Delhi High Court
Employees??? State Insurance ... vs M/S. Intercraft Limited & Another on 13 September, 2011
Author: Valmiki J. Mehta
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ FAO No.213/1999
% 13th September, 2011
EMPLOYEES' STATE INSURANCE CORPORATION ...... Appellant
Through: Mr. K.P.Mavi, Adv.
VERSUS
M/S. INTERCRAFT LIMITED & ANOTHER ...... Respondents
Through: None.
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
1. Whether the Reporters of local papers 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?
VALMIKI J. MEHTA, J (ORAL)
1. The challenge by means of this First Appeal under Section
82 of the Employees State Insurance Act, 1948 (hereinafter ESI Act) is
to the impugned order of the ESI Court dated 2.1.1999 quashing the
demand against the petitioners therein, and the respondent no.1 herein
(hereinafter referred to as respondent), issued by the appellant/ESIC for
the period from 1979 to 1983.
2. The appellant passed an order dated 27.7.1988 under
Section 45-A of the ESI Act calling upon the petitioner to pay
contribution amounting to Rs.1,34,216.45 along with interest. The
respondent herein challenged this demand before the ESI Court and
FAO No.213/1999 Page 1 of 5
stated that the payments which are shown in the balance sheet are not
towards wages/salaries but are, in fact, towards the outsourcing
charges which include not only wages but also tailoring charges,
packing charges and pressing and washing charges inasmuch as the
respondent-company used to outsource the manufacturing work to third
parties and a lump-sum amount was paid to the companies from where
the work of manufacturing of garments was got done. It was claimed
that the respondent-company could not carry out any manufacture
because there were no machines in the factory after around 1979 when
even the sewing machines were disposed of. It was further contended
by the respondent-company that a fire had broken out in its office
resulting in destruction of books of account pertaining to the period
from January, 1979 to January, 1982 and with respect to this, fire
department was intimated and an FIR was also lodged. Pursuant to the
notice issued by the appellant, the respondent besides filing the report
given to the fire department and also the FIR, filed the balance sheet of
the relevant years in its possession. The appellant had contended as
the respondent before ESI Court that it was upon the respondent to
show that the payments which are shown to have been made and
reflected in the balance sheet are not towards wages.
3. The issue therefore before the ESI Court was that whether
the payments which were as reflected in the balance sheet was towards
job work got done from a third party, i.e. whether the manufacturing
work was outsourced and the payments as shown in the Balance Sheets
FAO No.213/1999 Page 2 of 5
were not made towards the wages/salaries. In this regard, the ESI Court
in the impugned order has held as under:-
"9. According to the petitioner, he was getting the
work for tailoring, washing and packing from other
establishments and was not doing any work in is
factory. The question is whether the employees
employed by the contractor were working under the
supervision of the petitioner or were working
independently of the petitioner. Obviously, the
contract work was being done by the remaining
establishments of their own as per the orders given to
them by the petitioner-company and the payment
made to them included costs of raw material to be
used b y them, wages to be paid to the employees and
over-head expenses and profits to be earned by the
contractor-employer. Hence these payments cannot e
considered as wages under the definition of Section
2(9) of the ESI Act, since these workers were not
working under the establishment at the factory
premises of the petitioner, or under his supervision,
either 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. These employers who
were working on contract cannot be considered as
agents of the petitioner on work which is ordinarily part
of the work of the factory. Hence in my opinion the
amount considered as wages on the balance sheet on
the remaining ledgers having been taken as per the
report of the Fire Officer Ex.PW-1/1 and DD entry
Ex.PW-2/1 proved on the record thus goes to show that
the order imposing and considering the amounts shown
in the balance sheet as wages including packing
charges, tailoring charges, pressing and washing
charges and repairs for machines cannot be considered
as wages within the meaning of Sec.2(9) of the ESI Act.
No witness had been examined by the respondent who
has worked as Insurance Inspector for the period
between 1979 to 1983, who carried out any inspection
or proved his report. The report proved is of
subsequent period, of 1986 to 1987 and the Inspectors
who have been examined remained as Inspector of the
FAO No.213/1999 Page 3 of 5
area for 198 for two months and another Inspector for
the area from August, 1986 to December, 198. No
witness has been examined for the period 1979 to
1983. Hence I the absence of any inspection report
proved on the record on the basis of which the charges
were shown as wages has been proved on the record
by the respondent-corporation, and are not covered
within the definition of Sec.2(9) of a the ESI Act.
Hence the impugned demand raised by the
respondent-corporation is illegal and without any
jurisdiction. This issue is accordingly decided in favour
of the petitioner and against the respondent."
(underlining added).
4. I do not find any fault whatsoever in the impugned order
because once it is found as a matter of fact that the respondent-
company had no machinery, obviously it could not do any
manufacturing work and therefore the total payments which have been
made for the manufacturing of garments got done from third parties
would include not only amounts towards wages, but it would include
other charges such as packing charges, pressing and washing charges,
profit margins of the company from whom the manufacturing was got
done and so on. The ESI Court has therefore rightly held that the
payments made by the respondent cannot be said to be exclusively
towards wages/salaries.
5. Learned counsel for the appellant argued that as per the
provisions of Sections 102 to 106 of the Evidence Act, 1872 onus of
proof was on the respondent, and once onus of proof was on the
respondent, it should have been held that this onus of proof was not
discharged and the payments as reflected in the balance sheet should
be taken as wages. In my opinion, the issue of onus of proof pales into
FAO No.213/1999 Page 4 of 5
insignificance as per settled law once both the parties lead evidence. In
this case both the parties have led evidence. Once evidence is led by
both the parties and the Court considers the evidence along with the
respective stands of the parties, and believes one case or the other, the
issue no longer remains of onus of proof, and on the other hand, it
means that the onus of proof has been discharged as per the evidence
and the stand of the respondent which has been believed by the ESI
Court. It is not disputed by counsel for the respondent that as per the
balance sheet filed of the relevant year there is no entry with respect to
machinery. If that be so no manufacturing activities were being carried
out by the respondent and therefore the payment as per the evidence
led by the respondent has rightly been treated as payment done for job
work which was outsourced. No substantial question of law as required
under Section 82 thus arises.
6. In view of the above, I do not find any merit in the appeal
which is therefore dismissed leaving the parties to bear their own costs.
SEPTEMBER 13, 2011 VALMIKI J. MEHTA, J.
ak
