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Employees State Insurance Corporation v/s Agew Steel Manufacturing Pvt. Ltd.

    First Appeal No. 1241 of 1990

    Decided On, 28 August 2019

    At, High Court of Gujarat At Ahmedabad

    By, THE HONOURABLE ACTING CHIEF JUSTICE MR. ANANT S. DAVE

    For the Appearing Parties: Hemant S. Shah, A.C. Gandhi, Advocates.



Judgment Text

1. This appeal is arising out of an order passed by the learned Presiding Officer of the Employees State Insurance Court (ESIC), Ahmedabad under the provisions of Section 75 of the Employees State Insurance Corporation Act, 1948 (for short "the Act").

2. According to the appellant, the respondent-company is engaged in manufacturing of steel frames and doors and also undertakes the contract by tenders for manufacturing steel doors and frames with job work of fitting the same to the building of the person/customers, who have issued tenders for supplying of the doors and frames including job work of frames and doors.

3. Having regard to the nature of work of the respondent-Company, the appellant-Corporation issued demand notice to the tune of Rs. 16,050/- with interest towards outstanding contribution and further demanded Rs. 67,761/-; Rs. 25,129.45 Ps.; Rs. 30,909.80 Ps. and other miscellaneous amount in aggregate demand of Rs. 1,28,973/- is made by way of contribution under the provisions of the Act.

4. The respondent challenged the demand notice before the Employees State Insurance Court, Ahmedabad by filing an application (ESI) No.88 of 1987 seeking permanent injunction restraining the Corporation from recovering the amount. The contractors employed by the respondent-Company for fitting the doors and frames were not the employees of the Company and they could not have been included within a definition of 'employee' under Section 2 (9) of the Act and upon analysis of the materials on record, ESI Court rendered its findings. The appellant-ESI Corporation had no case to issue demand notices, in view of the nature of work executed by the respondent-Company, as the erection charges paid to contractors or their workers were not "wages" and they were not "employees" of the respondent-Company, by referring to the definition of "Employee" given under Section 2 (9) of the Act; "Factory" under Section 2 (12) of the Act, "Immediate Employer" under Section 2 (13) of the Act and the "Principal Employer" under Section 2 (17) and further definition of "Wages" under Section 2 (22) of the Act.

5. Shri Hemant Shah, learned advocate for the appellant would contend that ESI Court at the outset, committed an error in holding that ESI Corporation is not entitled to raise demand towards contribution from the respondent-Company and further definition the word of "Employee" under Section 2 (9) of the Act read with Section 2 (12) of the Act of the word "Factory" and the word "Wages" defined in section 2 (20) of Act. The workers performing the work of erecting and fixing windows and doors manufactured by the respondent-Company only and it was part of manufacturing activities undertaken by the respondent-Company on turnkey basis which was reflected from the debit book and provision made of Rs. 68,761/- in the book of account towards erection charges only.

6. At the outset, it is contended that in the case of Employees State Insurance Corporation v. K. Ramachandran and Ors.,1986 3 SCC 239 wherein the Apex Court has held that Section 2(9)(i) of the Act comprehends casual workers. Workers employed for construction of additional buildings for expansion of factory are employees as well. Work of construction of additional factory building is work incidental or preliminary to, or connected with the work of the Factory. The Apex Court further held that in such case, employer was duty bound to contribute in respect of workmen so employed. In the above case, the Apex Court also referred to word 'expression' "in connection with the work of an establishment" as was interpreted meaning thereby, the above expression includes a wide variety of workmen who may not be employed in the establishment but may be engaged only in connection with the work of the establishment. Some nexus exist between the establishment and the work of the employee but it may be a loose connection. The employee may not do anything directly for the establishment or may not do anything statutorily obligatory in the establishment. It is enough if the employee does some work which is ancillary, incidental or has relevance to or link with the object of the establishment, and therefore, in the present case, the above decision will be helpful.

7. Another decision in the case of Hyderabad Asbestos Cement Products Ltd. v. The Employees State Insurance Corporation and Ors., (1978) 1 SCC 194 refers to scope of Sections 38 and 39 of the Act wherein the Apex Court has held that the above provisions are not restricted to employees working "in the factory" but also working outside the factory, namely in zonal or branch offices connected with purchase of raw materials, sale of finished products or administrative work, and therefore, contribution towards ESI by such employer is must.

8. In-Spite of notices in earlier order, no one appears for the respondent-Company.

9. Having regard to the facts and circumstances of the case and considering the above two decisions, in the case of Employees State Insurance Corporation (supra), wherein, it is clearly held by the Apex Court that if the employee does some work which is ancillary, incidental or has relevance to or link with the object of the establishment, an employer of such an employee is duty bound to contribute towards Employees State Insurance, and further in the case of Hyderabad Asbestos Cement Products Ltd. (supra), the Apex Court has held that the employee working in a factory is the real test of not physical presence or absence outside the precincts of the factory but the test is whether under the control of the factory and is on the factory wages roll, or other similar tests. According to the Apex Court, the word 'employee' would include not only persons employed in the factory but also persons connected with the work of the factory. The employee may be working within the factory or outside the factory or may be employed for the work of the factory in any manner or such employees are included within the definition of "employee".

10. Keeping in mind the law laid down by the Apex Court, as above the factual scenario of this case reveals that provision of Rs. 68,761/- was made in the debit entry. The fact about no payment of charges to the customers is not important, since the business practice of the respondent-Company was to undertake job work of loading, unloading, shifting, erecting and fixing of doors and windows, for which they use to fix the charges from the customer and by employing co

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ntractor and other workers through such contractor, the work was carried out and keeping in mind definition of the word "employee" under Section 2(9) of the Act read with Section 2(12) of the Act of the word "factory" and Section 2 (13) of the act of the word "immediate Employer", Section 2 (17) of the Act of the word "principal employer" and the word "wages" defined in Section 2(22) of the Act, was interpreted by the Apex Court. 11. In view of the above facts and circumstances of the case, the present appeal is hereby allowed. The ESI Court has committed an error by granting permanent injunction of recovery of contribution towards ESI. Therefore, the impugned judgment dated 27.10.1989 is quashed and set aside.
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