2016 (2) TMI 1362 - SC - Indian Laws

Applicability of ESI Act - whether casual workers are covered under definition of employee as defined in Section 2(9) of the Employees State Insurance Act 1948 (ESI Act) and pertaining to period for which Turf Club is liable to pay from 1978-79 or from 1987? - HELD THAT - Reliance upon Regulations 26 to 31 of Regulations of 1950 is also of no avail as the Regulations make it clear that for the wage period contribution has to be made by the employer as provided in Regulation 31 otherwise he is liable to make payment as provided in Regulation 31A and amount carry interest which is recoverable as arrears of land revenue. It is also settled that interest cannot be waived. Regulation 36 also makes it clear that when an employee is employed by an employer for a part of the wage period the contribution in respect of such wage period shall fall due on the last date of the employment in that wage period. The intendment of regulation is clear to cover work rendered in part of wage period. This Court in Regional Director Employees State Insurance Corporation Madras v. South India Flour Mills (P) Ltd. 1986 (4) TMI 368 - SUPREME COURT has overruled the decision of the Madras High Court in Employees State Insurance Corporation v. Gnanambikai Mills Ltd. 1973 (2) TMI 142 - MADRAS HIGH COURT in which the High Court laid down that though casual employee may come within the definition of the term employee under section 2(9) of the Act yet they may not be entitled to sickness benefits in case their employment is less than the benefit period or contribution period and that it does not appear from the Act that casual employee should be brought within its purview. Coming to the submission that the ESI Corporation should be held bound by the consent terms the submission is factually incorrect misconceived legally untenable and otherwise also devoid of the substance - the demand in the instant case is based upon the notification dated 18.9.1978 which left no room to entertain any doubt that the establishments of the aforesaid department in question were also covered under the ESI Act. Thus no benefit can be derived by the consent terms which related to the earlier period when notification dated 18.9.1978 had not been issued. Notification has statutory force and agreement cannot supersede it. It is also clear that several departments of race club were covered under the notification issued in 1968. Thus the submission raised on the basis of consent terms is hereby rejected. The Turf Club is liable to make the contribution as per notification dated 18.9.1978 along with interest at such rate as provided in the Act and the Rules till the date of actual payment. Let the amount be contributed within a period of three months from today. Consequently the appeals preferred by ESI Corporation are allowed.

Summary

Issues Involved:
1. Whether casual workers are covered under the definition of "employee" as defined in Section 2(9) of the Employees State Insurance Act, 1948.
2. The period for which the Turf Club is liable to pay contributions under the ESI Act.
3. Whether the ESI Act is applicable to the Royal Western India Turf Club Ltd.
4. The impact of consent terms filed in Application No.16/1976 by the Turf Club before the ESI Court, Bombay.
5. The validity of the High Court's direction not to recover the amount before 1987.

Issue-wise Detailed Analysis:

1. Coverage of Casual Workers under Section 2(9) of the ESI Act:
The court examined whether casual workers fall within the definition of "employee" under Section 2(9) of the ESI Act. Section 2(9) broadly defines "employee" to include any person employed for wages in connection with the work of a factory or establishment, regardless of the nature of employment. The court emphasized that the definition is wide and inclusive, extending to various types of employees, including those employed temporarily or for part of a wage period. The court referenced Section 39, which mandates contributions for employees employed for part of the wage period, reinforcing that casual employees are covered. The judgment cited previous rulings, including Regional Director, Employees' State Insurance Corporation, Madras v. South India Flour Mills (P) Ltd., which confirmed that casual employees are within the purview of the Act.

2. Period of Liability for Contributions:
The court addressed the period for which the Turf Club is liable to pay contributions. It was argued that contributions should be calculated from 1978-79 based on the notification issued on 18.9.1978, which clearly covered the departments in question of the Turf Club. The court rejected the Turf Club's reliance on consent terms from an earlier period, stating that these terms could not override the statutory notification. The court concluded that the Turf Club is liable for contributions from 1978-79 onwards, not just from 1987, as the notification had statutory force.

3. Applicability of the ESI Act to the Royal Western India Turf Club Ltd.:
The court noted that the applicability of the ESI Act to the Turf Club had been previously settled by a 3-Judge Bench, which held that the Turf Club falls within the meaning of "shop" as per the ESI Act. Therefore, the provisions of the ESI Act extend to the Turf Club.

4. Impact of Consent Terms in Application No.16/1976:
The court examined the consent terms filed by the Turf Club, which excluded certain employees from coverage under the ESI Act. However, the court found that these terms related to an earlier period and were superseded by the notification dated 18.9.1978. The court held that the consent terms could not override the statutory notification, and thus, the employees in question were covered under the ESI Act from the date of the notification.

5. Validity of High Court's Direction on Recovery Period:
The court reviewed the High Court's direction not to recover contributions before 1987. It found this direction erroneous, as the notification dated 18.9.1978 clearly covered the departments in question. The court stated that the High Court had erred in quashing the demand for contributions from 1978 to 1987, as the Turf Club was covered under the ESI Act from 1968, and the 1978 notification included additional departments.

Conclusion:
The Supreme Court concluded that casual workers are covered under the definition of "employee" in the ESI Act. The Turf Club is liable to make contributions from 1978-79 as per the notification dated 18.9.1978, along with interest as provided in the Act and Rules. The appeals by the ESI Corporation were allowed, and those by the Turf Club were dismissed with costs of Rs. 2 lakhs payable to the ESI Corporation.