Dhule Agricultural Produce ... vs Employees State Insurance ...
2002 Latest Caselaw 1292 Bom

JUDGMENT

H.L. Gokhale, J.

1. This Writ Petition is filed by an Agricultural Produce Market Committee (hereinafter referred to as "the Market Committee"), which is governed under the provisions of the Maharashtra Agricultural Produce Marketing (Regulation) Act, 1963 (hereinafter referred to as "the A.P.M.C. Act").

2. The first respondent to this Petition is the Employees' State Insurance Corporation, constituted under the Employees' State Insurance Act, 1948 (for short, "the E.S.I. Act"). The second respondent is its Director and the third respondent is the State of Maharashtra.

3. The petitioner seeks a direction to the respondent authorities not to enforce the provisions of the E.S.I. Act against the petitioner-Market Committee. The cause of action leading to the Writ Petition arises due to notices issued in February, 1999 sent by the Recovery Officer of the first respondent-Corporation calling upon the petitioner-Market Committee to pay its contribution for various periods ranging from 8th November, 1981 onwards. Prior thereto, show cause notices were served on the petition-Market Committee for assessment of the pending contribution and then on determination of the amounts, notices of demand were issued. It is seen that earlier the Market Committee had filed a suit, bearing Regular Civil Suit No. 470 of 1987, for a similar direction and an injunction against the recovery and that suit came to be dismissed by an order dated 27th April, 1994 passed by the 5th Joint Civil Judge, Junior Division, Dhule. It is seen from para 7 of this judgment that, on the Act being applied, the E.S.I. Corporation asked the petitioner to get registered and on furnishing the necessary information the petitioner was registered, was given a Code number and was sent a coverage intimation letter on 15-12-1981. The judgment shows that objection to coverage was taken for the first time on 14-10-1983. The Court, however, took the view that it did not have jurisdiction to entertain the suit, and dismissed it on that ground also apart from giving findings on merits. That order does not appear to have been challenged. The petitioner has filed a dispute under Section 75 of the E.S.I. Act being No. 4 of 94 in the Employees' Insurance Court at Dhule and it is stated to be pending. Notices for criminal prosecution were issued to the petitioner-Market Committee in November, 1994. It is much later thereafter that the present Petition was filed on 13th April, 1999 and ad interim stay against the enforcement of the provisions of the E.S.I. Act and from recovery of amounts in terms of prayer Clause (D) was granted on 6th July, 1999. The Petition came to be admitted on 27th August, 2002 and the interim relief was continued. Thereafter, the matter has now reached for final hearing before this Bench.

4. Mr. N.B. Khandare, learned Counsel, has appeared for the petitioner, Mr. P.G. Godhamgaonkar, learned Senior Standing Counsel, has appeared for the respondent Nos. 1 and 2 and Mr. K.B. Choudhari, learned Assistant Government Pleader, has appeared for respondent No. 3.

5. Before we proceed to consider the submissions of the rival Counsel, it is necessary to refer to the relavant Notification issued by the State Government dated 3rd October, 1981 in exercise of the powers by Section 1(5) of the E.S.I. Act. The Notification states that the necessary prior notice had been issued and thereafter from 8th November, 1981 the provisions of the Act have been extended to the classes of establishments mentioned in column 1 of Schedule annexed thereto in the areas specified in column 2 of that Schedule. The said Schedule is as under:

SCHEDULE

Description of Establishments situated

Areas in which the Establishments are

1. Any premises including the precincts thereof whereon ten or more persons but in any case less than twenty 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; but excluding a Mine subject to the operation of the Mines Act, 1952 (35 of 1952) or a Railway Running Shed or an Establishment which is exclusively engaged in any of the manufacturing process specified in clause (12) of section 2 of the Employees' State Insurance Act, 1948 (34 of 1948).

1. The area within the Municipal limits of Akola

2. The area within the Municipal limits of Pulgaon town and the Revenue Survey Nos. 395/1 /K/392. 2, 399 to 402, 415 to 417, 419/1,420, 436/1 and 436/2 of village Nachangaon in the Taluka of Wardha.

3. The area within the Municipal limits of Nanded, Mouja Assadullabad and Mouja Vasirabad and the Survey No. 8 9, 44/1, 46, 47/1, 50, 52, 60/1, 60/2, 60/3 and 60/4 of Mouja Bramhapura in the Taluka and District of Nanded.

4. The area within the Municipal limits of Hinganghat.

5. The areas within the Municipal and Revenue limits of Barshi, in Barshi, District Sholapur.

6. Areas within the Municipal and Revenue limits of Miraj  in Taluka Miraj, District Sangli.

7. Area within the limits of Sangli Municipal Council in Taluka Miraj, District Sangli.

8. That area within the limits of Sholapur Municipal Corporation which formed the Municipal limits as they existed on 7-11-1974 of the erstwhile Solapur Borough Municipality in the North Solapur Taluka of the Solapur District.

9.

(i) Areas comprised within the Municipal and Revenue limits of Dhule.

(ii) Areas comprised within the revenue limits of the following Villages :

Mohadi Pragana Laling,

Balapir,

Fagana,

Nagaon,

Mahindale,

Deopur &

Vadjal,

10.

(i) The Municipal limits of Amalner town and

(ii) The Revenue Survey No.583 of Kasab Amalner in the District of Jalgaon (East Khandesh).

2. Any premises including the precincts thereof 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 carried on without the aid of power or is ordinarily so carried on but excluding a Mine subject to the operation of the Mines Act, 1952 (35 of 1952) or a Railway Running Shed or an Establishment which is exclusively engaged in any of the manufacturing process specified in clause (12) of section 2 of the Employees' State Insurance Act, 1948 (34 of 1948).

same as above

3. The following Establishments whereon twenty or more persons are employed, or were employed for wages on any day of the preceding twelve months, namely : (i) Hotels: (ii) Restaurants: (iii) Shops; (iv) Road Motor Transport Establishment; (v) Cinemas including preview theatres and (vi) Newspaper Establishment as defined in section 2(d) of the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955 (45 of 1955).

same as above

By order and in the name of the Governor of Maharashtra.

sd/-

(V. Srhiivasan)

Secretary to Government

6. Now, as seen earlier from the Schedule, in the column 2 thereof, the areas comprised in the municipal limits of Dhule are mentioned at Sr. No. 9(i). The covered establishments are described in Column No. 1. There are principally three classes of establishments in column 1. The first class refers to any premises including precincts wherein 10 or more (but less than 20) persons are engaged in the manufacturing process with the aid of power but excludes some establishments such as Mines. The second class refers to those premises including the precincts wherein 20 or more persons are employed and where the manufacturing process is carried on without the aid of power but excluding establishments such as the Mines. In the third class six types of establishments are covered provided they engage 20 or more persons. They are (i) Hotels, (ii) Restaurants, (iii) Shops, (iv) Road Motor Transport Establishments, (v) Cinemas, and (vi) Newspaper establishments. There is no dispute that the Market Committee is not covered under classes 1 and 2 and even when it comes to class No. 3 it will not be covered in the categories of hotel, restaurant, road motor transport establishment, cinema and newspaper establishments. The question remains as to whether it could be construed as a shop for being covered under the E.S.I. Act

7. Mr. Khandare, learned Counsel appearing for the petitioner, submitted that for an entity to be a shop it is necessary that buying and selling activity ought to be carried on therein. For this purpose he relied upon a judgment of the Apex Court in the case of Kalidas Dhanjibhai v. State of Bombay, , under the Bombay Shops and Establishments Act, 1948 and while dealing with the concept of shop as defined under Section 2(27) thereof, the Apex Court observed that:

"The very idea of a shop in that connotation betokens a room or a place or a building where goods are sold."

Mr. Khandare, learned Counsel, submits that the Market Committee itself does not engage in buying and selling and therefore, it could not be construed as a shop. As against this submission of Mr. Khandare, Mr. Godhamgaonkar. learned Senior Standing Counsel appearing for respondent Nos. 1 and 2, submitted that we are concerned with the concept of shop for the purposes of E.S.I. Act and the concept of shop under the Shops and Establishments Act and interpretation thereof would not be of much relevance. He referred us to different judgments rendered on the concept of shop for the purpose of the E.S.I, Act. The first judgment referred to by him was in the case of Hindu Jea Band v. Regional Director, E.S.I. Corporation, Jaipur . That was a case where services of playing music through band were made -available on payment of a stipulated price. The services of musicians employed by the petitioner on wages made the petitioner establishment a shop. The second judgment relied upon by Mr. Godhamgaonkar was in the case of International Ore and Fertilizers (P) Ltd. v. E.S.I. Corporation , wherein the Apex Court held that actual storing and delivery of goods in the particular premises was not necessary for the premises to constitute a shop. That was a matter wherein the Company was importing goods but they were not actually bought to the petitioner's premises and delivered to the purchasers over there. Yet in spite of severance of this activity from the premises of the establishment, the premises of the particular establishment were held to be a shop."

8. The third judgment relied upon by Mr. Godhamgaonkar was in the case of Cochin Shipping Co. v. E.S.I. Corporation . The appellant in that matter was carrying on the business of clearing and forwarding at the Port of Cochin. The question was whether the establishment was a shop within the expression used in the notification issued by the Government of Kerala under the very same Section 1(5) of the E.S.I. Act. This notification also had the similar six entries as in the present case, namely, hotel, restaurant, shop, road motor transport establishment, cinema and newspaper establishments. The Apex Court went into the definition of "shop" given in various Law Lexicons and dictionaries and held thus :

"It is obvious from the above meaning that a place where services are sold on retail basis is also a shop."

In paragraph 22 the Apex Court observed thus :

"........ It cannot be gainsaid that the appellant is rendering service to cater to the needs of exporters and importers and others who want to carry the goods further. Therefore, it is a shop carrying on a systematic economic or a commercial activity. This would be enough to bring in the appellant without specifically enumerating the specific activities carried on by the appellant."

Mr. Godhamgaonkar, therefore, submitted that thus the place where the services are rendered on retail basis is a shop and carrying on systematic economic or commercial activity is a material test for deciding as to whether a particular entity is a shop or not. He lastly drew our attention to a judgment in the case of E.S.I. Corporation v. R.K. Swamy and Ors. reported in 1993(11) C.L.R. 1068, wherein an advertising agency was held to be covered by the definition of shop. In this judgment, the Apex Court referred to an earlier judgment in the case of Regional Provident Fund Commissioner v. Shibu Metal Works , wherein, in the context of the Employees' Provident Fund Act, the Apex Court had laid down that in construing the material provisions of such an Act if two views were reasonably possible, the Courts should prefer the view which helped the achievement of the object. Mr. Godhamgaonkar submitted that a purposive approach has to be taken when it comes to deal with the concepts appearing either in the statute or in a notification governing a welfare provision.

9. Mr. Khandare, learned Counsel appearing for the petitioner, secondly submitted that the A.P.M.C. was a Local Authority as declared under Section 12(2) of the A.P.M.C. Act. The Sub-section (2) of Section 12 provides that:

"Notwithstanding anything contained in any law for the time being in force every Market Committee shall, for all purposes, be deemed to be a Local Authority."

Mr. Khandare, therefore, submitted that since it was a Local Authority it cannot be construed to be a shop under the E.S.I. Act. He relied upon the judgment of the Apex Court in the case of Union of India v. R. C. Jain . In that matter the question was as to whether Delhi Development Authority was local authority since the employees of Local Authorities were taken out of the purview of the Payment of Bonus Act, 1965, under Section 32(iv) thereof. The Apex Court laid down various tests of a Local Authority in that judgment particularly as seen in paragraph 2 thereof which included (i) being a body corporate elected by the inhabitants of the area, (ii) being entrusted with management of local fund, and (iii) being entrusted by the statute with the duties which are usually entrusted to municipal bodies. Then it came to a conclusion that the Delhi Development Authority was a Local Authority and, therefore, the provisions of the Payment of Bonus Act were not attracted.

10. In the present case, however, this argument cannot be stretched further, because it is difficult to say that these tests fully apply to the A.P.M.C. Besides, although under Section 12(2) of the A.P.M.C. Act, a Market Committee is declared to be a local authority for all purposes, there is no provision in the E.S.I. Act excluding local authorities from its application. In the Delhi Development Authority's case, under the Payment of Bonus Act itself the employees of the local authorities were excluded from the coverage of Bonus Act. Under the E.S.I. Act there is no such exclusion. Thus, even if the petitioner-Market Committee is considered as a Local Authority for the purpose of the A.P.M.C. Act, it cannot be taken out of the application of the E.S.I. Act ipso facto.

11. Mr. Khandare then submitted that there are six entries in Class 3 of the concerned Schedule and similar to them a specific entry with respect to Local Authority was necessary for being covered under the E.S.I. Act. A similar question was canvassed before the Apex Court in the case of Cochin Shipping Co., (supra) and in para 21 the Apex Court has negatived the said contention. The Apex Court observed :

"In our considered view, this argument cannot be accepted. First of all, merely because other establishments which are akin to shop are enumerated, it does not, in any manner, oblige us to give a narrow meaning to the word 'shop' nor does it any way dilute the meaning of 'shop'.

Thereafter, it is material to note that the Apex Court observed at the end of para 21 as follows :

"As rightly contended by the learned Counsel for the respondent, the object is to envelop as many establishments as possible without leaving any room for doubt. That is precisely what the notification intends to do."

12. The last submission of Mr. Khandare was that under Section 12(2) of the A.P.M.C. Act it is provided that the Market Committee is a Local Authority for all purposes. Then he went over to the provisions of the Bombay Shops and Establishments Act, 1948. Under Schedule II of that Act various establishments are mentioned to which the provisions of the Act either do apply or do not apply. Entry No. 3 in Schedule 2 is in respect to local authorities and it is stated that all the provisions of the Act do not apply to it. It is also submitted in this behalf that under the Bombay General Clauses Act, 1904, Section 3(26) defines Local Authority to be a body which manages local funds amongst others. It was submitted that there is Market Fund contemplated under Chapter VI of the A.P.M.C. Act which the Market Committee manages. On this ground also it was submitted that, if the Market Committee is considered as a Local Authority then it would get excluded in view of the provisions of Entry 3 of Schedule II of the Bombay Shops and Establishments Act, 1948.

13. Now, as far as the reference to these other Acts is concerned, in the aforesaid judgment in the case of Union of India v. R.C. Jain (supra), the Apex Court has observed in the context of Local Authority itself as follows:

"...... it is not a sound rule of interpretation to seek the meaning of words used in an Act, in the definition clause of other statutes. The definition of an expression in one Act must not be imported into another."

The Court did not approve referring to the definition of local authority in the General Clauses Act to fill the gaps arising out of absence of the definition of this concept in the Bonus Act. As far as the E.S.I. Act is concerned, same approach is reflected in a judgment of a Division Bench of the Andhra Pradesh High Court in the case of E.S.I. Corporation v. Scientific Fertilizer Co. Ltd reported in 1997(1) L.L.N. 820. In that matter the Division Bench held that concept of shop is not defined in the E.S.I. Act and the definition of shop given in the A. P. Shops and Establishments Act cannot be adopted in so far as the E.S.I. Act is concerned. In our view also the reliance on the provisions of the General Clauses Act as also the Bombay Shops and Establishments Act to exclude the Market Committee from the coverage of the E.S.I. Act is not tenable.

14. Mr. Godhamgaonkar drew our attention to the provisions of the A.P.M.C. Act and pointed out that, this Act created a statutory authority namely, the Market Committee. The Act was passed with a view to regulate the marketing of agricultural and certain other produce in market areas and to confer powers upon the market committees in that behalf. He drew our attention to the relevant provisions of the Act as to how the market committees are constituted and what are their powers and duties. Section 29 of the Act relates to the powers and duties of the Market Committees. Sub-section (1) thereof lays down that it is the function of the Market Committee to provide such facilities for marketing of agricultural produce as the Director, the State Marketing Board or the State Government may from time to time direct. The wording of Sub-section (1) of Section 29 clearly indicates that, the Market Committee carries on systematic economic activities. Thus, under Clause (iv) of Sub-section (2) of Section 29 of the A.P.M.C. Act, the Market Committee has to maintain and manage the market. Under Clause (v) it has to provide for necessary facilities for the marketing of agricultural produce within the market in the market area. Under Clause (vi) it has to supervise the auctions of notified agricultural produce and under Clause (vii) it has to regulate the making, carrying out and enforcement or cancellation of sales, werghment, delivery, payment etc. in respect of the notified agricultural produce. Under Clause (xvii) it has the power to levy, take, recovery and receive charges, fees, rates and other sums or money to which the Market Committee is entitled. Under Clause (xxiii) it has to pay salaries and other emoluments of its officers and servants, and under Clause (xxiv) it has to administer the Market Fund. After referring to these various duties and functions Mr. Godhamgaonkar submitted that all these activities are for the benefit of the agriculturists and traders. This is with a view to see to it that the agriculturists get the correct price for their produce and that the agriculturists while marketing their agricultural produce in the market area are not exploited. It sees to it that the manual workers, such as the Mathadies and the Weighmen, are given proper wages. All the transactions of sale and payments of wages etc. are executed through the Market Committee only. The Market Committee undoubtedly is a regulatory body but at the same time it cannot be denied that it is carrying a systematic economic activity and renders services for which it charges. The Market Committee is not supposed to run in losses. He, therefore, submits that it will have to be construed as a shop for the purpose of this Act.

15. Mr. Godhamgaonkar submitted that the E.S.I. Act is a welfare Legislature. It is an Act for the benefit of the employees as also the employers who are covered under the Act. The Act provides for various facilities to the employees as can be seen from the various provisions of the Act. The employees and the employers have to contribute nominally and on the strength of that contribution, the employees receive various benefits as termed in Chapter V of the Act. Just to mention a few, they include payment for insured persons' sickness, maternity, disablement suffered due to employment injury and payments to the dependents of persons who die due to employment injury etc. The employers also are benefited in the sense in the event of sickness or employment injury to the employees they are not required to pay all of a sudden a huge amount and their responsibility is taken over by the Corporation. He, therefore, submits that the E.S.I. Act is a welfare enactment and the application of such an Act to the organisations like the A.P.M.C. is necessary and the Notification extending E.S.I. Act should be considered purposively.

16. Having noted the submissions as above, we find that the Apex Court has held in the Cochin Shipping Company's case (supra) that a place where services are rendered on retail basis is also a shop and that carrying on a systematic economic or commercial activity would be the relevant factor for deciding as to whether an organisation is a shop. That yardstick is approved by the Apex Court in the subsequent judgment in the case of E.S.L Corporation v. R.K. Swami (supra). As seen earlier, in the present case, when we examine the scheme of the A.P.M.C. Act, it cannot be disputed that the A.P.M.C. is carrying on a systematic economic and commercial activity and renders services. Hence, although the A.P.M.C. Act declares the Market Committee to be a Local Authority under that Act, it will have to be held as covered under the definition of shop under the E.S.I. Act.

17. Mr. Godhamgaonkar has rightly emphasised that the provisions in a welfare statute or notification are functional and they have to be purposively constructed. This approach is already reflected in the leading case on the definition of "industry" rendered by the Apex Court in the case of Bangalore Water Supply and Sewerage Board v. A Rajappa . The Apex Court while dealing with the definition of "Industry" as occurring in the Industrial Disputes Act, held that where there is systematic activity organised by co-operation between employer and employees for production and/or distribution of goods and services calculated to satisfy human wants and wishes there would be an industry. The entries such as, (i) professions, (ii) clubs, (iii) educational institutions, co-operatives, (iv) research institutes, (v) charitable projects and (vi) other kindred adventures came to be covered under this definition when the triple test apply. Large regulating bodies like Universities and organisations such as hospitals were also held to be covered under the definition. This is only to mention as an example with respect to the approach which is expected while interpreting a welfare statute. In fact, even with respect to a notification under a welfare statute and that too one under Section 1(5) of the E.S.I. Act extending, its coverage to shop, the Apex Court has observed in the above referred International Ore and Fertilizers' s case (supra) in para 4 thus :

"We agree with the decision of the High Court that while construing a welfare legislation like the Act and the notification issued thereunder a liberal construction should be placed on their provisions so that the purpose of the legislation may be allowed to be achieved rather than frustrated or stultified."

In B.M. Lakshmanamurthy v. Employees' State Insurance Corporation Bangalore the Apex Court has held E.S.I. Act to be a beneficial piece of social security legislation in the interest of labour. The provisions of the Act and notification thereunder will have to be construed with that end in view.

18. Before we conclude we would like to record that although the petitioner was called upon to pay the contribution to the first respondent from 8th November, 1981, the petitioner has filed this petition on 13th April, 1999 in view of the recovery notices issued in February, 1999. Mr. Godhamgaonkar, learned Counsel for the respondents had, therefore, not pressed any submission on the question of delay in filing the petition. It could also be argued that the petitioner had already resorted to an alternative remedy by filing a dispute under Section 75 of the E.S.I. Act which was pending and the parties should proceed with that and not with this petition. The hearing of this petition was, however, not objected on that ground since it was thought that an authoritative pronouncement from the High Court would be desirable and the decision herein would govern the outcome of that dispute.

19. Hence, for the reasons stated earlier, we do not find any error on the part of the respondent Nos. 1 and 2 in issuing the notices which are impugned in the present Petition. The petitioner Market Committee is hereby held to be covered under the Notification dated 3rd October, 1981 which extends the provisions of the E.S.I. Act to the shops, amongst others, in the local area of Dhule. The actions taken by the respondent Nos. 1 and 2 for recovery of the amounts are, therefore, valid and proper.

20. Mr. Khandare, learned Counsel for the petitioner, submitted that in view of the decision arrived at in this matter, the petitioner will be required to pay 'the contribution from 8th November, 1981 onwards though the decision is being arrived at now. He submitted that although on one hand the petitioner would be required to pay the substantial amount, there would not be any benefit to the employees for the past period. He, therefore, submitted that at least the recovery for the past period may not be made. In this behalf it is material to note that a similar question had come out before the Apex Court in the case of Employees' State Insurance Corporation v. Hotel Kalpaka International reported in 1993(1) C.L.R, 332. That was a case where the respondent-establishment was closed from 31-3-1988 but the liability to pay contribution related to the period from 11-7-1985 to 31-3-1988. It was contended by the employer that the employees had gone away and there was no liability to contribute. In that matter, the Kerala High Court had upheld the finding of the Insurance Court that the respondents had failed to comply with the provisions of the Act at the appropriate time yet in view of the fact that the establishment was closed on 31-3-1988 it had held that the appellant was not justified in proceeding against the respondent. In its judgment, the Apex Court examined the scheme of the Act. It noted that under Section 26 thereof all contributions are paid into a common fund and that fund is to be administered for the purposes indicated in Section 28 of the Act. The Court, therefore, held that the employer cannot contend that he did not collect employee's contribution and hence he cannot be called upon to pay (para 12 of the report). The Court held in para 17 that under Section 40 of the Act it was the liability of the employer to pay contributions in the first instance and thereafter the employee's contribution could be deducted from his wages. The Apex Court allowed the appeal and held in para 28 as follows:

"It has to be carefully remembered that the liability to contribute arose from the date of commencement of the establishment and is a continuing liability till the closure. The very object of establishing a common fund under Section 26 for the benefit of all the employees will again be thwarted if such a construction is put."

21. In the circumstances it is not possible to accept the submission of the petitioner. Mr. Godhamgaonkar, learned Counsel appearing for respondent Nos. 1 and 2 submitted that there could be a liability in this earlier period also in view of the coverage of the A.P.M.C. under the E.S.I Act for the purposes of certain benefits. He, however, submitted that Chapter VIII of the E.S.I. Act contain provisions for exemption in certain contingencies and in the event the petitioner - Committee represents to the appropriate Government (which would be the State Government) and to the E.S.I. Corporation, the respondents, after examining the particulars, will furnish the necessary information to the State Government whereafter appropriate decision with respect to the past liabilities or part thereof could be arrived at.

22. The Writ Petition is therefore dismissed. Rule is discharged. Interim stay stands vacated. In the facts of the case, there will not be any order as to costs.

23. Mr. Khandare, learned Counsel for the petitioner, applies for continuation of the stay order which had been granted during the pendency of this Petition for a further period of four weeks to approach the Apex Court. Mr. Godhamgaonkar leaves it to the Court to pass appropriate order. Accordingly, it is directed that the stay which was running during pendency of this petition will continue to operate for a further period of four weeks.