Employees State Insurance Corporation v. M/s M.M. Suri & Associates (P) Ltd., (SC) BS15094
SUPREME COURT OF INDIA

Before:- S. Saghir Ahmad and D.P. Wadhwa, JJ.

Civil Appeal No. 5640 of 1997. D/d. 28.10.1998.

Employees State Insurance Corporation - Appellant

Versus

M/s M.M. Suri & Associates (P) Ltd. - Respondents

For the Appellant :- Mr. V.J. Francis, Advocate.

For the Respondents :- Mr Dushyant Dave, Senior Advocate, Mr. Tarun Sharma and Mr. Arun K. Sinha, Advocates.

Employees' State Insurance Act, 1948, Sections 2(9), (12), (22) and 1(15) - Employees - Persons employed - Wages - Applicability of the Act - Persons employed for the purpose of applicability of the Act include only those covered within the definition of Section 2(9) working in the establishment not other employees and partners etc. working therein - If the number of such persons falling within the definition of Section 2(9) is less than 20, the notification dated 30.9.1988 is not applicable.

[Para 8]

Cases Referred :-

Andhra Pradesh State Electricity Board, Nellore v. Employees' State Insurance Corporation, Hyderabad, 1977 Lab. I.C. 1107.

Regional Director, Employees State Insurance Corporation, Trichur v. Ramanuja Match Industries, 1985(1) SCC 218.

Employees State Insurance Corporation v. Apex Engineering Pvt. Ltd., 1998 (1) SCC 86.

JUDGMENT

D.P. Wadhwa, J. - Dissatisfied with the judgment of Delhi High Court holding that the notification dated September 30, 1998 issued under sub-section (5) of Section 1 of the Employees State Insurance Act, 1948 (for short, the 'Act') was inapplicable to the establishment of the respondent, Employees State Insurance Corporation (ESIC) has filed the present appeal after obtaining leave from this Court.

2. Under sub-section (5) of Section 1 of the Act, notification was issued, after complying with necessary formalities, extending the provision of the Act to 'shops'. It is not disputed that respondent is a shop and that the notification would be applicable to it if other conditions for application of the Act are fulfilled. The notification is as under :-

"Delhi Administration

(Labour Department)

Dated: 30.9.1988.

NOTIFICATION

In exercise of power conferred by sub-section (5) of section 1 of the Employees' State Insurance Act, 1948 (34 of 1948), read with the Ministry of Labour, Government of India, Notification No. 55.122(2) dated the 14th Dec., 1949 the Lt. Governor of the Union Territory of Delhi in consultation with the approval of the Central Government, and having previously given the requisite notice vide this Administration's Notification No. F.28(2)87/TMP/LC/Lab dated the 9th Feb. 1988 published in the Delhi Gazette (extra-ordinary) Part-IV dated the 9th Feb, 1988 hereby extends the provisions of the said Act to the classes of establishments specified in column I of the Schedule below w.e.f. the 2nd day of Oct., 1988.

SCHEDULE

Description of establishment, Area in which the establishments are situated

The following establishments wherein twenty or more persons are employed or were employed for wages on any day of the preceding twelve months namely :

Sd/-

(Mrs. M. Bassi)

Deputy Secretary (Labour)

Delhi Administration, Delhi"

Provisions of the Act apply to factories. 'Factory' is defined under clause (12) of Section 2 of the Act. It reads as under :-

This definition of 'factory' was introduced w.e.f. October 20, 1989. Definition of 'factory' as it originally existed prior to amendment by Act 44 of 1966 (w.e.f. 28.1.1968) was as under :

After the amendment by Act 44 of 1966 as aforementioned the words "or were working " in the definition of 'factory' were substituted by the words "or employed or were employed for wages". By subsequent amendment the number of persons have now been reduced to ten or more persons instead of twenty or more persons in the definition of 'factory'.

'Employee' and 'wages' have also been defined in clauses (9) and (22) and are as under :

and includes any person employed for wages on any work connected with the administration of the factory or establishment or any part, department or branch thereof with the purchase of raw materials for, or the distribution or sale of the products of, the factory or establishment or any person engaged as apprentice, not being an apprentice engaged under the Apprentice Act, 1961 (52 of 1961), or under the standing orders of the establishment; but does not include -

Considering these provisions, High Court was of the view that "the word 'employee' is applicable to those who are not officers. In the instant case, there are five officers and the balance of the workers are less than 20". High Court was, thus, of the view that the notification was not applicable in the case of the respondent.

3. There is conflict on decisions of the High Courts. One view is that for Act to be applicable to an establishment total number of employees should be 20 or more (now it is 10 or more) irrespective of the fact whether all the employees fall within the definition of 'employee' as given in Section 2(9) meaning thereby that drawing of any amount of wages is immaterial. Other view is that these 20 or more persons should be those who fall within the definition of 'employee' as given in Section 2(9) of the Act getting wages as prescribed therein. As to what 'wages' means has also been defined. Second view commends to us. It was submitted that it there are 18 employees drawing the amount of wages prescribed and only two or more are drawing more than that, the Act should be applicable as in any case this is beneficial legislation. Reliance has been placed on a Division Bench decision of the Andhra Pradesh High Court in Andhra Pradesh State Electricity Board, Nellore v. Employees State Insurance Corporation, Hyderabad, 1977 Lab. I.C. 1107 where the High Court said that the expression 'wages' used under Section 2(12) must be understood in wider sense as meaning any remuneration paid to any person who is employed in the factory and cannot be restricted only to remuneration paid to the employees, who come within the definition of Section 2(9). Section 2(12), no doubt, uses the words "persons are employed or were employed for wages". Stress was, therefore, on the word 'persons' and it is submitted that for the Act to be applicable only criteria is to see if the establishment has 20 or more persons on its employment. This interpretation ignores the fact of wages as defined in Section 2(22). If we refer to the definition of 'factory' when the Act came into force or at least till 1968 when the Act was amended by amending Act 44 of 1966, 'factory' meant any premises "wherein 20 or more persons are working". This definition of 'factory' was changed and at the relevant time it was substituted by the words 'employed for wages'. The exact amendment we have already noticed above. When the word 'wages' is specifically introduced in the Section it can only mean to have reference to what 'wages' mean in Section 2(22) of the Act. It cannot be given any other meaning has been done by the Andhra Pradesh High Court. In our view, therefore, the Act would apply to an establishment only when number of employees is 20 or more and all those employees answer the description of employee contained in Section 2(9) of the Act.

4. To controvert the argument that even though majority of the persons employed are 'employees' and their number is less than 20 they should not be deprived of the benefit under the Act, it was submitted that what will happen when the 'employees' falling within definition of Section 2(9) of the Act are only 2 or 3 though the total strength in the establishment is more than 20. How can it be said in that case that the Act should nevertheless apply to such an establishment ? The answer is obviously in negative that Act cannot apply.

5. The view which we have taken find support from two decisions of this Court in Regional Director, Employees State Insurance Corporation, Trichur v. Ramanuja Match Industries, 1985(1) SCC 218 and Employees' State Insurance Corporation v. Apex Engineering Pvt. Ltd., 1998 (1) SCC 86.

6. In Regional Director of Employees, State Insurance Corporation Trichur v. Ramanuja Match Industries, 1985(1) SCC 218 the question before this Court was whether a partner of a firm is an employee within the meaning of Section 2(9) of the Act. Three partners of the firm were also getting wages and with them the strength of total number of employees was more than twenty. There was thus no dispute that there were twenty or more persons employed for wages. This Court held that the partners were not the employees and rather they were the proprietors of the firm and with the partners being out the total number of employees would be less than twenty, the Act would be applicable to the establishment of the firm. The Court considered the arguments of ESIC that the Act was a beneficial legislation and said as under :-

7. In Employees' State Insurance Corporation v. Apex Engineering Pvt. Ltd., 1998(1) SCC 86 there was challenge to the judgment of the Bombay High Court holding that Managing Director of the respondent company was not an employee within the meaning of Section 2(9) of the Act and since the number of regular employees was less than 19 engaged for wages by the Company, it would not be covered under the Act as it would be outside the definition of 'factory' under Section 2(12) of the Act. This Court, after examining the provisions of Section 2(9) of the Act, said :-

The Court then referred to the definition of 'wages' as provided in Section 2(22) of the Act. The duties and powers of the Managing Director of the respondent company were referred to and this Court said that all these activities of the Managing Director were connected with the administration of the factory. The fifth condition, as aforesaid, was, therefore, satisfied. Then this Court observed as under :-

8. In the present case there is no dispute that as per the notification in question establishment of respondent is a shop and number of employees falling within the definition of Section 2(9) of the Act are less than 20. We, therefore, uphold the impugned judgment of the High Court that since in the establishment of the respondent the employees number less than 20 the notification dated September 30, 1988 extending the Act to the establishment of the respondent is not applicable.

Therefore, the appeal is accordingly dismissed. There shall, however, be no order as to costs.

Appeal dismissed.