TMI Blog1999 (11) TMI 901X X X X Extracts X X X X X X X X Extracts X X X X ..... State of Maharashtra, was not governed by the provisions of the Act. According to the appellant, the notification issued by the State of Andhra Pradesh, in exercise of its powers as an 'appropriate Government' under Section 1(5) of the Act extending the same to road motor transport establishments, cannot by itself, cover the appellant's branch at Bombay during the relevant time when the State of Maharashtra had not issued any such notification covering road motor transport establishments in the earmarked areas situated in that State. It is the case of the appellant that its Bombay branch was got covered by the Act only pursuant to the subsequent notification issued by the State of Maharashtra on 10.3.1989 where-under road motor transport establishments situated in Bombay in the earmarked areas mentioned in Scheduled-II of the said notification were subjected to the sweep of the Act. 2. The dispute in the present case between the parties arose on account of the fact that on July 29, 1986, the Deputy Regional Director, Employees' State Insurance Corporation, Bombay served show cause notice upon the appellant to explain as to why the contributions should not be paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tead of entirely quashing the impugned order passed under Section 45-A of the Act by the Deputy Regional Director, the proceedings were remitted back to the deputy Regional Director only for the purpose of quantifying the amount of contribution and the amount of interest to be paid thereon by the appellant. As noted earlier, it is the aforesaid judgment of the Division Bench that is made the subject matter of the present appeal before this Court. RIVAL CONTENTIONS: 4. Shri Pai, learned senior counsel for the appellant, vehemently contended that the Division bench of the High Court has patently erred in law in taking the view that the notification issued by the State of Andhra Pradesh under Section 1(5) for covering the appellant's establishments in Andhra Pradesh could have automatically made applicable the provisions of the Act to its branch at Bombay. That as the State of Maharashtra had not issued appropriate notification for covering the undertakings carrying on transport business in the State of Maharashtra as per Section 1(5) of the Act during the period, notification of Andhra Pradesh Government could not be pressed in service for covering the employees working in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the aforesaid points for consideration, it is necessary to have a look at the relevant statutory provisions holding the filed. STATUTORY FRAMEWORK 8. The Employees' State Insurance Act, 1948 is enacted to provide for certain benefits to employees in case of sickness, maternity and employment injury and to make provisions for certain other matters in relation thereto 9. Sub-section 2 of Section 1 of the Act lays down that: It extends to the whole of India It is, therefore, obvious that it is a Central Act, which the Parliament intended to operate throughout the country. 10. Sub-section 4 of Section 1 of the Act lays down as follows: It shall apply, in the first instance, to all factories, (including factories belonging to the Government other than seasonal factories). We are not concerned with the proviso to Sub-section 4 of Section 1. However, Sub-sections 5 6 of Section 1 of the Act are relevant for our present purpose. They are, therefore, extracted as under. 5. The appropriate Government may, in consultation with the Corporation and where the appropriate Government is a State Government, with the approval of the Central Government, after givin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the appellant's head office the regional office at Secunderabad, the applicability of which to the Bombay branch, is on the anvil of consideration in the present case. The said notification reads as under: NOTIFICATIONS BY GOVERNMENT HEALTH, HOUSING AND MUNICIPAL ADMINISTRATION DEPARTMENT (HEALTH) EXTENSION OF EMPLOYEES STATE INSURANCE SCHEME TO FACTORIES, SHOPS, COMMERCIAL ESTABLISHMENTS, HOTELS ETC. CONFIRMED (G.O.Ms. No. 297, Health, 25th March, 1975) In exercise of powers conferred by Sub-section (5) of Section 1 of the Employees State Insurance Act, 1948 (34 of 1948), the Government of Andhra Pradesh, after giving six months' notice as required thereunder by the Government of Andhra Pradesh Notification issued in ] G.O.Ms. No. 788, Health, dated 25th September, 1974 and published in the A.P. Gazette No. 315, dated September 25, 1974, hereby extends with effect from the 30th March, 1975, all the provisions of the said Act to the classes of establishments specified in Col. (1) of the Schedule below situated in the areas specified in Col. (2) thereof: The thrust of Sub-section 6 of Section 1 is to the effect that even if the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on hire to the principal employer by the person with whom the person whose services are so lent or let on hire is entered into a contract of service; and include any person employed for wages on any work connected with the administration of the factory or establishment or any part, department or branch thereof or 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 an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 or under the standing orders of the establishment; but does not include.] xxx xxx xxx The term 'factory' is defined in Sub-section (12) of Section 2 to mean; ...any premises including the precincts thereof - (a) whereon ten or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power or is ordinarily so carried on, or (b) whereon twenty or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such Government in this behalf or where on authority is so appointed the head of the Department; (iii) in any other establishment, any person responsible for the supervision and control of the establishment. xxx xxx xxx A conjoint reading of Sub-sections 9, 13, 17 of Section 2, therefore, clearly shows that if the head office or the registered office of the appellant is controlling its Bombay branch, the employee working in its Bombay branch can obviously be treated to be an 'employee' working under the supervision of the principal employer or his agent. Consequently, once such 'principal employer' like the appellant, having head office at Secunderabad in the State of Andhra Pradesh, is covered by the sweep of the Act, automatically employees working in its branches, may be anywhere in India, including the branch at Bombay would get covered by the sweep of the Act. That would be the direct consequence of the applicability of the Act by the notification of the 'appropriate Government', namely, the Andhra Pradesh Government under Section 1(5) of the Act. It is not in dispute that the Andhra Pradesh Government was the 'appropriate Government&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e employer's contribution) and contribution payable by the employee (hereinafter referred to as the employees' contribution) and shall be paid to the corporation. It has also to be kept in view that the present Corporation functioning under the Act is a Central Corporation known as Employees' State Insurance Corporation, which was established by the Central Government under Section 3 of the Act and it has all India operation. It operates through its various regional office spread over the country. It cannot be seriously disputed that employees working at the appellant's branch at Bombay are employees of the Appellant-Corporation. Shri Pai, learned senior counsel for the appellant, fairly stated that they are definitely employees of the company but his only grievance is that because they are functioning at the Bombay branch, which is a separate entity having a separate regional manager and administrative staff, those employees working at the Bombay branch cannot be said to be 'employees' of the appellant's establishment. It is this contention which falls for consideration in the light of the statutory scheme. Section 40 in Chapter-IV deals with the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefits are provided by Section 50 of the Act. Disablement benefits are provided by Section 51 of the Act. Section 51-A to 51-D deal with the benefits available in case of accidents arising in course of employment. These benefits represent a benevolent statutory scheme for the welfare of employees working in factories and establishments covered by the sweep of the Act. Apart from the scheme of the Act and the relevant statutory provisions of the Act to which we have referred to until now, we may also turn to the Employees' State insurance (General) Regulations, 1950 framed by the Employees' State Insurance Corporation in exercise of its power under Section 97 of the Act. The terms 'employer' and 'employer's code number' are defined by Sections 2(g) and (h) of the Regulation which read as follows: (g) Employer means the principal employer as defined in the Act (h) Employer's Code Number means the registration number allotted by the appropriate Regional Office to a factory or establishment for the purposes of the Act, the Rules and these Regulations. The term 'factory or establishment' is defined by Regulation 2(i) to mean a fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the term 'employee' which reads as follow: 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 on any work of or incidental or preliminary to or connected with the work of the factory or establishment, whether such work is done by the employee in the factory or establishment or elsewhere; or xxx xxx xxx Sub-para (iii) of Note (7) is also relevant for our present purpose and it, amongst others, lays down that the term 'employee' would include: ...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 distribution or sale of the products of the factory or establishment; but does not include: (a) any member of the Indian Naval, Military or Air Force, or (b) any person so employed whose wages (excluding remuneration for over-time work) exceeds one thousand six hundred rupees a month. Regulation 26 deals with return of contributions to be sent to appropriate offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffect that the business carried on by the appellant is transport of goods and materials all over the country and the nature of this business is such that it cannot be carried on only by the establishment at Andhra Pradesh without dependence on its branch offices. The goods are loaded at various places and in various branches spread over the country and also unloaded at various places. The branch office register the orders, accept the goods and materials to be transported from Bombay and to be received at Bombay. It is, therefore, obvious that the transport business carried on at the principal office as well as at its branch office is totally interdependent. In the light of the aforesaid factual position, which is well established on record, we have to consider whether the branch office at Bombay is a limb and part and parcel of the parent establishment, being the main establishment at Secunderabad, which is directly covered by the provision of the Act pursuant to the notification issued under Section 1(5) of the Act by the Andhra Pradesh Government. Learned senior counsel for the appellant Shri Pai has produced additional documents before us in support of his contentions that the B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncipal head office at Secunderabad. All the activities of the appellant-Corporation are obviously carried out through the active working and co-operation of all the branches and the employees working at these branches. Even a copy of general power of attorney produced with the additional documents shows that the regional managers controlling the branches in different regions of the country have to act only on the basis of the general power of attorney given to them by the appellant-Corporation and the appellant-Corporation is stated as the principal, while the power of attorney holders regional managers are shown as merely its agents at regional offices under which the branches work, obviously for carrying out the essential objects and purposes of the appellant-Corporation itself. All this factual data which remains well sustained and admitted on record, leaves no room for doubt that the branches of the appellant, though spread over different parts of the country, are part and parcel of the main establishment of the company which remains the 'employer' and the employees in different branches remain its 'employees'. We asked a pointed question to the learned senior c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Andhra Pradesh Government cannot act as 'appropriate Government' vis-a-vis branches situated in other States for which the 'appropriate Government' will be the concerned Government within whose territories the branches are situated. He also submitted that if such an extra-territorial operation of the Andhra Pradesh Government's notification is countenanced, then an unworkable situation may arise. He submitted by way of illustration that once the State of Andhra Pradesh thinks it proper to apply the Act to the appellant's undertaking in Andhra Pradesh and if the State of Maharashtra does not think it fit to apply the Act to the appellant's undertakings in the State of Maharashtra and, therefore, does not issue notification under Section 1(5) for covering the transport establishments in the State of Maharashtra then the application of the Act to the Bombay branch would go against the very intention of the Maharashtra State Government which would be the 'appropriate Government' for all the establishments situated within the State of Maharashtra. That this would also amount to pre-empting the independent decision of Maharashtra State Government by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 1(5) of the Act. So far as the branches situated outside the State are concerned, if the establishment is covered by the notification being situated within the territories of the State and if on facts it is found that such outside branches have functional integrality with the activities of the main establishment and are directly under the control and supervision of the main establishment, it could not be said that such notification issued by the State has any extra territorial operation. It has only territorial operation. Meaning thereby, it covers within its sweep all establishments situated within the State and covered by the notification and also automatically covers all the branches situated outside the State which are factually found to be mere appendages and limbs and part and parcel of the very same establishment. The Act seeks to bring in its sweep by notifications issued from time to time by appropriate State Governments all the relevant establishment which are required to be covered by the sweep of the Central Act having all India operation. The contention of learned senior counsel for the appellant Shri Pai that such a notification would have extra-territorial oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic religious and charitable institutions within the meaning of the definition clause in Section 2(1) of the Act, which are situated in the State of Bihar and any part of the property of which is in that State. In other words, both conditions must be fulfilled before the Act can apply. As this is the true meaning of Section 3 of the Act, none of the provisions of the Act have extraterritorial application or are beyond the competence and power of the Bihar Legislature. Undoubtedly, the Bihar Legislature has power to legislate in respect of, to use the phraseology of item 28 of the Concurrent List, charities, charitable institutions, charitable and religious endowments and religious institutions situated in the State of Bihar and in so legislating it has power to affect trust property which may be outside Bihar but which appertains to the trust situated in Bihar. 19. Similar view is taken by another Constitution Bench judgment of this Court in the case of The State of Bihar and Ors. v. Bhabapritananda Ojha AIR1959SC1073 , The same reads as follows Two conditions must be fulfilled for the application of the Act-(a) the religious trust or institution itself must be in Bihar and ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as at Calcutta could make available to the employees of the branch benefits of the Act even though head office was not covered by the Act. It becomes at once clear that this was a converse case wherein the head office was not governed by the Act as the West Bengal Government had not issued any notification for governing the parent establishment at Calcutta but it was the branch which was governed by the Act because it was situated in Andhra Pradesh State which had issued the notification in question. It was held by the Division Bench, speaking through Rama Rao J., that even if the head office was not governed by the Act, so far as the branch was concerned, because the Act was applicable to the employees working therein the benefit of the Act could not be denied to the employees of the branch within the limits of Andhra Pradesh State. Dealing with the statutory provisions of the Act and the beneficial provisions thereof, the following pertinent observations were made in paragraph 8 of the Report. The same read as follows: The Employees' State Insurance Act is aimed at conferring benefits on employees in case of sickness, maternity and employment injury. S.38 of the Act manda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the aforesaid decision was as to whether the main office of a factory once governed by the Act would automatically result in covering its regional or branch offices which are situated in a different State even when its branch offices or regional offices were not carrying on any manufacturing process and could not be treated to be independent factories. It was contended before this Court that the branch offices which are merely distributing or selling the goods manufactured by the factory situated in other State could not be covered by the sweep of the Act only because the parent factory was covered by the Act. Rejecting this contention, this Court in para 11 of the Report held as under: The principal test to connect the workmen and employer under the Act to ensure health to the employee being covered under the Act has been held by this Court in Hyderabad Asbestos case (1978)ILLJ181SC , i.e., the employee is engaged in connection with the work of the factory. The test of predominant business activity or too remote connection are not relevant. The employee need not necessarily be the one integrally or predominantly connected with he entire business or trading activities. The tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce or the principal office of the appellant is covered by the Act, all its branches in any part of the country would be covered by the Act, if such branches are under the supervision and ultimate control of the principal office at Secunderabad, as factually found herein-above. 23. Our attention was also invited to a two judge bench decision of this Court in Hyderabad Asbestos Cement Products Ltd. v. Employees Insurance Court and Anr. Etc. etc. (1978)ILLJ181SC . 24. While interpreting the term employees in a factory, this Court, on construction of Section 38 of the Act, took the view that zonal offices and branch offices of the factory would also be covered by the Act, Following the earlier decision of this Court in Nagpur Electric Light Power Co. Ltd. v. Regional Director, Employees State Insurance Corporation (1967)IILLJ40SC , it was held that: ...any employee who is connected with the work of the factory would be an employee under Section 2(9) whether he works within the factory or outside its premises. The section, after its amendment on January 28, 1968 by Act 44 of 1966 includes any person employed for wages on any work connected with the administration of the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nspecting the goods to be despatched for the appellant from Bombay to outside stations and also connected with receipt and unloading of goods coming from outside Bombay for being further carried within the State of Maharashtra or outside, would not be covered by the sweep of the Act. Such an incongruous and contradictory situation cannot be countenanced by the scheme of the Act especially in the light of clear wording of the definition Section 2(9) along with its relevant amended provisions. 26. The very same definition of the term 'employee' as per Section 2(9) of the Act fell for consideration of a two Judge bench decision of this Court in Royal Talkies, Hyderabad and Ors. v. Employees State Insurance Corporation (1978)IILLJ390SC . The question before the Court in that case was whether the persons employed in canteens and cycle stands of cinema theatres could be said to be governed by the Act when the establishment covered by the Act was cinema theatre itself. Repelling the contention that employees of the canteen and cycle stand could not be treated to be employees of parent establishment namely, cinema theatre itself, it was held by Krishna lyer, J., speaking for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... connection with the work of the factory, that is to say, in connection with the work of transforming and transmitting electrical power. Some of the employees were not engaged in manual labour. But a person doing non-manual work can be an employee within the meaning of Section 2(9)(i) if he is employed in connection with the work of the factory. The duties of he administrative staff are directly connected with the work of the factory. In view of the aforesaid well established legal position, therefore, it has to be held that as it is seen that the main work of the appellant-Corporation is to engage in transportation of goods to and through its various branches to different parts of the country, the Bombay branch facilitating and directly connected with this main activity of the principal office and working under the complete control and supervision of the appellant's main office, cannot be treated to be beyond the sweep of the Act once employees at Bombay branch are held to be 'employees' of the appellant-Corporation. It could not be held on facts of this case that the Bombay branch was functioning as a separate and independent entity not being controlled or supervis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e section are capable of two constructions one of which is shown patently to assist the achievement of the object of the Act, courts would be justified in preferring that construction to the other which may not be able to further the object of the Act.... As we have already seen earlier, the express phraseology of Section 2(9) of the Act defining an 'employee' read with Section 38 of the Act clearly projects the legislative intention of spreading the beneficial network of the Act sufficiently wide for covering all employees working for the main establishment covered by the Act even though actually stationed at different branches outside the State wherein the head office of he establishment is located. In any case, the said construction can reasonably flow from the aforesaid statutory provisions. If that is so, any other technical or narrower construction, even 'if permissible, cannot be countenanced, as that would frustrate the legislative intent underlying the enactment of such a beneficial social security scheme. 30. In the result, the impugned decision rendered by the Division Bench of the High Court cannot be found fault with and remains well sustained on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
