any day preceding the twelve months, thereafter the provisions of law are applicable. A simple illustration will be that if such a contingency occurs on any day within the total number of days of 12 months (calendar months) the provisions of the Act will be applicable for the entire period of 12 months. The reason appears to be simple. There may be fluctuations in the number of persons appointed in an establishment or a factory or the premises for various reasons viz., commencing from 1 to n ( in this case n will be between 1 to 20) but cut off from 10 to 20. That may be manipulated by many dubious ways as it normally happens to avoid the clutches of the law by making it 9 or 8 instead of 10 in a month to avoid the contribution. The magnitude may not extend to few number of workers as there may be factories having any number of employees like that. The law under the Act contemplates the contribution by such establishments or premises or factories etc., for the welfare and benefit of the employees and even as a social measure and the avoiding of such measure by the management or the owner of an establishment etc., would be inconsistent with the purpose of the law. Further more, the contribution for the whole period of 12 months or a particular period as per law would be only in regard to certain number of persons who were employed above 10 and below 20.

In the instant case, the respondent was found to have employed 10 persons in the premises or the establishment in the month of April and May, 1988 and therefore, the liability to contribute will extend to the entire 12 months ending with March and April, 1989. This is only an illustration given and may be worked out for various instances like that.

The relevance of the decision of the High Court of Madras as above to the facts of the case are to tally in appropriate. The question involved in that case was about the scope of Section 97 and Section 94 of the Act viz., that a report u/s 97 of the Act could be made by only ESI Corporation and not by the Director General and the question was whether such a power could be delegated. The question was also considered whether any management could be a factory if 20 or more persons had been employed or not. No questions of facts or law in the present case are either before the High Court of Madras or was considered or decided The reference to Section 2 sub-clause(12) of the Act in the decision to the extent stated above may be relevant or appropriate, provided that the respondent would be a factory and even then, by virtue of Section 1 sub-clause (4) of the Act, the provisions of the Act will be applicable. Therefore, the order of the ESI Court which is in challenge cannot be found to be correct on the proper examination of the question as above with affirmative answer in such a situation.

The appeal is allowed and the impugned order of the E.S.I. Court is set aside and the liability of the respondent regarding his contribution shall be regulated in the light of the observations made above. No costs.