The Regional Director, Employees State Insurance Corporation vs Anandha Silks Paradise

A. Selvam, J.—Challenge in these civil miscellaneous appeals is to the common order passed in ESIOP Nos. 12 of 2001 & 20 of 2001 by

the Employees State Insurance Court, Tiruchirapalli.

2.The respondent herein has filed ESIOP Nos. 12 of 2001 and 20 of 2001 on the file of the Employees State Insurance Court, Tiruchirapalli,

wherein the present appellant has been shown as respondent.

It is stated in the petitions that the petitioner is a partnership firm and the petitioner has been doing cloth business. At any point of time, under the

petitioner more than 18 employees have not been served. Therefore, the petitioner has not come within the purview of Employees'' State Insurance

Act (34 of 1948). The Inspector of the respondent has inspected the petitioner on several occasions and subsequently a notice has been issued,

wherein it has been stated that from 01.04.1987 to 30.06.1990 the petitioner has to pay Rs. 7,488.75 paise towards premium and further it has

been directed that the petitioner should make personal appearance on 24.12.1990. The petitioner has given a reply notice dated 19.12.1990. The

persons namely Periyannan, Somasundaram & Shanmugam have served as partners of the petitioner and therefore, the petitioner is not liable to

pay the amount demanded by the respondent. Further it is stated in the petitions that as per notice dated 27.07.1990 the petitioner is not liable to

pay the amount of Rs. 26,085.70 paise to the respondent. Under the said circumstances, with regard to the amount of Rs. 7,488.75 paise, ESIOP

No. 12 of 2001 has been filed and likewise, with regard to the amount of Rs. 26,085.70 paise, ESIOP No. 20 of 2001 has been filed.

On the side of the respondent in both the petitions detailed counter has been filed, wherein it has been stated that the Inspector of the

respondent has inspected the petitioner on 07.04.1988 and ultimately found that from 01.04.1987 to 30.06.1990 the petitioner is bound to pay

Rs. 7,488.75 paise towards premium and likewise, as per notice dated 27.07.1990 the petitioner is liable to pay Rs. 26,085.70 paise towards

premium. Under the said circumstances, the petitioner has been given the concerned notices and therefore, the present petitions deserve dismissal.

The Court below, after considering the divergent contentions raised on either side, has allowed both the petitions and ultimately set aside the

notices issued by the respondent to the petitioner. Against the common order passed by the Court below, the present civil miscellaneous appeals

have been filed.

Since common questions of law and facts are involved in both the civil miscellaneous appeals, common judgment is pronounced.

The sum and substance of the contention urged on the side of the petitioner is that the petitioner is a partnership firm and at any point of time, the

petitioner has not employed more than 18 employees and therefore, the petitioner would not come within the purview of Employees'' State

Insurance Act (34 of 1948) and the respondent has unnecessarily issued the notices in question and thereby directed the petitioner to pay the

amounts mentioned therein and in order to set aside the same, the present petitions have been filed.

In order to remonstrate the contention urged on the side of the petitioner, it is stated on the side of the respondent that the petitioner has been

inspected on various occasions and no acceptable answers have been given and under the said circumstances, the notices in question have been

issued to the petitioner and thereby directed the petitioner to pay the amounts mentioned therein towards premium and therefore, the petitioner is

not entitled to get the reliefs sought for in the petitions.

The only point that has now winched to the fore is;

Whether the petitioner would come within the contour of Employees'' State Insurance Act (34 of 1948)?

The learned Counsel appearing for the appellant/respondent has repeatedly contended that during the relevant period, under the petitioner

more than twenty employees have served and under the said circumstances, the respondent has issued the order dated 16.01.1992 and thereby

directed the petitioner to pay Rs. 7,488.75 paise and likewise, the respondent has issued another order dated 25.01.1991 and 18.06.1991 and

thereby directed the petitioner to pay Rs. 26,085.70 paise and it is false to contend that the persons namely Periyannan, Somasundaram &

Shanmugam are the partners of the petitioner and they are the employees of the petitioner and the Court below, without considering the

contentions urged on the side of the appellant/respondent, has erroneously allowed ESIOP Nos. 12 of 2001 & 20 of 2001, and therefore, the

common order passed by the Court below is liable to be set aside.

Per contra, the learned Counsel appearing for the respondent/petitioner has also equally contended that the petitioner is a partnership firm and

at any point of time, the petitioner has not employed more than 18 employees and the persons namely Periyannan, Somasundaram & Shanmugam

have been appointed only to look after the business of the petitioner and they have not been given wages and for the service to be done by them,

only renumeration would be given out of profits and they are not the employees of the petitioner and the Court below, after considering the rival

contentions raised on either side, has rightly allowed the petitions and therefore, the argument advanced by the learned Counsel appearing for the

appellant/respondent is liable to be rejected and altogether the present civil miscellaneous appeals deserve dismissal.

As adverted to earlier, the specific contention of the respondent/petitioner is that the persons namely Periyannan, Somasundaram &

Shanmugam are not the employees of the petitioner and they have been directed to look after the business of the petitioner and for their service

remuneration would be paid out of profits.

The entire case of the respondent/petitioner hinges upon Ex.A22. Ex.A22 is an agreement which has come into existence between A.K.K.

Karuppiah and the persons namely Periyannan, Somasundaram & Shanmugam. In Ex.A22, it has been clearly stated that the persons namely

Periyannan, Somasundaram & Shanmugam have to look after the business of the petitioner and they would be paid renumeration to the extent of

20% from net profits. From the close reading of Ex.A22, the Court can unflinchingly come to a conclusion that the persons namely Periyannan,

Somasundaram & Shanmugam are not the employees of the petitioner. Under Ex.A22 a power has been given to them so as to administer the

petitioner. Since the said persons have not been appointed as employees of the petitioner and since they agreed to receive 20% out of net profits

by way of renumeration, the Court cannot come to a conclusion that they are the employees of the petitioner.

At this juncture, it would be more useful to look into the following decisions;

a) In Regional Director, Employees'' State Insurance Corporation, Trichur Vs. Ramanuja Match Industries, , the Honourable Apex Court has held

as follows;

A partner who belongs to the class of employer cannot rank as employee because he also works for wages for the partnership. Undoubtedly the

term employee is the correlative of employer. In common parlance the status of a partner qua the firm is different from employees working under

the firm, it may be that a partner is being paid some remuneration for any special attention which he devotes but that would not involve any change

of status and bring him within the definition of employee. The contention that on the basis of the statute being beneficial, a partner should also count

as an employee is unsustainable.

b) In Champaran Cane Concern Vs. State of Bihar and Another, the Honourable Apex Court has held that in a partnership each partner acts as an

agent of the other. The position of a partner qua the firm is thus not that of a master and a servant or employer and employee which concept

involves an element of subordination but that of equality. The partnership business belongs to the partners and each one of them is an owner

thereof. In common parlance the status of a partner qua the firm is thus different from employees working under the firm, it may be that a partner is

being paid some remuneration for any special attention which he devotes but that would not involve any change of status and bring him within the

definition of employee.

From the close reading of the decisions referred to earlier, it is pellucid that the person who is being paid some renumeration for any special

attention, would not come within the contour of Employees'' State Insurance Act (34 of 1948).

In the present civil miscellaneous appeals the main contention of the appellant/respondent is that the said three persons are also employees of

the respondent/petitioner. It has already been pointed out that as per Ex.A22, the said three persons have been appointed only to look after the

administration of the petitioner and they have not been paid monthly salary and for the service to be done by them, they would get only

renumeration at the rate of 20% out of net profits. At the most they can be called as power of attorney agents of the petitioner. As per the dictum

rendered by the Honourable Apex Court, the persons who have been appointed under Ex.A22, cannot be treated as employees of the

respondent/petitioner. Since the persons who have been appointed under Ex.A22 cannot be treated as employees, it is needless to say that the

provision of Employees'' State Insurance Act (34 of 1948) would not apply to the petitioner.

In the light of the discussion made earlier, it is very clear that the argument advanced by the learned Counsel appearing for the

appellant/respondent does not hold good and whereas the argument advanced by the learned Counsel appearing for the respondent/petitioner is

really having subsisting force.

The next contention urged by the learned Counsel appearing for the appellant/respondent is that the petition has filed only a xerox copy of the

partnership deed and the same is inadmissible in evidence and the Court below without considering the admissibility of the same, has erroneously

relied upon the same and therefore, common order passed by the Court below is liable to be set aside.

Of-course, it is true that Ex.A21 is a xerox copy of partnership deed dated 01.04.1984. At the time of marking Ex.A21, no objection has

been raised on the side of the appellant/respondent. Even assuming without conceding that Ex.A21 is inadmissible in evidence, as per Ex.A22 the

Court cannot come to a conclusion that the provision of Employees'' State Insurance Act (34 of 1948), would cover the petitioner.

In order to analyse the aforesaid legal position, it would be more useful to look into the decision reported in R.V.E. Venkatachala Gounder Vs.

Arulmigu Viswesaraswami and V.P. Temple and Another, , wherein the Honourable Apex Court has culled out the stage at which objection can

be raised with regard to secondary evidence;

A) Objection that the document sought to be proved is itself inadmissible; and

B) Objection directed not against the admissibility of the document but against the mode of proof thereof on the ground of irregularity or

insufficiency.

The objection under category ''A'' can be raised even after the document has been marked as an exhibit or even an appeal or revision. But, the

objection under category ''B'' can be raised when the evidence is tendered but not after the document has been admitted in evidence and marked

as an exhibit.

In the instant case, as animadverted to earlier, no valid objection has been raised at the time of marking Ex.A21 either with regard to the

admissibility of the same or with regard to the mode of proof thereof. Therefore, the second contention raised on the side of the

appellant/respondent is also sans merit.

The Court below, after considering all the contentions raised on either side, has rightly allowed the petitions. In view of the foregoing narration

of both the factual and legal aspects, this Court has not found any illegality nor infirmity in the common order passed by the Court below and

therefore, the present civil miscellaneous appeals deserve dismissal.

In fine, Civil Miscellaneous Appeal Nos. 384 of 2002 and 385 of 2002 deserve dismissal and accordingly are dismissed without costs. The

common order passed in ESIOP No. 12 of 2001 & 20 of 2001 by the Employees State Insurance Court, Tiruchirapalli is confirmed.