Delhi High Court

Sanjay Bhaskar vs Sanjay Bhaskar on 20 April, 2009

Author: A.K.Sikri

                             Reportable
*             IN THE HIGH COURT OF DELHI AT NEW DELHI

+                           WP (C) No. 1993 of 1989
                            WP (C) No. 2907 of 1989
                                       and
                            WP (C) No. 2963 of 1989

%                                             Reserved on : January 19, 2009
                                              Pronounced on : April 20, 2009

1.     WP (C) No. 1993/1989

Sanjay Bhaskar                                         . . . Petitioner

                   through :              Mr. Anand Yadav with
                                          Ms. Anita Tomar, Advocates

              VERSUS

Union of India                                         . . . Respondent

                   through :              Mr. R.P. Chawla, Advocate


2.     WP (C) No. 2907/1989

Sanjay Bhaskar                                         . . . Petitioner

                   through :              Mr. Anand Yadav with
                                          Ms. Anita Tomar, Advocates

              VERSUS

Union of India                                         . . . Respondent

                     through :            Mr. R.P. Chawla, Advocate


3.     WP (C) No. 2963/1989

Capital Cooperative Industries Society Ltd.            . . . Petitioner

                   through :              Mr. Anand Yadav with
                                          Ms. Anita Tomar, Advocates

              VERSUS

Union of India                                         . . . Respondent

WP (C) No. 1983, 2907 & 2963/1989   nsk                                   Page 1 of 20
                    through :                  Mr. R.P. Chawla, Advocate
CORAM :-
    THE HON‟BLE MR. JUSTICE A.K. SIKRI
    THE HON‟BLE MR. JUSTICE SURESH KAIT

       1.     Whether Reporters of Local newspapers may be allowed
              to see the Judgment?
       2.     To be referred to the Reporter or not?
       3.     Whether the Judgment should be reported in the Digest?


A.K. SIKRI, J.

1. Because of the commonality of the factual and legal aspects involved

in the three writ petitions, the same were heard together and are

being disposed of by this common judgment.

2. For the sake of convenience, facts of WP (C) No. 1993/1989 are

taken note of in the first instance.

3. M/s. Capital Cooperative Industries Society Ltd. (hereinafter referred

to as the „Society‟) is a cooperative society registered as a Producer‟s

Cooperative Society under the provisions of Cooperative Societies

Act, 1912. The object of the said Society is the promotion of

common interest of its members in accordance with the cooperative

principles with needs and interest common amongst its members, for

the betterment of the conditions of living and better methods of

production. The Society was registered on 8.9.1948. The Bombay

Cooperative Societies Act, 1925 was extended to the Union Territory

of Delhi vide notification dated 8.1.1949, as amended by subsequent

notification dated 21.2.1950. By force of Section 73, the

Cooperative Societies Act, 1912, insofar as it applied to the Union

Territory of Delhi, was repealed. The Parliament enacted the Delhi

Cooperative Societies Act, 1972 to consolidate and amend the law

relating to cooperative societies in the Union Territory of Delhi. The

above-named Society is covered by the provisions of Employees‟

Provident Fund and Miscellaneous Act, 1952 (hereinafter referred to

as the „PF Act‟). However, the Regional Provident Fund

Commissioner (RPFC) has passed orders under Section 7-A of the PF

Act whereby he has called upon the members of the Society to pay

Provident Fund contribution on the salary which they are receiving.

Though these persons are the members of the Society, they are also

drawing salary for working in the said Cooperative Society. The

dispute, therefore, is as to whether these members working in the

Cooperative Society are „employees‟ within the meaning of the PF

Act.

4. The genesis of this dispute goes back to the year 1963. The

department had taken the view at that time that irrespective of the

fact that a person working in the establishment was a

„Member/Shareholder‟, he would be deemed to be an „employee‟

and as such liable to be enrolled as a member of the Provident Fund.

Similar dispute had arisen qua these member employees for their

coverage under the Employees‟ State Insurance Corporation Act (for

short, „ESI Act‟). The Society filed WP (C) No. 323/1972 and

611/1979. Both these cases were decided by a learned Single Judge of

this Court vide common judgment dated 11.9.1979. The issue was

decided against the Society, inter alia, observing as under :-

"That a member of the Society by acting as a worker or employee of the Society has one capacity and the same member acting as a member of the society has a different capacity. It is possible to have a dual capacity."

Thereafter, Letters Patent Appeals preferred against the said

judgment were dismissed in limine by the Division Bench of this

Court. Further, the SLPs thereagainst were also dismissed in limine.

5. Incidentally, the decision of the ESI authorities was also challenged by

filing WP (C) No. 338/1972. This writ petition was decided by the

same learned Single Judge, vide judgment dated 25.5.1981 holding

that a member of the Producers‟ Society cannot be treated as an

employee of the Society, inter alia, in the following manner :-

"....The real and crucial test for the applicability of the definition is the employment for wages. A member of a Producers‟ society cannot be treated as an employee of the Society. There have been cases where a partner of a firm was himself working and receiving sums which are called wages and it was found that it did not really create the relationship of an employer and an employee. It was considered as a mode of adjusting the amount that must be taken to have been contributed to the partnership assets by a partner. A Managing Partner of the firm attending the office to acquaint himself with the day-to-day work and affairs of the business of a factory was held as could not be included amongst the 20 persons working in the factory. Similarly, the participation of the Karta of a member of the Joint Hindu Family business was not taken into account for the purpose of determining if 20 or more persons were working in the factory during the material period. The participation of the employer or the proprietor of the business or the Karta of the Joint Hindu Family business has not been construed by the Courts as working as an employee for wages. The result of the above discussion is that the members of a Producers‟ Society cannot be construed as employees within the meaning of the Act. The net effect is that the contributions demanded by the Employees‟ State Insurance Corporation are illegal and are declared void."

6. After the dismissal of the writ petitions and LPA preferred by the

Cooperative society, the present writ petition is filed by four persons,

who are the member/shareholders and are challenging the decision

of the RPFC dated 9.10.1989 passed under Section 7-A of the PF Act

whereby such members are covered by the PF Act treating them as

„employees‟ as they have received salary from the Society. Some of

the relevant provisions of various Acts and Rules, which are

highlighted by the petitioners and on the basis of which they contend

that the petitioners, who are members/shareholders of the Society,

cannot be treated as „employees‟, may first be taken note of.

7. It is stated that a Society whose property and business is that of its

members and whose debts and liabilities are equally the debts and

liabilities of its members and which is not in any manner distinct from

the members composing it is a Producers‟ Cooperative Society within

the meaning of Rule 4(b) of the Delhi Cooperative Society Rules

1973. The said Rule reads as under :-

"4(b) "Producers‟ Society", means a co-operative society formed with the object of producing and disposing of goods as the collective property of its members and includes a co- operative society formed with the object of the collective disposal of the labour of the members of such a co-operative society."

The Act and the byelaws of the Society indicate, in no

uncertain terms, that the said society has been formed to promote

thrift, self-help and mutual aid amongst persons of moderate means

with common needs and interest for the betterment of the conditions

of living and better methods of production. Such provisions have

been made in the Act under which the Society has been registered.

8. The Rules and byelaws mark out the Society from other

establishments, i.e. joint stock companies and other institutions. It

may be useful to refer to Section 91 of the Delhi Co-operative

Societies Act, 1972 and Section 2(7) of the Companies Act, 1956.

The said sections reads thus :-

"Section 91

The provisions of the Companies Act, 1956 shall not apply to co-operative societies.

Section 2(7)

"body corporation" or "Corporation" includes a company incorporated outside India but (does not include -

(a) A corporation sole;

(b) A co-operative society registered under any law relating to co-operative societies; and

(c) Any other body corporate (not being a company as defined in the Act) which the Central Government may by notification in the Official Gazette specify in this behalf

9. In terms of Section 28 of the Delhi Cooperative Societies Act, 1972,

the final authority in a co-operative society vests in the "General

Body" of members. The word "General Body" has been defined in

Rule 2(xi) of the Delhi Co-operative Society Rules, which is

reproduced below :-

"2(xi) "General Body" in relation to any cooperative society means all the members of the co-operative society and in relation to a co-operative society which has provided for the constitution of a representative general body all the delegates or representatives constituting the representative general body elected in accordance with the provisions of the bye-laws of such a cooperative society or the rules approved by the Registrar and the word "member" in relation to general body or general meeting wherever occurring in these rules or

byelaws of such a cooperative society shall always be construed as such delegate or representative."

The status of a cooperative society is distinct from a company

incorporated under the Companies Act and this fact is evident from a

reading of Section 24 of the Delhi Cooperative Societies Act, 1972 in

terms of which every member of the co-operative society shall

exercise his vote in person and no member shall be permitted to vote

by proxy.

10. On the basis of the aforesaid provisions, the submissions, in brief, of

the petitioners are as under :-

(i) The establishment of the Society is being operated and run by

its members. The hands are of the working members and the

voice is their‟s in so far as its day-to-day affairs are concerned.

(ii) There does not exist any relationship of „master‟ and „servant‟

and that of an „employer‟ and an „employee‟ between the

Society and the members comprising it.

(iii) The status of the working members is akin to that of partners in

a partnership concern. They are working for their own-self

with common needs and interest.

(iv) The members of the Society are not employed for wages.

(v) They do not, by virtue of the status conferred upon and

enjoyed by themselves, answer the description of the word

„employee‟ as defined in Section 2(f) of the Employees‟

Provident Funds and Miscellaneous Provisions Act, 1952.

(vi) The Society‟s name is only a collective name of those

individuals who constitute it.

(vii) Drawings of the members, by whatever name they are

described are a part of the profits and that too for obvious

reasons that the business of the Society is the business of its

members.

(viii) A member of the Society cannot be employed by it and that

too for the reasons that a man cannot be his own employer.

(ix) The Society through its committee is only competent to

appoint and dismiss any paid staff and not the members. The

working members can only be expelled in a meeting of the

General Body with 2/3rd majority.

11. The respondent RPFC has taken the preliminary objection that these

writ petitions are barred by principles of res judicata. In this behalf,

it is submitted that the Society, which is covered by the provisions of

the PF Act, complied with the provisions of the Act upto January

1970. After this date, dispute was raised that the Society and

members/shareholders of the Society are not covered under the Act

and the Scheme framed thereunder. Against the dismissal of the said

writ petition, LPA was filed, which was also dismissed. Special leave

petition filed before the Supreme Court also met the same fate. After

the dismissal of the SLP, notices were issued by the RPFC. The

Society was directed to produce the relevant records from June 1962

to date, on 22.12.1987 for the purposes of determination of the dues

in respect of all the employees of the society. In the order passed

under Section 7-A of the Act, it was held that the provisions of

Employees‟ Provident Fund and Miscellaneous Provisions Act, 1952

have rightly been applied to the Society and in view of the fact that

the members are also employees within the meaning of the Act, the

Society is liable to comply with the provisions of the Act in respect of

them from the date of coverage of the society under the Act. The

Society again filed representation along with the resolution passed by

the General Body Meeting of the Society, but RPFC passed order

dated 20.12.1988 which was forwarded to the Society vide letter

dated 9.1.1989.

12. On the basis of the aforesaid, submission of Mr. Chawla, learned

counsel for the respondent/RPFC, was that the disputes raised in

these three writ petitions were the same which were raised by the

Society in the earlier writs which were dismissed and those orders

were upheld till the Supreme Court. It was, therefore, not open to

the petitioners, member/employees of the Society, now to go

forward and rake up the issue all over again.

On merits also, it was submitted that the principle that a

company is a separate and distinct entity from its members would

apply in the case of a Cooperative Society as well. The submission

was that in Saloman v. Saloman, (1897) AC 22 (HL) = All England

Law Report Volume 1895 to 1899 page 33), it was decided that a

company is a separate and distinct entity from its shareholders. The

submission was that the doctrine that the Corporation has a separate

legal identity of its own is firmly rooted in our notions and has been

derived from Common Law and has further been applied in the

matter of taxable identity also in the following cases :-

       (i)     52 ITR Page 524, 532 (Supreme Court)

       (ii)    27 ITR 1 (6) Supreme Court - AIR 1955 SC 74

       (iii)   AIR 1970 SC 564

       (iv)    86 ITR 133 (Supreme Court)

       (v)     21 STC 317 (Supreme Court)

       (vi)    49 STC 150 (DB)

       (vii) (1996) 5 SCC 522

13. We may also point out at this stage itself that even in the impugned

order dated 20.12.1988 passed by the RPFC, he has relied upon the

judgment passed in WP (C) No. 611/1979 and 338/1972 as per which

these members were held to be „employees‟ within the meaning of

the PF Act.

14. Mr. Anand Yadav, learned counsel appearing for the petitioners,

submitted that it was necessary for the RPFC to consider the case on

merits rather than applying the judgment of the learned Single Judge

in WP (C) No. 611/1979 mechanically, more so when other view

expressed by the same Judge in respect of the same Cooperative

Society was also available, al beit, under the provisions of the ESI Act.

What follows therefrom is that the principles applicable to decide

whether a member of the Society is an employee or not are the same

under the ESI Act and the PF Act. He also submitted that the

principles of res judicata would not apply in this behalf.

His submission was that the question involved was one of law

and a question of law does not operate as res judicata for all times to

come. He argued that various orders have been passed by the RPFC

in respect of various members of the Society and the said orders are

different and distinct in respect of each member and, therefore, the

said decisions of RPFC cannot be said to operate as res judicata.

Further, the RPFC has not applied his mind to the ratio laid down in

WP (C) No. 338/1972 and even the directions issued by the RPFC

vide circular dated 8.10.1965 only on the ground that order was

passed against the Society in WP (C) No. 611/1979. He added that

the petitioners were not the parties to the said writ petition and the

present petition has been filed by the petitioners being a member of

the Society and the Society has been arrayed as respondent No.3.

Reliance is placed on the following judgments :-

       (i)     M.M. Ipoh & Ors. v. CIT, Madras,
               1968 Vol. 678 ITR 106 (SC)

       (ii)    Seth R. Dalmiya v. CIT
               1971 Vol.I, ILR (Delhi) 30

       (iii)   Jawahar Singh v. Jai Gopal
               1972 Vol.I ILR 63

       (iv)    M/s. Anwar Khan Mehboob & Co. v. State of M.P. & Ors.
               (1966) 2 SCR 40

       (v)     Mathura Prasad Bajoo Jaiswal & Ors. v. Dossibai N.B.
               Jeeseebhoy, AIR 1971 SC 2355.

15. In the aforesaid backdrop, the first and foremost aspect which needs

determination is as to whether these writ petitions are barred on the

ground of res judicata. Before we answer this question, it would be

apposite to take note of both the judgments of the learned Single

Judge, namely, first judgment dated 11.9.1979 passed in WP (C) Nos.

323/72 and 611/1979 and the other judgment dated 25.5.1981 passed

in WP (C) No. 338/1972 and 1183/1972 as these petitions relate to

this very Cooperative Society.

16. In the first judgment, order of the RPFC covering members within the

provisions of the PF Act was challenged and in the second judgment,

question of coverage under the ESI Act of these very members was

questioned.

17. In the judgment dated 11.9.1979, after taking note of the various

byelaws of the Cooperative Society, the learned Single Judge was

mainly influenced by the fact that a Society can be distinguished from

its members. It was also opined that there was no impediment in the

byelaws which provides that a member cannot be an employee, in

the strict sense of the society. According to the learned Single Judge,

since the working members were paid wages by the Society, as

earned by them, and they were in the establishment, they would be

treated as employees. Following discussion in this behalf is relevant

to note :-

"To put it in the nutshell the corporate character of the petitioner society, the privileges of the society over the members of the society, the capital structure and funds of the society as distinct from the funds of the members, the

distribution of the profits, the reserve fund, the distribution of surplus assets on liquidation not going to the members of the society and the settlement of disputes between the society and its members persuades me to draw an inference that the members of the society working as such are employees with the meaning of section 2(f) of the 1952 Act. There is no impediment in the bye-laws that a member cannot be an employee, in the strict sense of the society. The working members are paid by the society their wages as earned by them. They work in the establishment. Section 16 of the Act is a further pointer that any establishment registered under the Co-operative Societies Act, 1912 or any other law for the time being in force in any state relating to co-operative societies would be covered if employing 50 or more persons and working without the aid of power."

Thus, the main factors which influenced the learned Single

Judge to form the aforesaid opinion were: (a) a Society is distinct

from its members, like a corporate personality; (b) there was nothing

in the byelaws that a member cannot be an employee; and (c) since

the members were working in the establishment of the Society and

were being paid by the Society, they would be treated as employees.

18. In the second judgment dated 25.5.1981, while deciding the same

issue, the same learned Single Judge referred to the various provisions

of ESIC and specifically to Section (2)(ix) of the Act which defines

„employee‟. The object of the Act and its byelaws were also referred

to. On perusing the same byelaws of the same Society, it was

observed that it was designed to invigorate in the members the spirit,

practice of thrift and mutual help, with the object of producing and

disposing of goods. The object was to enable the members to earn

their livelihood by making a collective effort and, therefore, these

members cannot be the employees of the Society within the meaning

of Section 2(ix) of the Act. The learned Single Judge went to the

extent of holding that though the Society is registered under the Act

and the Rules by virtue of which it is constituted as a body, even

then the veil of incorporations has to be lifted to find out whether it

gets a separate legal entity apart from its members so as to make it an

employer of the members. Answer was given that it cannot be

treated as a separate entity. Following discussion in this aspect from

the said judgment also needs to be reproduced :-

"The above provisions of the bye-laws of the society and the statutory provisions relating to a Producers‟ Society show that a Producers‟ Society is designed to encourage in the members the spirit and practice of thrift, mutual help with the object of producing and disposing of goods. It is with the object of enabling the members of the Society to earn their livelihood by making a collective effort. The members of a Producer Cooperative Society by collective disposal of the labours of the members of the Society, cannot become the employees of a Cooperative Society within the meaning of Section 2(9) of the Act. The collective disposal of the labour of the members of the Society does not create the relationship of employer and employee. It is only one of the modes of providing labour of the members in producing and disposing of the goods as the collective property of its members. It is in the nature of a contribution of the labour by a member of the Society in relation to the production and disposal of goods. The goods produced is the collective property of its members in a Producers‟ Society. Each member is the collective master. If a member is contributing his labour, then he is both master and servant. A member, however, cannot be an employee of the Society. To be an employee, he must be under a contract of service. No contract of service is involved in the case of a Producers‟ Society. Each member contributes his labour as a member of the Society and not an employee. The definition is not only that the persons are employed but they are employed or were employed for wages. The members of a Producers‟ Society are not paid any wages for the labour. There are no provisions in the bye-laws of the Society in the nature of imposition of any penalties of misconduct or termination of services or similar provisions as are in relation to a master and servant. The provisions in the bye-laws exist as to a person when he ceases to be a member of the Society. The Society can expel a member by a vote of general meeting if he commits one of the defaults. The absence of the power of removal or dismissal of other imposition of penalties in the bye-laws suggest that the relationship of a member with the Society is not that of a master and servant. The members

working in the Society are all shareholders and working in the Society as members. An employee can work only for a probationary period and thereafter a period of 12 months he has to enroll as a member of the Society. The non-members, therefore, are also on their way to become fulfledged members of the Society and are entitled to contribute their labour as members to be only for a period of 12 months. The share- holders are members of the Society or collective owners of the assets of the Society. Even though the Society is registered under the Act and the Rules and by virtue of registration is constituted as a body, even then the veil of the incorporation has to be lifted to find out whether a Producers‟ Cooperative Society gets a separate legal entity apart from its members so as to make it an employer of the members. The members of the Producers‟ Cooperative Society as the petitioner cannot be termed as employees within the meaning of the Act.

(Emphasis supplied)"

The aforesaid conclusion was supported with the judgment of

the Supreme Court in M/s. Khedut Sahakari Ginning and Pressing

Society Ltd. v. State of Gujarat, AIR 1972 SC 1786.

19. One thing which becomes manifest from the reading of the two

judgments is that on the same facts the question of law was decided

differently. It is stated at the cost of repetition that both the cases

were of this very Cooperative Society. Same byelaws of this

Cooperative Society were considered. In the first judgment, the

Cooperative Society was treated as a separate entity and it was

opined that members can be treated as the employees who were

getting wages. In contrast, in the other case it was held, on same

facts, that the Cooperative Society should not be treated as a

separate entity as it was the alter ego of its members. It was also

held that the members, while working, were giving the contribution

of their labour in relation to the production and disposal of the

goods and would not become employees thereby. The learned

Single Judge went to the extent of observing that each member is the

collective master and if a member is contributing his labour, then he

is both master and servant. However, he cannot be an employee of

the Society. The Court went to the extent of holding that what was

paid to these members was not wages for any labour. Referring to

same bye laws, it was held that there was no provision therein in the

nature of imposition of any penalties of misconduct or termination

of service or similar provisions as are in relation to a master and a

servant.

20. There is no dispute on facts, which remain the same. On the basis of

those very facts, question of law was decided in two cases with

diametrically opposite conclusions. Whereas these very members

were held to be employees in the first judgment, in the second

judgment it was opined that they cannot be treated as employees. In

this backdrop, we have to decide as to whether a question of law

can operate as res judicata. Answer has to be in the negative in view

of the dicta laid down in numerous judgments of the Supreme Court

and followed by various High Courts, including this Court, which are

relied upon by learned counsel for the petitioner.

21. In M.M. Ipoh (supra), which is a case under the Income-Tax Act, the

doctrine of res judicata was explained in the following terms :-

"The doctrine of res judicata does not apply so as to make a decision on a question of fact or law in a proceeding for assessment in one year binding in another year. The assessment and the facts found are conclusive only in the year of assessment: the findings on questions of fact may be good and cogent evidence in subsequent years, when the same

question falls to be determined in another year, but they are not binding and conclusive."

22. In Jawahar Singh (supra), this very principle was explained in a more

lucid manner by referring to various cases of this Court as well as the

English Courts in the following manner :-

"Learned counsel for the appellant, however, argues that even a wrong decision on a question of law is res judicata. It is true that the correctness or otherwise of a decision is not relevant to determine whether it is res judicata or not. But it cannot be said that all decisions on questions of law are always res judicata. The first exception to the rule that a decision on a question of law is res judicata is this : If a question of law is wrongly decided then it is res judicata only in the case in which the decision is given. But. in a subsequent case arising out of different cause of action, it is not res judicata. This exception was recognized by the Supreme Court in M/s. Anwar Khan Mehboob & Co. v. State of Madhya Pradesh and others, (1966) 2 SCR 40 and in Mathura Prasad Bajoo Jaiswal and others v. Dossibai N.B. Feejeebhoy,(1970) 3 SCR 830. The best illustration of different causes of action is provided by annual assessments by taxing authorities The cause of action in each year is different. therefore, the decision regarding the assessment of one year on a question of law wrongly decided does not act as res judicata in a subsequent assessment based on a different cause of action. This was first recognized by the judicial committee of the Privy Council in Broken Hill Proprietary Company Ltd. v. Municipal Council of Broken Hill, (1926) Appeal Cases 94, Curiously enough, a contrary view was taken by a differently constituted judicial committee of the Privy Council in Hoy stead v. Taxation Commissioner, (1926) Appeal Cases 155("). The conflict between these two decisions was not noticed at first and we find in foot-note (d) on page 182 of 15 Halsbury's Laws of England (Third Edition), both these decisions cited without any mention of the direct conflict between them. In 1960, however, the House of Lords in Society of Medical Officers of Health v. Hope, (1960) Appeal Cases 551, finally laid down that "It is not in the nature of a decision given on one rate or tax that it should settle anything more than the bare issue of that one liability, and that, consequently, it cannot constitute an estoppel when a new issue of liability to a succeeding year's rate-or tax comes up for adjudication". In view of this decision of the House of Lords the Privy Council was compelled to choose between its two former dectsions. In Caffoor v. Colombo Income Tax Commissioners, (1961) Appeal Cases 584, they expressly adopted the principle laid down in the Broken Hill case and disapproved Hoystead v. Federal Taxation Commissioner case.

As pointed out by Spencer Bower and Turner in their books on "Res Judicata" Second Edition, p. 15, a wrong decision on a question. of law may operate as a judicial precedent by virtue of the doctrine of stare decisis..."

23. Applying the aforesaid principles to the present case, we are of the

opinion that the issue decided in the first judgment would not be res

judicata, particularly where the question of law is decided by the

same Judge in respect of the same Cooperative Society differently.

As pointed out above, though the LPA as well as the SLP

against the first judgment were dismissed, they were dismissed in

limine.

24. There is yet another reason for this view. A Division Bench of this

Court in the case of Regional Director Employees State Insurance

Corporation v. Capital Co-op Industries Society Ltd. & Anr., 2001 II

CLR 219, has held that members of the Producers‟ Cooperative

Society are not employees within the meaning of Section 2(ix) of the

Act. Same is the view taken by the Division Bench of the Kerala High

Court in E.S.I. Corporation v. Vattiyoorkavu H.W. Co-operative

Society, 2001 II CLR 219. Justice K.G. Balakrishnan (as he then was),

now the Chief Justice of India, who wrote the judgment, referred to

another judgment and described the legal position in the following

manner :-

"7. In the decision reported in Employees‟ State Insurance Corporation, Hyderabad v. M/s. Laxmi Power Loom Weavers Co-operative and Sales Society Ltd. 1986 LAB IC 370, it was held that the Society gave employment to its members as part of its scheme for self employment and therefore, it was not covered by the E.S.I. Act. It was held that jural relationship of

master and servant cannot be attributed by mere fact that members happened to work for remuneration.

In the instant case, we are of the view that the members of the Society are not workers of the Society and the members of the Society were self employed and they share the profits. It has rightly been held by the Insurance Court that the Society was not covered by the E.S.I. Act. Appeal is accordingly dismissed."

25. In the present case, as already noticed in the beginning, RPFC simply

followed the first judgment dated 11.9.1979 in WP (C) Nos.

323/1972 and 611/1979 and did not discuss with the case on merits.

However, in view of the position of law explained above, we are of

the view that the second judgment dated 25.5.1981 of the learned

Single Judge narrates the legal position correctly as that is the legal

position which is accepted by various courts, including the Division

Bench of this Court which has upheld the judgment of the learned

Single Judge by a speaking order.

26. The result of the aforesaid discussion would be to hold that the

petitioners, who are the members of the Cooperative Society, are not

„employees‟ within the meaning of the PF Act and, therefore, no