Employees??? State Insurance ... vs Sea Hawk Cargo Carriers Pvt. Ltd.
2010 Latest Caselaw 4421 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI


+     FAO 483/1999

                             Reserved on :        13th September, 2009
                          Date of Decision :      21st September, 2010

      EMPLOYEES‟ STATE INSURANCE CORP.          ..... Appellant
                         Through: Mr K.P. Mavi and
                                  Mr Saurabh, Advs.

                    versus

      SEA HAWK CARGO CARRIERS PVT. LTD.
                                                         ..... Respondent
                                Through:    Mr P.R. Sikka, Adv.


%     CORAM:
      HON'BLE MR. JUSTICE SIDDHARTH MRIDUL

      1.       Whether reporters of local papers may be allowed
               to see the judgment?                                Yes.
      2.       To be referred to the Reporter or not?              Yes.
      3.       Whether the judgment should be reported
               in the Digest?                                      Yes.


                             JUDGMENT

SIDDHARTH MRIDUL, J.

1. The present appeal under Section 82 of the Employees‟ State

Insurance Act, 1948 (hereinafter referred to as „the Act‟) assails the

decision/order of the Employees‟ State Insurance Court (in short „ESI

Court‟) dated 17th July, 1999 passed in ESI Case No. 27/1992 under

Section 75 of the Act.

2. The respondent is a company incorporated under the provisions

of the Companies Act, 1956. The respondent-company in terms of an

agreement with the International Airport Authority of India (IAAI) was

engaged in the loading and unloading of cargo at the Indira Gandhi

International Airport on a long term contract basis. The appellant-

Corporation issued notice dated 18th April, 1991 informing the

respondent-company that it is a shop and as such the provisions of the

Act were applicable to it by virtue of Notification No. F.28(2)/88-IL

LAB dated 30th September, 1988 by which all shops were brought

under the purview of the Act w.e.f. 2nd October, 1988. A code number

was also allotted and a direction was issued for compliance with the

provisions of the Act.

3. On receipt of the aforesaid notice the respondent-company vide

its letter dated 2nd May, 1991 brought to the notice of the appellant-

Corporation that the company is only acting as contractor for loading

and unloading of cargo for IAAI and that the services are neither

rendered nor available to any party other than IAAI.

4. The appellant-Corporation thereafter sent another notice dated

15th September, 1991 wherein the respondent was asked to pay the

contribution for the period from 2nd October, 1988 to 30th September

1991. The respondent-company once again reiterated its submissions

and specifically submitted that provisions of the Act were not

applicable to the company. However, the appellant-Corporation vide

letters dated 13th February, 1992 and 20th March, 1992 informed the

respondent-company that the contents of its letters dated 9th May,

1991, 23rd September, 1991 and 27th January, 1992 are not legally

valid and sustainable and as such coverage of the establishment under

the Act as shop is in order.

5. Aggrieved by the said order the respondent-company filed a

petition under Section 75 of the Act for quashing and setting aside of

the order No. D/11-17867 dated 15th January, 1992 issued by the

appellant-Corporation. After completion of the pleadings and on the

basis thereof the following issues were framed by the ESI Court:

"(1) Whether the Plaintiff business is not covered under the ESI Act?

(2) Whether the Plaintiff is entitled to the relief claimed?

(3) Relief."

6. Vide the impugned order dated 17th July, 1999 the ESI Court,

Delhi held that the services being rendered by the respondent-

company to the IAAI is exclusively services to one customer under

contract basis and as such they are not providing or supplying any

services in retail or goods sold in retail to customers. The impugned

order, therefore, further held that the provisions of the Act are not

applicable to the respondent-company.

7. Aggrieved by the order dated 17th July, 1999 the appellant-

Corporation preferred the present appeal on the following substantial

questions of law, namely:

1. Whether the services of loading and unloading of cargo are covered under the meaning of the term „shop‟?

2. Whether the firm/company, which is providing services only to one principal/customer, is not liable to be covered under the provisions of the Act?

3. Whether the term „shop‟ is restricted only to mean a place where goods are sold and purchased on retail basis only?

4. Whether the services provided to one customer i.e. IAAI for consideration by respondent falls within the meaning of the term „shop‟ or not?

8. On behalf of the appellant it was urged by Mr K.P. Mavi,

counsel, that the impugned order misconstrued the judgment of the

Supreme Court in M/s Hindu Jea Band, Jaipur vs. Regional

Director, Employees' State Insurance Corporation, Jaipur

reported as AIR 87 SC 1166. Counsel urged that the word „shop‟ has

to be given a liberal interpretation since the object of the Act is to

give essential security to workers. Counsel further urged that service

of 450 persons employed by the respondent-company was not without

consideration and as such the activity of loading and unloading as

carried out by the respondent-company comes within the meaning and

purview of the term „shop‟. Counsel on behalf of the appellant also

urged that the activity carried out by the respondent-company is a

systematic, economic and commercial activity and that the ESI Court

failed to appreciate that it is the nature of transaction which is

important and not the area or space which determines the concept of

„shop‟.

9. Per contra, it was argued on behalf of the respondent-company

by Mr P.R. Sikka, counsel, that there was no infirmity in the impugned

order since the premises where the activity of loading and unloading

was carried on belonged to the IAAI and not to the respondent-

company. Counsel further urged that the respondent-company

entered into a contract for a particular job with only one principal and

as such the services rendered by them did not fall within the meaning

of „shop‟ as defined in Section 2(27) of the Delhi Shops and

Establishments Act, 1954. Counsel further urged that to fall within the

definition of „shop‟ services had to be rendered to customers and

services rendered to a single customer namely IAAI would not result

in the conclusion that the premises where services were being so

rendered were a „shop‟ within the meaning as defined in the Delhi

Shops and Establishments Act.

10. Before considering the rival submissions made by the parties it

would be necessary to extract the relevant portion of the decisions

relied upon by them in support of their submissions.

1. In Hindu Jea Band (Supra) the Supreme Court observed

as follows:

"3. The first contention urged in support of the petition is that since the petitioner was not selling any goods in the place of its business but was only engaged in arranging for musical performances on occasions such as marriages, etc., its business premises cannot be called a 'shop'. We do not agree with the narrow construction placed by the petitioner on the expression 'shop' which appears in the notification issued under Section 1(5) of the Act which is a beneficent legislation. The word 'shop' has not been defined in the Act. A shop is no doubt an establishment (other than a factory) to which the Act can be extended under Section 1(5) of the Act provided other requirements are satisfied. In Collins English Dictionary the meaning of the word 'shop' is given thus: "(i) a place esp. a small building for the retail sale of goods and services and (ii) a place for the performance of a specified type of work; workshop". It is obvious from the above meaning that a place where services are sold on retail basis is also a shop. It is not disputed that the petitioner has been making available on payment of the stipulated price the services of the members of the group of musicians employed by it on wages. We, therefore, hold that the place where the petitioner has been carrying on business is a shop to which the Act is applicable by virtue of the notification referred to above. The first contention, therefore, fails.

4. We do not find much substance in the second contention too. The fact that the services are rendered by the employees engaged by the petitioner intermittently or during marriages does not entitle the petitioner to claim any exemption from the operation of the Act. The petitioner cannot rely on Sub-section (4) of Section 1 of the Act which refers to factories only in support of its case. We are concerned in this case with a shop and not a factory as defined under Section 2(12) of the Act. Moreover the services of the employees of the petitioner are not confined only to marriages. It cannot also be said that marriages take place only during a specified part of the year. Now-a-days marriages take place throughout the year. The petitioner provides music at several other social functions also which may take place during all seasons. The definition of an 'employee' under the Act has a wider meaning. The employees who worked outside the business premises but those whose duties are connected with the business are also 'employees' within the meaning of Section 2(9)(i) of the Act. (see Nagpur Electric Light & Power Co. Ltd. v. Regional Director Employees‟ State Insurance Corporation, (1967) 3 SCR 92: (AIR 1967 SC 1364)). Even those employees who are paid daily wages or those who are part-time employees are employees for purposes of the Act. Hence we do not find any merit in this special Leave Petition. The petition, therefore, fails and it is dismissed."

2. In Employees State Insurance Corporation vs. R.K.

Swamy & Ors., JT 1993 (6) SC 176, the Supreme Court

in paragraph 11 referred to the case of M/s International

Ore & Fertilizers (India) Pvt. Ltd. vs. Employees‟ State

Insurance Corporation, (1987) 4 SCC 203, with approval:

"The word "shop" is not defined in the Act or in the notification issued by the State Government. According to the Shorter Oxford English Dictionary the expression "shop" means "a house or building where goods are made or prepared for sale and sold". It also means a "place of business" or "place where one's ordinary occupation is carried on". In ordinary parlance a "shop" is a place where the activities connected with the buying and selling of goods are carried on."

The Supreme Court further observed:

"12. In the case of M/s Cochin Shipping Company [(1992) 4 SCC 245] this court took note of the decisions

in the case of Hindu Jea Band and International Ore & fertilizers (India) Pvt. Ltd., and it noted that the appellant was carrying on stevedoring, clearing and forwarding operations. Clearing documents, even it be in the Custom house, was necessary for the export or import of goods. These services formed part of the carriers‟ job. It could not be gainsaid that the appellant was rendering a service to cater to the needs of exporters and importers and others who wanted to carry goods. Therefore, the appellant‟s premises were held to be a shop carrying on a systematic economic or commercial activity.

13. In the case of Regional Provident Fund Commissioner v. Shibu Metal Works [(1965) 2 SCR 72] this court noted that the Employees Provident Fund Act was intended to serve a beneficent purpose. The object which the Act purported to achieve was to require that appropriate provision should be made for employees employed in establishments to which the Act applied. That meant that in construing the material provisions of such an Act if two views were reasonably possible, the courts should prefer to view which helped the achievement of the object. When the words used in an entry were capable of a narrow or a broad construction, each construction being reasonably possible, and it appeared that the broad construction would help the furtherance of the object then it was necessary to prefer that construction. This rule postulated that there was a competition between the constructions, each one of which was reasonably possible. The rule did not justify straining words or putting an unnatural or unreasonable meaning on them just for the purpose of introducing a broader construction.

14. There is no doubt at all that the said Act is beneficent legislation. If, therefore, it is reasonably possible so to construe the word "shop" as to include the activity of an advertising agency within it, that construction must be preferred."

11. The following broad principles emerge from a conspectus of the

decisions cited above:

(a) The Act was intended to serve a beneficent purpose.

(b) The object which the Act purported to achieve was to

require that appropriate provision should be made for

employees employed in establishments to which the Act

applied.

(c) When the words used were capable of a narrow or a broad

construction, and it appeared that the broad construction

would help the furtherance of the object then it was

necessary to prefer that construction.

(d) Premises where systematic economic or commercial

activities were carried on are „shops‟.

(e) „Shop‟ also means a place of business or place where one‟s

ordinary occupation is carried on.

(f) „Shop‟ would include a place where services are sold on a

retail basis.

(g) „Shop‟ connotes a place for the performance of a specified

type of work; workshop.

(h) The definition of an „employee‟ under the Act has a wider

meaning. The employees who worked outside the business

premises but those whose duties are connected with the

business are also „employees‟ within the meaning of the

Act.

12. Now coming to the facts of the instant case it is observed that

the respondent-company employed 450 employees for the purpose of

loading and unloading cargo at the Indira Gandhi International

Airport on a long term contract basis with the IAAI. Thus, the

employees were engaged for the performance of a specified type of

work at the premises of the IAAI. Further, although the employees

were working outside the business premises, their duties were

connected with the business of the respondent-company and

consequently they constitute „employees‟ within the meaning of the

Act. Furthermore, it must be observed that the employees of the

respondent-company were performing the said specified task of

loading and unloading for valuable consideration under the contract

with IAAI. The said activity clearly constituted a systematic economic

and commercial activity. Therefore, the submission of the learned

counsel for the respondent-company that the contract was for a

particular job with only one principal and as such did not constitute

services rendered by them so as to fall within the meaning of „shop‟ is

not tenable. As already seen in the decisions of the Apex Court, the

Act was intended to serve a beneficent purpose i.e. to require

appropriate provision be made for employees. It is also seen that

where the broad construction would help the furtherance of the object

then it was necessary to prefer that construction.

13. In the circumstances, the performance of the services by the

respondent-company, albeit at the premises of the IAAI, would still

constitute a specified type of service at a workshop or a shop. The

premises of the IAAI would nonetheless be business premises where

employees of the respondent-company performed duties connected

with the business of the latter company for consideration.

14. It must also be pointed out that the argument of the respondent-

company that it rendered services to just one customer for

consideration and therefore did not fall within the meaning of „shop‟

as defined under Section 2(27) of the Delhi Shops and Establishments

Act, 1954, does not hold water. This is for the reason that where the

said provision provides for the plural i.e. customers, it must also be

considered, in a liberal sense of the expression, to include the

singular. In other words, a „shop‟ does not cease to be one just

because it caters to the needs of just one client. Employees cannot be

precluded from the benefit of a beneficent legislation by adopting

such a narrow interpretation, particularly in view of the systematic

economic activity being carried on by the respondent-company.

15. In the result, it is held that the services of loading and unloading

of cargo are covered under the meaning of the term „shop‟, even

though the said services are rendered to a single principal. Further,

that the term „shop‟ is not restricted only to mean a place where

goods are sold and purchased on retail basis alone. It includes

premises where employees are employed in connection with the

business of the employer, even though the said premises may belong

to another party.

16. Consequently, the present appeal is allowed and it is held that

the respondent is covered under the provisions of the Act. As such,

the respondent-company is liable to pay the contribution demanded by

the appellant-Corporation in accordance with law. No order as to

costs.

SIDDHARTH MRIDUL, J.

SEPTEMBER 21, 2010 mk