Khadi Gramodyog Emporium vs Deputy Regional Director ...
2016 Latest Caselaw 1597 Bom

                                                        1                fa753.04.odt

                     IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                             NAGPUR BENCH, NAGPUR




                                                                                      
                                                             
                               FIRST APPEAL  NO. 753 OF 2004 


                Khadi Gramodyog Emporium,




                                                            
                Gandhi Sagar, Nagpur,
                by its Secretary and Manager ......                               APPELLANT

                                     ...VERSUS...




                                              
                Deputy Regional Director,
                             
                Incharge,
                Employees State Insurance Corporation,
                ESIC Bhavan, Ganeshpeth, Nagpur ......         RESPONDENT
                            
     -------------------------------------------------------------------------------------------
     Shri S.W.Ghate, counsel for appellant.
     Smt. B.P.Maldhure, counsel for Respondent
      

     -------------------------------------------------------------------------------------------
                              CORAM: R. K. DESHPANDE, J.

th DATE : 18 APRIL, 2016 .

ORAL JUDGMENT

1] On 18.12.2004 the respondent Deputy

Regional Director in the office of Employee State

Insurance Corporation issued notice to the appellant

calling upon it to pay contribution arrears of Rs.5624.45,

alleging that the declaration forms in respect of 3 tailors

working in the establishment of the appellant were not

submitted. The appellant submitted reply on 19.01.1985

informing that those 3 tailors were only allowed to keep

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their sewing machines outside the shop and they used to

provide service of stitching to the customers who

purchase the clothes from the appellant. The

relationship of employer and employee between the

appellant and those 3 tailors was denied.

2] On 14.05.1985, the respondent Corporation

passed an order under Section 45A of the Employees

State Insurance Act, 1948, rejecting the plea taken by the

appellant that 3 tailors were not the employees and

asking the appellant to pay contribution arrears of

Rs.5624.45 from 01.04.1982 to 31.05.1984 along with

interest amounting to Rs.6075.20 upto 30.04.1985,

failing which the interest at the rate of 6% per annum

was made payable with effect from 01.05.1985 till

realization.

3] The aforesaid order dated 14.05.1985 was the

subject matter of challenge by the appellant before the

Employees State Insurance Court at Nagpur, by filing an

application under Section 75(1) of the said Act,

registered as Application (ESI) No. 5 of 1985. The Court

framed two issues; (i) whether 3 tailors working for the

appellant are the employees within the meaning of

Section 2(9) of the said Act, and (ii) whether the

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appellant is liable to pay the amount of contribution as

was demanded. The Court recorded the finding that the

relationship of employer and employee has been

established between the appellant and 3 tailors and

accordingly, dismissed the application by judgment and

order dated 24.09.2004, which is the subject matter of

challenge in this appeal.

4]

On 11.04.2005 this Court admitted the matter

on the following substantial question of law.

Whether the Tailors are the employees within the meaning of Section 2(9) of the Employees' State Insurance Act, 1948?

5] Before the Employees State Insurance Court

the appellant examined Gopal Vinayakrao

Shahastrabuddhe, whereas no one entered the witness-

box on behalf of the respondent Corporation. The Court

recorded the finding that Exhs. 34 to 41 which are the

documents placed on record have not been disputed by

the appellant. It records the finding that the witness has

admitted that Khadi Gramodhyog used to give cloth to

the tailors for stitching and tailors used to take cloth to

their homes for stitching and used to return the stitched

clothes as per direction of Khadi Gramodhyog and the

tailors were paid wages for this work as fixed between

4 fa753.04.odt

Khadi Gramodhyog and the tailors. If further admitted

that if the tailors committed mistake in stitching then the

clothes used to be returned to the tailors for correcting

the mistake by stitching it again as directed by Khadi

Gramodhyog. Exh. 34 has been relied upon to hold that it

was ledger extract showing the amount paid under the

head "Majurikhata". The Employees State Insurance

Court placed reliance upon the decision of the Apex

Court in Silver Jubilee Tailoring House and ors ig vrs.

Chief Inspector of Shops & Establishment and another ,

reported in AIR 1974 SC 37 and the another decision of

the Apex Court in the case of M/s. P.M.Patel and sons &

ors vrs. Union of India & others, reported in 1986(I)

SCC 32.

6] In the decision of the Apex Court in case of

Workmen of Nilgiri Cooperative Marketing Society Ltd

vrs. State of Tamil Nadu and others reported in (2004)

3 SCC 514, the decision of the Apex Court in Silver

Jubilee Tailouring House's case has been considered

along with several other judgments. In paragraph No.

32, the Apex Court has held that the determination of the

vexed questions as to whether a contract is a contract of

service or contract for service and whether the

employees concerned are employees of the contractors

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has never been an easy task. It is held that, no decisoin

of this Court has laid down any hard-and-fast rule nor it

is possible to do so. It holds that the question in each

case has to be answered having regard to the fact

involved therein and no single test - be it control test, be

it organization or any other test - has been held to be the

determinative factor for determining the jural

relationship of employer and employee. In paragraph

No. 47 of the said decision, it is held that the person who

sets up a plea of existence of relationship of employer

and employee, the burden would be upon him. The Apex

Court has referred the judgment of Kerla High Court in

paragraph No. 48, which holds that the burden of proof

being on the workmen to establish the employer-

employee relationship, an adverse inference cannot be

drawn against the employer that if he were to produce

books of accounts they would have proved employer-

employee relationship.

7] In the decision of the Apex Court in Union

Public Service Commission vrs. Girish Jayantilal Vaghela

and othres, reported in (2006) 2 SCC 482, the distinction

between the "contract of service" and "contract for

service" has been considered in paragraph no. 6 of the

judgment, which is reproduced below.

6 fa753.04.odt

The problem of defining what is an employer and employee

relationship and what is an independent entrepreneurial dealing frequently arises before the courts. Difficulty arises in defining what is a "contract of service" and what is

"contract for service". In Cassidy v. Ministry of Health (1951) 1 All ER 574, after referring to some earlier decisions, it was held that in a "contract for services" the master can order or require what is to be done, while in the other case (a contract of service) he can not only order or require what is to be done but direct how it shall be done.

The House of Lords in Short v. J. & W. Henderson, Limited (1946) 174 Law Times 417, laid down the attributes of employer-employee relationship which have been followed in later decisions. In this case the appellant, who was a dock labourer, sustained injuries by accident and claimed

compensation against the respondents under the Workmen's Compensation Act, 1925. The respondents contended that the appellant was not a workman within the meaning of Section

3(1) of the said Act but was a member of a joint stevedoring adventure. The House laid down the following four indicia of contract of service, namely, (a) the master's power of selection of his servant; (b) the master's responsibility of

payment of wages or other remuneration; (c) the master's right of suspension or dismissal; and (d) the master's right to control the method of doing the work. It was also observed that a contract of service may still exist if some of these elements are absent altogether, or, present only in an unusual form and that the principal requirement of a contract of

service is the right of the master in some reasonable sense to control the method of doing the work, and that this factor of

superintendence and control has always been treated as critical and decisive of the legal quality of the relationship.

8] Exh. 34, the ledger extract, relied upon

merely shows some amount under the head

"majurikhata" account. The witness examined by the

appellant has stated that 3 tailors mentioned in the

report are not in appellant's service but they used to do

the work of customers after the customers purchase the

clothes from Khadi Gramodhyog. He has also stated that

these 3 tailors used to take their wages of their tailoring

7 fa753.04.odt

from the customers and they were never paid any

remuneration for their tailoring work by the appellant,

nor the appellant has given any work to the tailors. In

the reply filed by the appellant before the respondent in

the proceedings under Section 45A of the said Act, the

stand was taken that 3 tailors were allowed only to keep

their sewing machines outside the shop, though within

the premises and they used to bring the stitched clothes

from their residences. It was also the stand taken that

the appellant used to add the stitching charges in the bill

without taking any extra amount as profit.

9] In the decision of the Apex Court in the case

of Silver Jubilee Tailoring House, cited supra, the

relationship of employer and employee was established

and the dominating factor taken into consideration by the

Court was that the stitching machines were supplied by

the owner and the tailors used to attend the shop to do

the work on such machines regularly, which was

indicative of the fact that it was a contract of service.

Here in the present case, it is not the fact proved and

brought on record that the respondent Corporation either

by way of inspection note or by examining the witnesses

that the sewing machines were owned by the appellant

and the tailors were employed for performing the job on

8 fa753.04.odt

such machines. It is not the case proved by the

respondent Corporation that the appellant exercised

supervision and control over the functioning of these

tailors. Merely because the ledger account indicate some

amount paid under the head "majurikhata" and the

statement of the witness made dehors the context that

the charges were paid, would not be enough to hold that

it is a contract of service or that there existed

relationship of employer and employee between the

appellant and 3 tailors.

10] Smt. Maldhure, the learned counsel for the

respondent has urged relying upon the decision in Silver

Jubilee Tailoring House's case that the Apex Court has

diluted the test and it is held that the test of supervision

and control would not always be a dominating test. The

proposition cannot be disputed, but as has been held by

the Apex Court, it will have to be seen in the facts and

circumstances of each case, what would be the

dominating test. In case of such tailors, the Court

has applied the test of ownership of sewing machines,

which has not been established in the present

case. The Employees' State Insurance Court has

committed an error of law in ignoring the vital test of

burden of proof and in the absence of any evidence

9 fa753.04.odt

brought on record by the respondent Corporation, it has

committed an error in holding that it was a contract of

service and therefore, the appellant was liable to pay the

contribution in respect of those 3 tailors. It is not in

dispute that in respect of other employee working on the

establishment of the appellant the contribution as

required under the Employees' State Insurance Act was

being regularly paid.

11]

Smt. Maldhure, the learned counsel for the

respondent has relied upon the following decisions;

(I) Silver Jubilee Tailoring House vrs. Chief

Inspector Shops and Establishment, reported in AIR 1974 SC 37;

(II) Prakash Match Industries vrs. Employees' State Insurance Corporation, reported in 2000 II LLJ 49;

(III) Employees' State Insurance Corporation vrs.

Oswal Wollen Mills Ltd., reported in 1980 (47) FLR 232; and

(IV) M/s P.M.Patel vrs. Union of India and others,

reported in 1986 (SC) 1 LLJ 88

I have gone through the said decisions and once it is held

that it depends upon the facts and circumstances of each

case, in the present case, this Court has taken a view

that the respondent has failed to establish that it was a

contract of service and there existed relationship of

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employer and employee. The judgments, therefore,

would be of no assistance.

12] In view of above, the impugned judgment

and order cannot be sustained. The same will have to be

quashed and set aside along with the order dated

14.05.1985 passed under Section 45A of the said act by

the respondent Corporation.

13]

In the result, the appeal is allowed. The

order dated 24.09.2004 passed by the Employees' State

Insurance Court along with the order dated 14.05.1985

passed by the Deputy Regional Director of Employees'

State Insurance Corporation are hereby quashed and set

aside. The proceedings under Section 45A of the said Act

are dismissed. No order as to costs.

JUDGE

Rvjalit