Employees State Insurance ... vs Sangam Chinema House Nagpur
2016 Latest Caselaw 3832 Bom

                                                   1                                    jg.fa745.04.odt




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




                                                                     
                                FIRST APPEAL NO. 745 OF 2004

    Employees State Insurance Corporation 




                                                                    
    Sub-Regional Office, Panchdeep Bhavan, 
    Ganeshpeth, Nagpur 
    through its Deputy Director                                                         .... Appellant 




                                                      
           -  Versus  - 

    Sangam Cinema House (Theatre) 
                                  
    Tiranga Chowk, Sakkardara Road, 
    Nagpur through its Manager                                                          .... Respondent
                                 
    -------------------------------------------------------------------------------------------------------
    Smt. B. P. Maldhure, Advocate for the appellant
    None for the respondent
    -------------------------------------------------------------------------------------------------------
       


                                                        CORAM :  PRASANNA B. VARALE, J.

                                                        DATE     :  14-7-2016.
    



    ORAL ORDER  : 

By the present appeal, the appellant - Employees State

Insurance Corporation is challenging the judgment and order passed by

the learned Employees State Insurance Court, Nagpur in Insurance Case

No. 6/1991.

2. The brief facts giving rise to the present appeal can be

summarized as follows :

The respondent before this Court, a cinema house i.e. theatre,

namely, Sangam Cinema House situated at Tiranga Chowk, Sakkardara

2 jg.fa745.04.odt

Road, Nagpur is being run and operated through the partnership firm duly

registered under the Partnership Act. The said establishment i.e. a theatre

was covered the provisions of the Employees State Insurance Act and as per

the procedural formality, Code No. 23-2093-121 was allotted to the

respondent - firm vide communication dated 26-9-1984. The respondent,

being aggrieved by the communications issued by the appellant had

approached the Court below. The Inspector attached to the appellant -

Corporation visited the establishment of the respondent and inspected the

same on 5-7-1990, finding certain shortfalls, communication was

forwarded to the respondent - establishment. It was the submission of the

respondent before the Court below that the shortfalls noted by the

Inspector and communicated to the respondent were complied with. The

appellant - Corporation by communication dated 3-9-1990 (the same being

treated as the order by the authority) asking for payment of the amount of

Rs. 34,705/- assessing the liability towards payment of ESI contribution

of canteen employees and the cycle stand employees was received by the

respondent. It was submitted by the respondent before the Court below

that erroneously, the liability was fastened and no opportunity of hearing

was granted. It was submitted before the Court below that the respondent

was operating establishment as a tenant of one Vidarbha Theatres Pvt. Ltd.

There were other tenants also and monthly lease money were being paid by

3 jg.fa745.04.odt

the tenants to Vidarbha Theatres Pvt. Ltd. in view of the agreement

between the parties. It was also ground raised that for obtaining licence to

run a cinema theatre, it was not necessary for the theatre owner/operator

to be armed with a catering house or a vehicle parking stand. It was also

submitted that though on earlier occasion, a notice was issued by

letter/communication dated 23-7-1990 seeking demand of the contribution

for the period 26-1-1984 to April, 1987, but the appellant could not have

asked for depositing the said amount as the notice issued to the respondent

was for the contribution which was time barred. It was the further

submission of the respondent before the Court below that in the subsequent

visit of the officer of the appellant - Corporation, nothing adverse was

observed by the officer concerned, as such, fastening liability on the

respondent by the subsequent officer is unsustainable and untenable. It

was also submitted that on the demand for inspection of record, the

necessary record was made available to the officer concerned. It was

further submitted that as there were other lessee in the premises and the

canteen facility and the cycle stand was utilized by them also. The

appellant - Corporation by filing the written statement resisted the claim of

the respondent herein. It was submitted in the written statement that in

the visits of all the officers, namely, Insurance Inspectors dated 6-3-1986

and 28-3-1988, it was observed that the respondent i.e. the applicant

4 jg.fa745.04.odt

before the learned court below failed to make compliance in respect of

contribution of the employees engaged in the cycle stand and the canteen.

It was then submitted by the appellant - Corporation that though the

canteen and the cycle stand was being operated through contractors, it was

in the premises of the theatre and was catering needs of the movie goers.

It was submitted that the facilities like the canteen and cycle stand are the

essential facilities of the cinema theatre. It was then submitted that there

was also a communication dated 3-5-1988 seeking compliance in respect of

the employees of the respondent, namely, a Part-time Sweeper and the

respondent was directed to furnish the monthly statement in respect of the

number of employees employed in canteen and the cycle stand and the

wages paid to them. In spite of the communication seeking the

information, the respondent failed to furnish the information. It was

submitted that the premises of the respondent was inspected and verified

by the ESI Inspector on 5-7-1990 and the deficiency in respect of

contribution towards the employees and non-furnishing the information

was also pointed out to the respondent by communication dated

23-7-1990. On the said material referred to above, a show cause notice

was issued seeking contribution on ad-hoc basis in respect of cycle stand

employees and canteen employees. A notice was issued to the effect that

why the ad-hoc assessment made by the Department should not be made

5 jg.fa745.04.odt

final and the respondent was communicated the date for personal hearing

on 1-8-1990. The respondent without attending the personal hearing

submitted the reply denying the liability itself. As the respondent denied

the liability and chose not to appear before the authority, order under

Section 45-A of the ESI Act was passed on 3-9-1990 claiming contribution

along with interest up to 31-7-1990. Another order under Section 45-A

was passed on 3-9-1990 claiming the contribution up to 31-7-1990. In

spite of the order communication directing the respondent to pay the

amounts, the respondent failed to pay the amount and as such, recovery

certificate for the amount of Rs. 39,000/- was issued on 30-10-1990. On

the rival contentions of the parties, issues were framed by the learned

Court below. The learned Employees State Insurance Court, Nagpur by

judgment and order dated 23-9-2004 allowed the application thereby

quashing and setting aside the orders dated 3-9-1990 and further declared

that the respondent was not liable to pay the ESI contribution demanded by

the appellant - Corporation.

3. Learned counsel Smt. Maldhure for the appellant -

Corporation vehemently submitted that the learned Court below utterly

failed to appreciate the facts and material placed on record. It was the

submission of Smt. Maldhure, learned counsel that the learned Court below

6 jg.fa745.04.odt

erred in observing that as the canteen and cycle stand were being operated

through the contractors and there was a contract between the owner,

namely, Vidarbha Theatres Pvt. Ltd. and the contractors, the employees of

the canteen and the cycle stand could not have been covered under the Act

and the learned Court below further erred in observing that the respondent

was not liable to pay contribution towards these employees. It was also

submitted by Smt. Maldhure, learned counsel that the learned Court below

only referred to one visit of the Inspector and accepted the submission of

the respondent/ applicant that as nothing adverse was observed in the visit

of the officer, the respondent was not liable to pay contribution. It was

submitted by Smt. Maldhure that the material placed before the Court

below to the effect that there was a subsequent visit of a Inspector found

that there was certain employees engaged in the canteen as well as the

cycle stand, a list of such employees was prepared and a communication

was forwarded giving these details and asking the respondent to pay the

contribution. Smt. Maldhure, learned counsel further submitted that the

learned Court below also failed to appreciate that though the ground was

raised by the respondent that no opportunity of hearing was granted to the

respondent, the record clearly reflected that by issuing the communication

to the respondent, the respondent was intimated about the date of personal

hearing and the respondent chose not to appear before the authority and

7 jg.fa745.04.odt

submitted only reply denying the liability. Thus, the respondent could not

have raised the ground of denial of opportunity of hearing or failure of

observing principles of natural justice. It was also submitted by the learned

counsel for the appellant that though there was an oral evidence tendered

by the appellant in the form of examination of the officers/Inspectors in

support of the stand of the appellant that the officers visited the premises,

found shortfalls and also found that the employees were engaged at the

cycle stand and the canteen and accordingly, notices were forwarded to the

respondent. The learned court below only on the ground that the ledger

was not placed on record, the inspection carried out by the officer

concerned was not proved. It was submitted by learned counsel for the

appellant that it was the responsibility and liability of the respondent to

discharge the burden if the respondent was relying on a ledger maintained

by the respondent and non-filing of the ledger by the respondent could not

have adversely affected the case of the appellant. Smt. Maldhure, learned

counsel submitted that the learned Court below erred in arriving at the

conclusion that as the cycle stand and canteen was being operated through

a private contractor and the facilities like the canteen and the cycle stand

was not the essential facilities of the respondent - Cinema Theatre and

these facilities were being utilized by some other lessee, the respondent

was not entitled for payment of any contribution is clearly a view in

8 jg.fa745.04.odt

contrast to the decision of the Apex Court reported in AIR 1978 SC 1478 in

the case of Royal Talkies, Hyderabad and ors Vs. Employees State

Insurance Corporation through its Regional Director, Hill Fort Road,

Hyderabad. Smt. Maldhure, learned counsel submitted that the issue is

squarely covered by the judgment in the case of Royal Talkies.

4. In spite of sufficient opportunities granted to the respondent,

none appears for the respondent.

5. It will be useful to refer to the order passed by this Court dated

12-4-2016 which reads as follow.

This appeal is under Section 82 the Employees State

Insurance Act, 1948 and it was admitted on 8 th June, 2005,

without framing any substantial question of law, which is the mandatory requirement of Section 82(2) of the said Act.

Heard Smt. Maldhure, the learned counsel appearing for the appellant. No one appears for the respondent.

The question is whether the employees of the canteen and those running the cycle stand in the premises of the respondent -

Sangam Cinema House can be considered to be the "employees" of the respondent for the purpose of Employees State Insurance Act.

Smt. Maldhdure, the learned counsel for the appellant has placed reliance upon the decision in the case of Royal Talkies, Hyderabad and others vrs. Employees' State Insurance Corporation reported in AIR 1978 SC 1478, wherein it has been held that in

9 jg.fa745.04.odt

terms of Section 2(9)(ii) of the said Act, person who is employed

by or through an immediate employer at the premises of a factory or establishment or under the supervision of the principal employer or his agent "on work which is ordinarily part of the work of the

establishment or which is preliminary to the work carried on in or incidental to the purpose of the establishment. It is held in the said decision that two operations namely, keeping a cycle stand and

running a canteen are incidental or adjuncts to the primary purpose of the theatre.

In the present case, the Tribunal has held that there is

nothing on record to show that any rent was paid either by the canteen owner or by the person running a cycle stand in the premises of a theatre. Before the Tribunal, reliance was placed

upon Exh. 37, a report of the Inspector under the E.S.I. Act, which makes reference to payment of rent as is found by him in the

ledger book during the course of inspection carried out on 16.08.1991.

In view of above, the substantial question of law which arises for consideration is as under;

Whether the Tribunal has committed an error in holding that the employees in the canteen and those running the

cycle-stand cannot be said to be the employees covered by Section 2(9)(ii) of the said Act for the purposes of contribution under the scheme framed under the said Act?

Put up this matter on 20.04.2016 to provide an opportunity to the respondent to contest the substantial question of law.

10 jg.fa745.04.odt

6. As this Court crystalised the issue involved in the present

appeal, in my opinion, it would not be necessary to refer to the other facts

of the matter and the relevant facts are already reflected in the backdrop of

the appeal and the submissions of the learned counsel Smt. Maldhure. As

the controversy revolves around the issue whether the employees of the

canteen and those running the cycle stand on the premises of the

respondent can be considered as employees of the respondent for the

purpose of Employees State Insurance Act and a reference is made to

Exhibit No. 37, it would be useful to refer the Exhibit Nos. 35 and 37.

Perusal of the Exhibit No. 35 shows that the premises was visited and

inspected on 5-7-1990 and the earlier inspection was carried out on

28-3-1988. Exhibit No. 35 then refers to said details such as the owner and

occupiers of the premises. The perusal further shows that clause 12 of the

report referred to irregularities observed, if any, in the submission of

declaration forms, in this column, it is observed by the Inspector that the

details in respect of canteen and cycle stand employees were not submitted.

The perusal further shows that in respect of coverage of canteen and cycle

stand employees, it is observed that the employer as well as the contractor

has not made any record available for inspection. It further stated that the

employer had given the canteen on rent. It further states that there were

11 jg.fa745.04.odt

five employees in the canteen and Pan-thela. Then there is reference to the

names of these employees of the canteen and the Pan-thela. The report

further refers to the cycle stand employees and it reads that the employer

has given the cycle stand on contract basis and two employees were

engaged on the cycle stand. The names of those employees are referred to

in the report. It will be also important to refer to Exhibit No. 36, a report

submitted by the Inspector to the Joint Regional Director, ESIC, Nagpur. It

is submitted in the report that on inspection dated 5-7-1990, the Inspector

found that :

(i) the canteen and cycle stand is situated in the premises of

Cinema (i.e Sangam Theatre).

(ii) the canteen and cycle stand is functioning during cinema hours.

(iii) the canteen and the cycle stand is generally for the people who are coming to see the picture in Cinema.

Exhibit No. 37 refers to the recovery of the amount due and payable by the

respondent. Thus, on perusal of the record, I am of the opinion that the

learned counsel Smt. Maldhure was justified in making the submission that

the learned Court below utterly failed to appreciate the material in its

proper perspective and only on the ground that the ledger was not

presented, arrived at an erroneous conclusion. The learned counsel for the

appellant also justified in submitting that if the respondent was placing

12 jg.fa745.04.odt

reliance on the said ledger, it was for the respondent to discharge the

burden by producing supporting material and for non-production of the

material which is in the possession of the respondent, namely, ledger book,

the adverse inference ought not to have been drawn against the appellant -

Corporation.

7. It would be also useful to refer to the judgment heavily relied

on by the learned counsel Smt. Maldhure for the appellant. The facts of the

present matter are nearly identical, namely a stand was taken by the

theatre owner that the employees working at the canteen and the cycle

stand could not have been covered under the definition of 'employee' under

the Employees' State Insurance Act as the canteen and the cycle stand were

leased out to contractors under instruments of lease and the employees

engaged by the contractors were the servants of the contractors. In the

matter of Royal Talkies, Hyderabad, the Insurance Court held that the

owner of the theatre were principal employers with reference to the

persons employed by the contractors in the canteens and the cycle stands

attached to the theatres and rejected the application filed by the owners of

theatres under Section 75 of the Act. The threatre owners being aggrieved

by the order approached the High Court. The High Court was not inclined

to cause any interference in the order of the Insurance Court and the

13 jg.fa745.04.odt

appellants were before the Apex Court. The Apex Court dealing with the

issue observed thus :

"Law is essentially the formal expression of the regulation of economic relations in society. That is the key note thought in

this case, where the core question is : who is an employee ? Secondly, to decide the meaning of a welfare measure a feeling

for the soul of the measure is a surer guide than meticulous dissection with lexical tools alone."

Then the Apex court further observed that :

9. A conspectus of the statute, to the extent relevant, is necessary to appreciate the controversy at the Bar. The statutory personality and the social mission of the Act once

projected, the resolution of the conflict of interpretation raised

in this case is simple. Although, technically, the Act is a pre- Constitution one, it is a post-Independence measure and shares the passion of the Constitution for social justice. Articles 38, 39,

41, 42, 43 and 43-A of the Constitution show concern for workers and their welfare. Since Independence, this legislative motivation has found expression in many enactments. We are

concerned with one such law designed to confer benefits on this weaker segment in situation of distress as is apparent from the Preamble. The machinery for state insurance is set up in the shape of a Corporation and subsidiary agencies. All employees in factories or establishments are sought to be insured against sickness and allied disabilities, but the funding, to implement the policy of insurance, is by contributions from the employer

14 jg.fa745.04.odt

and the employee. In view of the complexities of modern

business organisation the principal employer is made primarily liable for payment of contribution "in respect of every employee, whether directly employed by him or by or through an

immediate employer". Of course, where the employee is not directly employed by him but through another 'immediate employer', the principal employer is empowered to recoup the

contribution paid by him on behalf of the immediate employer

(S. 41). There is an Inspectorate of superwise the determination and levy of the contribution. There is a chapter prescribing

penalties; there is an adjudicating machinery and there are other policing processes for the smooth working of the benign project envisaged by the Act. The benefits belong to the

employees and are intended to embrace as extensive a circle as is feasible. In short, the social orientation, protective purpose and

human coverage of the Act are important considerations in the statutory construction, more weighty than mere logomachy or

grammatical nicety.

10....

11. Before us counsel .........

Admittedly, the canteens and cycle stands are within the theatre premises. Within this factual matrix let us see if the definition in S. 2(9) will fit. (emphasis supplied)

12. We may read the definition of "employee" once again before analysing the components thereof :

2 (9) "employee" means any person employed for wages

15 jg.fa745.04.odt

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

ii) who is employed by or through an immediate employer on

the premises of the factory or establishment or under the supervision of the principal employer or his agent on work

which is ordinarily part of the work of the factory or establishment or which is preliminary to the work carried on in or incidental to the purpose of the factory or establishment, or

iii) whose services are temporarily lent or let on hire to the

principal employer by the person with whom the person whose services are so lent or let on hire has entered into a contract of service; and includes 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; but does not include :-

(a) any member of the Indian naval, military or air forces; or

(b) any person so employed whose wages (excluding remuneration for overtime work) exceed five hundred rupees a month :

16 jg.fa745.04.odt

Provided that an employee whose wages (excluding

remuneration for overtime work) exceed five hundred rupees a month at any time after and not before, the beginning of the contribution period, shall continue to be an employee until the

end of that period.

13. The reach and range of the definition is apparently wide and deliberately transcends pure contractual relationships. We

are in the field of labour jurisprudence, welfare legislation and

statutory construction which must have due regard to Part IV of the Constitution. A teleological approach and social perspective

must play upon the interpretative process.

The Apex Court then breaking up the Section in two parts further observed

that :

16. Merely being employed in connection with the work of an establishment, in itself, does not entitle a person to be an 'employee'. He must not only be employed in connection with the

work of the establishment but also be shown to be employed in one or other of the three categories mentioned in Sec. 2(9).

17. Sec. 2(9) (i) covers only employees who are directly

employed by the principal employer. Even here, there are expressions which take in a wider group of employees than traditionally so regarded, but it is imperative that any employee who is not directly employed by the principal employer cannot be eligible under Sec. 2(9)(i). In the present case, the employees concerned are admittedly not directly employed by the cinema

17 jg.fa745.04.odt

proprietors.

18. Therefore, we move down to Sec. 2(9)(ii). Here again, the language used is extensive and diffusive imaginatively embracing all possible alternatives of employment by or through

an independent employer. In such cases, the 'principal employer' has no direct employment relationship since the 'immediate employer' of the employee concerned is some one else. Even so,

such an employee if he works (a) on the premises of the

establishment, or (b) under the supervision of the principal employer or his agent "on work which is ordinarily part of the

work of the establishment or which is preliminary to the work carried on in or incidental to the purpose of the establishment", qualifies under Sec. 2(9)(ii). The plurality of persons engaged

in various activities who are brought into the definitional net is

wide and considerable; and all that is necessary is that the employee be on the premises or be under the supervision of the principal employer or his agent. Assuming that the last part of

Sec. 2(9) (ii) qualifies both these categories, all that is needed to satisfy that requirement is that the work done by the employee must be (a) such as is ordinarily (not necessarily non-

statutorily) part of the work of the establishment, or (b) which is merely preliminary to the work carried on in the establishment, or (c) is just incidental to the purpose of the establishment. No one can seriously say that a canteen or cycle stand or cinema magazine booth is not even incidental to the purpose of the theatre. The cinema goers ordinarily find such work an advantage, a facility an amenity and sometimes a

18 jg.fa745.04.odt

necessity. All that the statute requires is that the work should

not be irrelevant to the purpose of the establishment. It is sufficient if it is incidental to it. A thing is incidental to another if it merely appertains to something else as primary. Surely,

such work should not be extraneous or contrary to the purpose of the establishment but need not be integral to it either. Much depends on time and place, habits and appetites, ordinary

expectations and social circumstances. In our view, clearly the

two operations in the present case, namely, keeping a cycle stand and running a canteen are incidental or adjuncts to the

primary purpose of the theatre. (emphasis supplied)

Thus the Apex Court dismissed the appeals filed by the theatre owners.

8. It will not be out of place to refer to the judgment of this Court

reported in 2005(2) Bom. C.R. 716 in the case of N. J. Nayudu & Co. Vs.

Regional Provident Fund Commissioner. Reliance was placed in the

judgment of the Apex Court in the matter of Royal Talkies. While referring

to the judgment, this Court observed that the Apex Court has stated that

the question to be decided is not whether without such amenity or facility

the establishment can function or not but whether such amenity or facility

howsoever peripheral if may has got some link with the establishment. The

Hon'ble Apex Court thereafter has given illustration to clarify the sweep of

the said phrase. It will thus be seen that the Hon'ble Apex Court has

interpreted only phrase in connection with the work of establishment. The

19 jg.fa745.04.odt

said phrase is also used in definition of term employee in section 2(f) of the

E.P.F. Act, 1952. In such circumstances, the discussion by the Hon'ble Apex

Court is directly on the point and clinches the issue. The Division Bench of

this Court in judgment reported at 2004(Supp.3) Bom.C.R. 1 : 2004(2)

Mh.L.J. 164 has also relied upon the very same judgment of the Apex

Court in Royal Talkies. While interpreting this phrase and has found that

21 car driver employed by 21 manager of B.A.S.F. India Ltd. are in fact the

employees of B.A.S.F. Ltd. and has dismissed the appeal preferred by

B.A.S.F. India Ltd. while confirming the order of learned Single Judge.

9. While considering the above referred aspects, the substantial

question of law framed by this Court by order dated 12-4-2016 will have to

be answered in affirmative i.e. the Tribunal has committed an error holding

that the employees in the canteen and those running the cycle stand cannot

be covered under the ESI Act for the purposes of contribution under the

scheme framed under the Act. The judgment and order passed by the E.S.I.

Court on these aspect is unsustainable. The appellant thus succeeds in the

appeal. The judgment and order passed by the E.S.I. Court, Nagpur in

Insurance Case No. 6/2004 in Application (ESI) No. 6/1991 is quashed and

set aside.

                                                                              JUDGE
    wasnik





                                      20                                 jg.fa745.04.odt




                                                                             
                                   CERTIFICATE




                                                     

"I certify that this Judgment uploaded is a true and correct copy of original singed Judgment."

Uploaded by : Shri A. Y. Wasnik, P.A. Uploaded on : 18-7-2016