Regional Director, Employees State Insurance Corporation, Hyderabad vs Bharat Cement Pipe Industries

This CMA was filed against the order dated 20-11-1991 in EI Case No.2 of 1989 on the file of the Employees Insurance Court, Hyderabad, wherein it was held that the petitioner in EI Case No.2 of 1989 is not liable to pay contribution on the amounts paid to the hamalis.

It is contended by the Counsel for the appellant that the judgment and decree passed by the Employees Insurance Court at Hyderabad is contrary to the provisions of the State Employees Insurance Act. It is further contended that the hamalis come within the definition of Section 2(9) of the ESI Act. Therefore, the order of the Employees Insurance Court that the respondent herein is not liable to pay contribution on the wages paid to the hamalis is liable to be set aside.

To appreciate his contention, few facts of the case are necessary to be extracted. The respondent Industry, namely Bharat Cement Pipe Industries, was a partnership firm having involved in the manufacturing of cement pipes and the factory is located at Adilabad District. It is admitted that the petitioner''s industry is covered under the ESI Act (for short "the Act") w.e.f, 2-12-1984 and since then the petitioner firm is paying the contributions without fail and delay. While things stood thus, the Regional Director, ESI Corporation through his notice dated 11/18-2-1987 conveying the observation made by their Inspector, who inspected the factory on 9-12-1986 found, that there are delays in payment of contributions. As per Regulation 31 of ESI (G) Regulations, 1950, a principal Employer has to pay the contributions within 21 days of expiry of the relevant wage period. Therefore, the Corporation demanded an amount of Rs.14,013.75 ps. towards contribution. Finally, it was observed that the declaration forms in respect of temporary workers have'' not been submitted so far. The declaration forms may be submitted in respect of temporary workers and intimate the same to the office. Basing on the said legal notice of the Regional Director, the petitioner has given reply on 20-5-1987 informing the payment of certain amount and explaining the situation with regard to the payment to the hamalis and to certain casual workers who were engaged on civil works. To the surprise of the petitioner, the first respondent sent another notice dated 3/8-7-1988 asking them to pay some more contributions and finally the respondent has passed order through his proceedings dated 30-9-1988 asking the petitioner to pay Rs.14,013.75 ps., or otherwise it will be recovered as if it was land revenue along with interest and the respondent in the EI Case has also addressed the District Collector on 30-11-1989 for the recovery of the said amount by way of arrears of land revenue. On 20-5-1987, the petitioner submitted representation to consider the issue once again, but the respondent has not given any reply to the representation. Without considering the above representation and without giving any opportunity, the respondent has issued notice dated 30-9-1988 which violates the principles of natural justice and further submitted that the hamalis are not covered by Section 2(9) of the ESI Act and therefore he prayed the Court to quash the above said proceedings as illegal and improper and also prayed to stay the letter addressed to the District Collector dated 30-11-1989 by the first respondent.

In respect to the above said averments made by the petitioner, the respondents have filed their counter. The industry is covered under the State Insurance Act w.e.f., 2-12-1984 and the principal employer is required to pay contributions as per Sections 39 and 40 of the Act in respect of his employees either employed directly or through an immediate employer as the rates specified in the first schedule as amended. But the petitioner has failed to pay the contribution as per the above said provisions under the Act. On 9-12-1986 the Inspector of the respondent-Corporation visited the industry and verified the records of the industry and observed that the petitioner has not paid the contributions of casual labourers and hamalis engaged for the period from 12 of 1983 to 3 of 1985 to the tune of Rs.27,069.81 ps. and for the period from 4 of 1985 to 10 of 1986 an amount of Rs. 1,24,997.24 ps. Finally, the Corporation has claimed an amount of Rs.11,024.90 ps. under office letter dated 18-2-1987 and the petitioner did not pay the said amount. It is further reported for the subsequent period also. Thereafter, through notice dated 18-3-1988 another claim was made and the petitioner did not pay the same. The petitioner was also given opportunity vide letter dated 30-9-1988 in Form No.''C-18'' to pay the contributions within 15 days before involving Revenue Recovery action u/s 45-B of the Act and they denied the failure on the part of the respondent to consider the representation dated 20-5-1987. The Inspector of the Corporation who was deputed to verify the correctness or otherwise of the representation, on 8-1-1988 the petitioner''s industry was visited with prior intimation, but the petitioner failed to place the relevant vouchers and ledgers. Hence, it is contended that the petitioner has no ground to say that he has not given any opportunity before issuance of order dated 30-1-1988.

The Tribunal after considering the oral and documentary evidence on record and also following the judgment of the Bombay High Court rendered in Paris Bottling Co. Ltd. v. E.S.I. Corporation, 1989 (2) UN, 494, held that the ESI Corporation is not entitled to claim the payment of contributions on the remuneration paid to them by the petitioner under the provisions of the ESI Act. It also held that the charges paid to the hamalis for the job of loading and unloading amounts to wages and the first respondent is not entitled to claim any contribution on such amounts paid to the hamalis. The learned Counsel while making his submissions that the above said finding of the ESI Court is against the provisions of the ESI Act and settled principles of law, relied on the judgment of the Supreme Court reported in Rajakamal Transport and another v. Employees'' State Insurance Corporation, Hyderabad, 1996 SCC (L&S), 1307, where the above said judgment was delivered by the Supreme Court on a judgment went from this Court. The Supreme Court after taking into consideration the provisions of Section 2(9) of the Employees State Insurance Act and following the judgment in Royal Talkies, Hyderabad and Others Vs. Employees State Insurance Corporation, and Regional Director, Employees'' State Insurance Corpn., Madras Vs. South India Flour Mills (P) Ltd., , held that the whole object of the statute is to make the principal employer primarily liable for the insurance of any kind of employees on the premises whether they are there in the work or are merely in connection with the work, of the establishment. The primary test in the substantive clause being thus wide, the employees of the canteen and the cycle stand may be correctly described as employed in connection with the work of the establishment. A narrower construction may be possible but a larger ambit is clearly imported by a purpose-oriented interpretation. Therefore, the saine was re-oriented in the case of Regional Director, ESI Corporation, (referred to above) that "the tests of predominant business activity or too remote connection are not relevant. The employee need not necessarily be the one integrally or predominantly connected with the entire business or trading activities. The true test is control by the principal employer over the employees. That test alone will be the relevant test......" Applying the principal laid down by the Supreme Court in the above said judgment, if the averments made by the petitioner in the ESI case is taken into account, that the petitioner has engaged the hamali workers on a temporary basis and he has not engaged them continuously and he is not even aware of the names of the hamalis and the payment was received by one of them on piece rate basis on the same day immediately after completion of their work and the hamatis are engaged at the customers'' place for loading and unloading work and the payments payable to them is part and parcel of casual labour charges. The loading and unloading work is done by the hamalis at different places, but not at the factory premises. Therefore, the question of paying the contribution does not arise. But it is not disputed that the hamalis are not under the control of the respondent industry and they are doing the job of loading and unloading in connection with the work of the industry. As submitted by the appellant Counsel that the hamalis are engaged by the respondent herein and the amounts are paid by the respondent having full control over them.

In the above backdrop of the case, let us examine Section 2(9) of the Act which defines an "employee"

"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) who is directly employed by the principal employer or any work of, or incidental to or connected with the work of, the factory or establishment, whether such work is done by the employee in factory or establishment or elsewhere; or

(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;

(iii) xxxxxxxx etc.

As seen from the above section, it is clear that the "employee" means any person employed for wages, in connection with the work of a factory or establishment, where such work is done in factory or an establishment or elsewhere, who was directly employed by the principal employer for any work of the factory or establishment or which is preliminary to the work carried on in or incidental to or connected with the work. Therefore, there is no difficulty to bring hamalis within the meaning of Section 2(9) of the Act who are employed for wages, not necessarily directly by the principal employer, but also employed through an immediate employer or under the supervision of principal employer or his agent is sufficient, either to work in the factory or establishment or elsewhere. They should not necessarily be employed by the principal employer to work in the factory or establishment, by their engagement to work incidental to the preliminary work or connected with the work of the factory or establishment is sufficient and even if they are engaged by the agent of the principal employer is also sufficient to bring the hamalis within the meaning of "employee" defined u/s 2(9) of the Act.

Therefore, following me principle laid down in the judgments of the Apex Court and as per Section 2(9) of the Act, 1 have no hesitation to hold that the hamalis are the employees of the respondent and they are covered within the meaning of Section 2(9) of the ESI Act. Therefore, the respondent is liable to pay the contribution as demanded by the appellant through proceedings dated 30-9-1988 which is held valid, proper and within the provisions of the Act. Therefore, in view of the finding, the order passed by the ESI Court is set aside and the appeal is allowed. But in the circumstances of the case, without costs.