JUDGMENT D.G. Deshpande, J.
Page 771
1. Heard counsel for the appellants and the respondents.
2. This Appeal is filed by the appellants against the order of the E.S.I. Court, Mumbai, dated 17.2.2005 dismissing the application of the appellants. It was an application under Section 75 of Employees State Insurance Act, 1948 (hereinafter referred to as "the Act").
3. Before the ESI Court, it was the stand of the Respondents Corporation that the Appellants club is a shop within the meaning of the Notification dated 18.9.1978 issued by the Government of Maharashtra and it was employing 19 persons for the wages and who were rendering services. It was also their contention that Inspector of the Corporation verified the record including the Books of Accounts for the years 1978-79 to 1982-83 and found that applicant had not covered all their employees and had not paid contribution on certain payment of wages. The issue is of temporary staff engaged on race days for issue of tickets and dividends. The ESI Court framed six issues. The findings were all against the appellants club, which ultimately resulted in the final order.
4. The main contention of the appellants was that the appellants club which conducts horse races under the licence granted by the Government of Maharashtra was giving full cooperation to the respondents who were acting under the Act, but, the respondents were making false, unwarranted, unjustified claims against the club for payment of various amounts, which were not payable by the appellants club to the ESI Corporation / Respondents. One such demand was for Rs. 4,00,000/-made by the Corporation in 1975. The club moved ESI Court vide Application No. 16 of 1976 wherein consent order came to be passed on 17.4.1979. The same reads as under :
"The Employees of the following department are not covered by the Employees' State Insurance Act :
(1) -----
(2) ----
(3) Racing and Stud Book Department (Apprentice Jocket School) (4) ----
(5) ----
(6) ----
(7) ----
(8) ----
(9) Temporary staff engaged on Race Days for issue of tickets / dividends."
That order was not challenged by either of the parties before any higher court and it has become final and binding.
5. The club in this background submitted in their application that inspite of this consent order, ESIC issued two notices dated 16.11.1987 and making unjustified allegations (a) to recover from the applicant an amount of Rs. 11,36,859.45 paise as Employer's contribution including the period from 1978-79 to 1982-83 Page 772 in respect of persons who are not covered under the provisions of said Act and (b) for arrears of Rs. 5,16,525.90 paise as Employer's Contribution for the period 1978-79 to June 1983 for the same reason. Then requests were made by the club against these demands and ultimately an application came to be filed. It is the case of the club that the persons in respect of whom notice is given for contribution could not be considered as employees within the meaning of the said Act and payments made to these persons could not be considered as wages. Similarly, their contention was that because of the consent terms, the matter stood permanently resolved between the parties and the Corporation was not entitled to make any further claim on the principle of resjudicata. It is this application of the club under Section 75, which came to be dismissed by ESI Court by the impugned order dated 17.2.2005, and, therefore, this Appeal.
6. Mr. Cama, the learned Counsel of the appellants contended that the Notification of the Government of Maharashtra dated 18.9.1978 was not applicable to the club because it was not a shop but it was a theatre as per the licence issued to the club and theatre were excluded from the definition of shop. Secondly, he contended that when the consent terms were filed in the lower court and they were not challenged by the Corporation any time subsequently before any higher forum, the consent terms can act as estoppel and the Corporation was not entitled to make any further demand or cover the labourers employed as temporary staff engaged on race days for issue of tickets and dividends. Mr. Cama contended that issue of estoppel was applicable in the case. He relied upon the Judgment of the Supreme Court Hope Plantations Ltd. v. Taluk Land Board, Peermade and Anr. According to Mr. Cama, casual daily workers could not be considered as employees. He also relied upon the report of the Inspector of the ESI which fully favours the appellants and as per this report, the casual labourers are not liable to be covered. He further relied upon the judgment reported in 1992 II CLR 765 in support of his contention that wages have to be monthly payment. Lastly, he submits that any claim prior to 1982, was not maintainable.
7. On the basis of the unreported judgment of the Supreme Court in Civil Appeal No. 4686 of 1999 Employees State Insurance Corporation v. Hyderabad Race Club, counsel for the appellants contended that in any case the demands prior to 1987 of the Respondents Corporation cannot be allowed and if the Act is applicable it can be enforced only from the year 1987 onwards.
8. On the other hand, Mr. Mehta for the respondents Corporation contended that the consent terms filed do not operate as resjudicata. Consent terms were in respect of the dispute that was before the court or that was not existing between the parties. The consent terms were not meant to tie the hands of the Corporation for ever in perpetuity for all contingencies to occur or for all circumstances to occur.
9. Mr. Mehta also contended that the plea that the appellants was a theatre and not a shop was raised for the first time, but it was not raised by the appellants in their application under Section 5 regarding the Report of the Inspector. Mr. Mehta contended that Inspector's Report was firstly not binding, Page 773 secondly, it was not conclusive, and, thirdly, it could not override the provisions of the Act. Mr. Mehta also contended that if the Notification of the State Government was applicable from 12.11.1978 then the earlier concession given to the appellants could not withstand.
10. Mr. Mehta relied upon judgment reported in 1996 II LLN 1012 and contended that shop under the ESI Act has wider connotation than the word "shop" in the State i.e. Shop and Establishment Act. He also relied upon the judgment of this Court reported in 1980 LAB. I.C. 100 Poona Industrial Hotel Ltd. v. I.C. Sarin and Anr., then F.J.R. Vol. 71 page 8 Hindu Jea Band v. Employees State Insurance Corporation, Jaipur, about the applicability of ESI Act even where the workers engaged by marriage band. Mr. Mehta also contended that the object of the Act was to give benefit to the workers and it was required to be liberally construed. Mr. Mehta also relied upon judgment of Allahabad High Court reported in 1987 LAB.I.C. 14 Dass Hitachi Pvt. Ltd. Delhi v. Employees' State Insurance Corporation, New Delhi and Ors., Employees State Insurance Corporation v. R.K. Swamy and Ors., and Cochin Shipping Co. v. E.S.I. Corporation.
11. In reply to the legal submissions made by Mr. Mehta, Mr. Cama contended that even if the point of theatre was not raised by the appellants, that could be raised on the basis of the judgment Chittoori Subhanna v. Kudappa Subbana and Ors. Then he contended that non factory workers were not covered. He further contended that the case laws relied upon by Mr. Mehta, were not applicable.
12. So far as the plea of Mr. Cama that the appellants is registered as a theatre and not as a "shop" is concerned, this plea cannot be considered by this Court, firstly, because this plea was not raised before the trial court. The matter before the trial court or Employees Insurance Court was initiated by the appellants by filing Application No. 2 of 1988, copy of the same is at Exhibit 'A' of the Appeal, there the appellant is described as a Company i.e. registered as a Company. Nowhere in this application the appellants have stated that at any time they were registered as a theatre. Secondly, in the consent terms filed between the parties, as stated above, there is no mention that the appellants is a theatre and therefore exempted. No such claim was made earlier when the consent terms came to be filed. Thirdly, whether the appellants is in fact a theatre or a club doing the business of horse racing, is a question of fact but not pure question of law. That being so, this submission of Mr. Cama, in this regard, cannot be accepted.
13. Second submission of Mr. Cama was that the consent terms were filed by the appellants and the respondents and they are binding on the respondents. Mr. Mehta, in this regard rightly contended that consent terms were arrived Page 774 at regarding a particular demand and they were restricted and related to only that demand. They are not clog on the rights of the respondents in making their claims from the appellants for ever in perpetuity. A copy of the consent terms is on record and the court also specifically noted that the compromise agreement was confined to specific period of earlier proceedings and the cause of action was notice dated 26.2.1976 issued by the Respondents Corporation to the appellants. The present case is arising out of the demand of the Respondents Contribution for contribution from 1978 - 79 to 1982-83 i.e. for the period not covered by the consent terms, and therefore the consent terms arrived at between the parties, do not and cannot act as estoppel nor they act as resjudicata nor they amount to waiver by the Corporation of all their rights under the Act for ever and in perpetuity.
14. The third contention of Mr. Cama was that so far as the specific class of employees are concerned, i.e. temporary staff engaged on race days for issue of tickets and dividends, my attention was invited by Mr. Cama to the Report of the Inspector dated 29.11.1975 at Exhibit 'F'. In the last paragraph of this Report, the Inspector has stated as under:
"On the days of Race Meets, the Club engages a number of casual employees for the issue of tickets and payment of Dividends, The same persons may or may not be engaged on every Race Day. They are engaged only for the day of the Races, and for the work in connection with the Props conducting of the Races. Each one of them is paid over Rs. 25/- per day of the race. These persons are the full time employees working either in some covered factories or Banks or elsewhere. Such persons also cannot be termed as employees within the meaning of Section 2(9) of ESI Act."
And at the end Inspector has noted :
"In view of the nature of their work, they did not seem to be coverable under the ESI Act."
Mr. Cama therefore contended that if the Inspector of the Respondents has given his opinion after physical verification of the facts, then the respondents was bound by the opinion of the Inspector.
15. Mr. Mehta as against this, rightly contended that the opinion of the Inspector is not binding upon the Corporation and an employee of the Corporation cannot overcome the statutory and legal provisions. My attention was drawn by Mr. Mehta to the remaining part of the said paragraph, wherein the Inspector has stated that :
"In the past, on the basis of some of the Inspection Report specially one at Sr. No. 135, we have claimed dues in respect of temporary employees engaged on the days of Races. As we kept on pursuing our claim, the Club has recently started paying employees' share of contributions in respect of such temporary staff. They have however not paid the employer's share of contribution. The employees' share is also being paid by cheque to the State Bank."
16. Mr. Mehta therefore contended that collecting shares from the employees towards their contribution under the ESI Act and pay it to the Corporation by cheque is an act on the part of the appellants, which precludes them from contending that ESI Act is not applicable to these employees.
Page 775
17. Different submissions were made by Mr. Cama about non applicability of the ESI Act to this specified class of employees. However, all that controversy has to be resolved on the basis of the Judgment of the Supreme Court in Hyderabad Race Club and the case of Cochin Shipping Corporation v. ESI Corporation referred in that judgment.
18. In Cochin Shipping Corporation case reported in (1992) 4 SCC 245, the Supreme Court considered the definition of the word "shop". It was even though the appellant was rendering services to cater the needs of the exporters and importers and therefore it was a shop carrying on systematic economic or commercial activity arising from customer service. The Supreme Court also held that merely because other establishments which are akin to shop are enumerated, it does not, in any manner, oblige the court to give a narrow meaning to the word "shop" nor does it any way dilute the meaning of 'shop'. Then in paragraphs 13 and 14, the Court took into consideration the over all policy of the ESI Act and observed :
"The Employees State Insurance Act is an Act to provide certain benefits to employees in case of sickness, maternity and employment injury and make provision for certain other matters in relation thereto. The Act is an outcome of a policy to provide remedy for the widespread evils arising from the consequences of national poverty. Indeed, it is a piece of social security."
Then in paragraph 14 the Court held that :
"Under Section 1(4), in the first instance, it is made applicable to all factories. The Act envisages the extension of benefit to the employees in other establishments or class of establishments, industrial, commercial, agricultural or otherwise ... and therefore the conclusion is inescapable that it is a welfare legislation. The endeavour of the Court should be to place a liberal construction so as to promote its objects to which a reference has been made."
In that view of the matter, the Supreme Court dismissed the appeal filed by the employers.
19. This decision in Cochin Shipping Company is referred to by the Supreme Court in Hyderabad Race Club case and the Court has held :
"It is quite clear that the institution like the appellant Club comes within the purview of the Act, hence, we find no difficulty in accepting the finding of the High Court in this regard, therefore, this contention of the appellant-Club in C.A. No. 4687/99 has to be rejected."
The finding of the High Court in C.A. No. 4687/99 was that the appellant club was held to be an establishment for the purpose of the Act.
20. Admittedly the activities of the Hyderabad Race Club and the activities of the present appellants are identical. The ESI Act is welfare legislation. On race days different employees are employed, and this is a permanent activity of the club. Therefore, care has to be taken to see and look after their welfare Page 776 as contemplated under the ESI Act and it has to be therefore held that the ESI Act is applicable to the appellants, and particularly the aforesaid class of employees as stated.
21. I have already rejected the contention of Mr. Cama regarding the appellant being the theatre. In order to show that the definition of the word "shop' applies to the appellants club, Mr. Mehta relied upon three judgments reported in (1) 1996 II LIN 1012, 1980 Lab I.C. 100 Poona Industrial Hotel Ltd. v. I.C. Sarin and Anr. and F.J.R. Vol. 71 page 8 Hindu Jea Band v. Employees State Insurance Corporation, Jaipur. In the case of Poona Industrial Hotel Ltd., the Court held that Hotel Blue Diamond was a factory as per paragraph 16. The Court also in paragraph 17 did not accept the contention of Mr. Chinoy in that case that if some part of the premises are unconnected with the manufacturing process then that part could not be held to be covered by the definition of "factory" contained in the ESI Act. The court held that the observations of the Supreme Court do not lend support to the view, which Mr. Chinoy had put forth. Mr. Mehta also replied upon the judgment reported in Hind Jea Ban v. ESIC, Jaipur. In that case it was held by the Supreme Court that a place where services are sold on retail basis is also a "shop". Therefore, where the services of the members of a group of musicians employed by the petitioner on wages made available on payment of the stipulated price, the place where such business was carried on would be a "shop" to which the provisions of the Act had been applied by the notification. These two judgments coupled with the fact in the present case clearly show that part of these premises or a major portion of the workers working for the appellant as per compromise, ESI Act has been made applicable, so far as specified class of workers in this case is concerned. Their contribution to the ESI Corporation was deducted by the appellants. Thridly, the activity of holding races is a continuous activity and therefore on all these days when races are held, services of these persons are required and they are required to be paid for the work done by them, and, therefore, looking also to the judgment of the Supreme Court in Hyderbad Club Case and Cochin Shipping and the prior view taken, it has to be held that appellant is a "shop" and the payment to these workers are all covered by ESI Act.
22. However, these finding cannot help the respondents in recovering the amount from the appellants for the period in dispute i.e. from 1978-88 and 1982-83. In this regard, Mr. Cama again relied upon the same judgment of the Supreme Court in Hyderabad Race Course case. In that case also the Respondents Corporation has claimed contribution for the period from 1975 to 1986, though the Supreme Court gave a finding that the Act is applicable to the Hyderabad Race Club case, in the subsequent paragraphs, the Supreme Court upheld the contention of the club that demands could not be made prior to 1987. Reasoning of the Supreme Court, in this regard, is as under:
"...However learned Counsel for the appellant contended that assuming for argument sake that the club is an establishment for the purpose of the Act even then it was obligatory on the part of the authorities below to have factually examined the liability of the Club which as contended by the learned Counsel for the Club was not done by the authorities below. We Page 777 find no merit in this argument also. Since it is found on record that inspite of the opportunity being granted to the appellant club, no material was produced or evidence led to prove what exactly was the number of workmen in the club who are entitled to the benefit of the Act. Per contra, the authorities below including the High Court has relied on the report of the Inspector who made a spot inspection and submitted a report to the authorities which has gone unchallenged. Therefore this factual finding also cannot be disturbed in this appeal.
So far as the contention of the Corporation in their Appeal C.A. No. 4686/99 is concerned, the same is confined to the question of limiting the liability of the Club for the period after 1985. It is argued that once the applicability of a statute is declared by a court of law, the same applies from the date of the said law being brought into force, hence, in the instant case by the notification of 1975 the Club was brought within the purview of the Act, therefore, the liability of the Club started from the said date. Therefore, in this background, the High Court erred in exonerating the Club from its liability between the period 1975 to 1985.
It is true as contended by the learned Counsel on behalf of the Corporation that once a court of law declared the applicability of a statute the said declaration in the ordinary course should apply from the date the law in question was brought into force, but there could be exception to this principle depending upon the facts of the case. It is undisputed that till the judgment of this Court in the case of Hindu Jea Band, Jaipur v. Regional Director, Employees' State Insurance Corporation, Jaipur (AIR 1987 SC 1166) the law in regard to the institutions like a Club coming within the purview of the definition of establishment for the purpose of the Act was nebulous. It was so understood even by the Corporation itself which is evident from the fact that the action against the appellant for non-compliance of its liability was not taken for nearly 15 yeas until the visit of the Inspector of the Corporation on 17.6.1990. In that background even the Corporation was not very certain whether the word establishment used in the concerned notification of 26.3.1975 included a Club. Therefore, in our opinion, the High Court was justified in coming to the conclusion to call upon the Club to make contribution for a period between 1975 to 1986 would be somewhat reasonable. Thus in the peculiar facts of this case, we are in agreement with the finding of the High Court that the demand under the Act as against this Club can be enforced only from the year 1987 onwards."
23. Mr. Cama therefore contended that on the basis of the aforesaid observation of the Supreme Court that in any case the appellants club cannot be made liable to pay the dues for the period prior to 1987. As against this, Mr. Mehta tried to contend and has repeated his submissions in paragraph 8 of his written submissions that this issue was not raised before the lower court that the respondents Office in Mumbai has already covered the appellants as factory with effect from 28.1.1968 and the Respondent Page 778 Corporation after checking the record for the year 1978-79 to 1982 - 1983 issued demand notice in respect of temporary staff engaged on race days for issue of tickets / dividends, and the appellants club was covered with effect from 28.1.1968 and other departments of the appellants club were covered by the consent terms. He also submitted that after issuance of notification under Section 1(5) of ESI Act, the appellants has paid contribution in respect of other departments and sections with effect from 12.11.1978 and no contribution has been paid in respect of temporary staff engaged on race days for issue of tickets and dividends.
24. Mr. Mehta therefore tried to distinguish Hyderabad Race Club case from the present case and contended that the demand was perfectly legal and justified.
25. It may be that so far as other employees are concerned, provisions of ESI Act has been made applicable to them. But the demand in question is a specific demand and even if I have held that the ESI Act is applicable to those specified employees stated above i.e. temporary staff engaged on race days for issue of tickets and dividends, the demand prior to 1987, does not seems to be justified. In view of the aforesaid judgment of the Supreme Court in Hyderabad Race Club, the portion of which, I have reproduced above. Demand in this case for payment of contribution from 1978-79 to 1982-83 came to be made by the Corporation for the first time in 1987 i.e. 4 notices dated 6.1.1988 and 1.12.1987. Admittedly, the demand is for all the period prior to 1987 and therefore considering the Supreme Court judgment, I am constrained to take the same view in the facts and circumstances of the case.
26. As a result, the appeal is required to be partly allowed. The finding of the lower court that the ESI Act applies to this specified employees i.e. temporary staff engaged on race days for issue of tickets and dividends, is upheld. However, the demand notices requiring the appellants to pay contribution from 1978-79 to 1982-83 cannot be given effect to and they are required to be set aside and quashed, as prayed by the appellants in the lower court. Therefore, I pass the following order :
ORDER Appeal is partly allowed.
Finding of the lower court on Issue No. 1 and 2 are upheld. ESI Act applies to specified employees i.e. as mentioned in Notices dated 23.4.1987 and 16.11.1987. However, in view of the judgment of the Supreme Court in Hyderabad Race Club case, the notices issued on the appellants demanding their contribution for the aforesaid period 1978-79 and 1982-83 i.e. prior to 1987 are declared illegal as per the prayer (a) of the appellants before the lower court. No order as to costs of this appeal.