Mitsui And Co. Limited vs Employees State Insurance Corpn.
2004 Latest Caselaw 898 Del

JUDGMENT

R.S. Sodhi, J.

1. FAO 176/2002 seeks to challenge the judgment dated 4.2.2002 of the Senior Civil Judge, ESIC Court in ESIC Petition No. 47/96 whereby the learned Judge has held the petitioner-company (for short 'the company') covered under the Employees State Insurance Act 1948 (for short 'the ESI Act').

2. Brief facts of the case, as have been noted by the learned Judge, are as under :

''The petitioner-company is having a Liaison Office in Delhi and has filed the present petition through its attorney, Mr. Mazuichi Miwa. The petitioner-company is a trading company incorporated in Japan and has branches and offices all over world including India. One such office is situated at Delhi and is engaged in undertaking liaison work relating to export and import of iron, tobacco, food-stuffs, textiles etc. as per the permission granted by the Reserve Bank of India under Foreign Exchange Regulation Act, 1973. The nature of services rendered by the petitioner-Company is restricted only to forwarding of market enquiries, tender notices from Indian parties to its Head Office in Japan and finding out potential suppliers in India for exports abroad.

Based on the tenders and market enquiries sent by the petitioner, Mitsui and Co. Ltd. Head Office sends quotations and offers to the petitioner for onward submission to the Indian buyers. The petitioner received delegations from Japan who may come for negotiations with Indian parties and takes care of their stay and comfort and travel in India. Negotiations are held by the said delegations with their Indian parties like technical details, terms of supply etc. The petitioner is no involved in such negotiations. On the basis of such negotiations, contracts are made between the head Office at Tokyo and the concerned Indian parties for import/export of goods. The petitioner is not involved in the negotiations at all nor terms of sale, nor does it carry on survey of the goods imported/exported, nor does it arrange for delivery of any goods nor does it collect the price of the goods sold. The petitioner does not engage itself in any trading activity whatsoever. As such the petitioner is not a 'shop' within the meaning of the Act, but the respondents have covered the Liaison office at Delhi as a 'shop' engaged in systematic economic activity. It has repeatedly been claimed that since the petitioner is not engaged in any economic or commercial activity is services tendered by it are not charges nor does any salaries are paid by it, the petitioner has been wrongly covered under the Act which resulted in the filing of the instant petition for quashing of the order dated 5-6-1996.

The respondent contested the petition and filed their written statement contending that the petition has not been filed by an authorised person without any cause of action. It is claimed that the petitioner is not only a Liaison office but is engaged in trading also. It has been repeatedly claimed that the petitioner is engaged in systematic economic activity and as such is a 'shop' liable to be covered under the Act. It has been denied that the petitioner is not involved in negotiations of the agreements or in the survey of the market etc. Other allegations contained in the petition have also been denied and it is reiterated that the petitioner-company has been rightly covered being a 'shop'.

In the replication, the petitioner has denied the allegations made in the written statement and has reasserted the averments made in the petition.

On the pleadings of the parties, the following issues were settled for trial on 20-1-1998:-

1. Whether the present petition is not maintainable in view of the preliminary objection no.1 in the written statement?

2. Whether there is no cause of action for filing the present petition?

3. Whether the present petition has been signed and verified by a duly authorised person.

4. Whether the petitioner is entitled to the relief claimed?

5. Relief.''

3. The petitioner-company, in order to sustain its case, examined Mr. Mayur Batra, PW-1, who has supported the version of the Company's claim. While, on the other hand, respondents have examined Mr. M.L. Kakkar, Insurance Inspector, RW-1, Mr. T.K. Ghosal, Deputy Director, RW-2, Ms. Manju Chakravarty, Deputy Director, RW-3, and Mr. Y.S. Rathi, Deputy Director, RW-4.

4. It was contended by counsel for the petitioner-company that the activities of the Company are not of a nature as would term it a 'shop' and, therefore, bring it within the purview of the ESI Act. He further submitted that the petitioner-company carries on no business but is merely a Liaison Office which does not qualify being termed as a 'shop'. Learned counsel also submitted that no issue has been framed as to whether the establishment of the petitioner-company is a 'shop' and, therefore, the petitioner-company did not have sufficient opportunity to lead evidence. On the other hand, counsel for the respondents submitted that the activities of the petitioner-company are in the nature of furthering the ends of commercial transactions of Mitsubisind Company Limited, Japan (the principal-company) and are, therefore, part and parcel of the commercial activities undertaken by its principal-company. He submitted that even though termed as 'Liaison Office, the petitioner-company is trading and ding business and is as such covered under the ESI Act.

5. I have heard counsel for the parties and gone through the judgment under challenge. From the evidence of PW-1 it is evident that the establishment of the petitioner-company in Delhi which is being termed as 'Liaison Office' is part and parcel of the principal-company. The principal-company is undoubtedly a trading house which trading is facilitated by Delhi office in the nature of providing it information such as marketing inquiries/tender notices from Indian parties as also identifying potential suppliers in India for exports abroad. However, the witness has categorically stated that the petitioner-company is not a 'shop' as they do not sell any goods nor render any services for consideration. In his cross-examination this witness has stated that the Delhi office receives funds from principal-company which are used to pay salaries to the employees and meet other office expenses. He admits that the principal-company is a trading company while the office in Delhi is for liaison purposes. He has deposed that the Delhi office is rendering services to the principal-company in Japan. Its only object is providing relevant information for marketing inquiries, tender notices and regarding business opportunities in India and that the Delhi office is covered under the provisions of the Employees' Provident Fund Act, 1952.

6. RW-1, Mr. M.L. Kakkar, has deposed to the effect that he was Insurance Inspector with the ESIC and conducted survey on 14.9.1989. He visited the office of the petitioner-company and physically checked the staff working there which was around 20-25 persons. The office maintained attendance register and 35 employees were employed for wages for the purpose of companies activities. This witness has further deposed that the main function of the petitioner-company is to book orders for their trading activities and to supply material accordingly. The survey report is Ex.RW-1/1. This witness has also deposed to the effect that the petitioner-company is covered under the Delhi Shops and Establishment Act as also is registered with the Employees' Provident Fund Department. The Shop and Establishment registration number is 6/727/II dated 3.4.1959. He has deposed that he recommended covering the petitioner-company under the ESI Act. However, in his cross-examination he has admitted that he saw no booking orders from any customer nor did he see any record of booking such orders.

7. RW-2, Mr. T.K. Ghosal, deposed to the effect that he was Deputy Director, ESIC regional office, Delhi, and had dealt with the file of the petitioner-company. He afforded opportunity for personal hearing to the petitioner-company on 26.10.1993 and computed a contribution of Rs.1,31,829/- in respect of 35 employees.

8. RW-3, Ms. Manju Chakarbarty, has stated that she was Deputy Director, ESIC, with the regional office, Delhi, and directed covering the petitioner-company finally under the ESI Act on 13.6.1990 with effect from 2.10.1988. The letter covering the company is Ex.RW-3/1. This was done on the basis of the Notification issued by the Government of Delhi covering the petitioner-company under the Delhi Shops and Establishment Act and, therefore, covered the petitioner-company under the provisions of ESI Act.

In her cross-examination, this witness has stated that there is material on record to show that the petitioner-company is a 'shop' and that it was rendering services for a price for the reason that the company was rendering services to the customers and as receiving remittances from abroad.

9. RW-4, Mr. Y.S. Rathi, Deputy Director (Medical), ESI Delhi deposed that he dealt with the file of the petitioner-company and that he gave an opportunity of personal hearing to the company on 5.2.1996. The letter is Ex. RW-4/1. The representative of the petitioner-company visited him personally for the hearing on the given date. After that, nothing was heard from them. The representations dated 9.2.1996 and 18.10.1993 were considered by him in the light of the provisions of ESIC Act and that on the basis of information supplied by Mr. Adhikari of the petitioner-company, he came to the conclusion that on the basis of the business activities of the petitioner-company it was a fit case to be covered under the provisions of the ESI Act and, as such an order was passed under Section 45-A of the ESI Act on 15.6.1996, which is Ex. RW-4/2. In his cross-examination, this witness has deposed that only shops can be covered under the provisions of ESI Act and that the petitioner-company was engaged in activities which are related to or concerned with working of a shop i.e. it was engaged in giving liaison services and useful information to the principal-company in connection with their business. Therefore, it was a 'shop' and as such covered under the Delhi Shops and Establishments Act and there was no doubt about the petitioner-company not being a 'shop'. He also deposed to the effect that the petitioner-company had engaged 35 employees for rendering services to the company.

10. On a careful perusal of the evidence on record as also from the reasoning of the judgment of the trial court, I find that the petitioner-company is nothing but an extension of the principal-company in Japan to gather information and/or to further the objects of the principal-company in facilitating their activities. The so-called Liaison Office is not an independent entity but is supported by and under the direct control of the principal-company whose prime object is trading. This is evident from the statement of PW-1 who admits that the Delhi branch/Liaison Office is used to pass on marketing inquiries/tender notices to Tokyo and also inform the headquarters of potential customers/exporters to enable the principal-company to carry on business to carry on business. In other words, the Delhi Office of the principal-company in Japan is part and parcel of the Japanese Company which is using it to further its ends of doing business/trading.

11. As has been held by the Supreme Court in M/s International Ore and Fertilizers (India) Pvt. Ltd. vs. Employees State Insurance Corporation, , that it is not actually necessary that delivery of goods to the purchaser should take place at the premises in which the business of buying or selling is carried on to constitute the premises to be a 'shop'. The delivery of goods sold to the purchaser is only one aspect of the trading activities. Negotiation of the terms of sale, carrying on of the survey of the goods imported, arranging for the delivery of the goods sold, collection of the price of the goods sold etc. are all trading activities. In other words, even the gathering of information and supplying the same for the purpose of furthering the object of the principal-company to do business is one of the trading activities and, therefore, it cannot be said that the petitioner-company is not covered under the ESI Act.

12. As regards the non-framing of issue, I find issue No.4 is all embrasure and the parties have led evidence to prove the fact of the applicability of the Act to the establishment of the petitioner-company. Surely, it cannot be said they had no opportunity to lead evidence. This is answered accordingly.

13. Having given my careful consideration to the judgment under challenge, I find that the learned Senior Civil Judge has given cogent reasons to arrive at his conclusion which cannot be faulted with. Accordingly, I find no ground to interfere with the judgment of the trial court which is affirmed. F.A.O. 176 of 2002 and CM 404/2002 are dismissed. No order as to costs.