Madras High Court

Assistant Regional Director vs Premier Match Industries on 4 March, 2021

                                                                                C.M.A.No.1565 of 2018

                                   IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                  DATED : 04.03.2021

                                                       CORAM

                            THE HONOURABLE MR.JUSTICE S.M.SUBRAMANIAM

                                                C.M.A.No.1565 of 2018
                                                         and
                                                C.M.P.No.12400 of 2018

                     Assistant Regional Director,
                     ESI Corporation,
                     39/57, Three Roads,
                     Salem – 636 009.                                               ..Appellant

                                                           Vs.
                     1.Premier Match Industries,
                       Rep.by its Proprietor,
                       J.P.Aswath Narayanan,
                       59R, Bye Pass Road,
                       Dharmapuri – 636 701.

                     2.G.Padmanabhan                                                ..Respondents

                     Prayer : Civil Miscellaneous Appeal filed under Section 82 of the ESI
                     Act, against the order passed in EIOP.No.4 of 2013 dated 19.12.2017,
                     on the file of the Employees Insurance Court (Labour Court, Salem),
                     Salem.




                                      For Appellant    :         Mr.SP.Srinivasan

                     1/8

https://www.mhc.tn.gov.in/judis/
                                                                               C.M.A.No.1565 of 2018



                                     For Respondents :        R1 – Mr.M.R.Raghavan
                                                              R2 – No appearance



                                                  JUDGMENT

The order and judgment dated 19.12.2017 passed in E.I.O.P.No.4

of 2013 is under challenge in the present Civil Miscellaneous Appeal.

2. The Substantial Question of law mainly raised by the appellant

is that whether the employees engaged by Senthil Scoring Industries and

Priya Slitters are the employees of Respondent under ESI Act and

whether they fall within the definition of “employees” as defined under

Section 2(9) of the ESI Act.

3. Section 2(9) of the ESI Act defines “Employee”. In order to

establish, records must be available. The officials of the appellant

Corporation conducted an inspection of the records of the factory on

23.10.2007. The Inspector, who conducted the inspection though

directed the Management of the company to produce records, the

learned counsel for the appellant states that they have not produced any

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records. Therefore, they have verified the Attendance, Wage Register,

Books of Accounts and arrived a conclusion that the two companies are

one and the same. The two companies are administered by the family

members and accordingly, assessed the liability and fixed the

contribution to be payable.

4. The learned counsel for the appellant made a submission that

the Appellate Court has not considered any of these aspects, the

appellant could able to establish through Ex.A18 and relied on the

deposition of P.W.2 and P.W.1. Relying on the said evidences, it is

contended that the Appellate Court failed to consider the deposition as

well as the documents.

5. The learned counsel appearing on behalf of the respondent

company mainly contended that no documents are relied on by the

appellant Corporation officials to establish that the two companies are

one and the same. Though the two companies are different and distinct,

the Directors of the Companies are relatives. It is an admitted fact that

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the units are separate and the two units are functioning separately. The

appellant and terms of services are also different. However, those factors

were not established with reference to the records available. When two

companies are distinct and different, it is to be established with records

that the Management is one and the same. However, merely on the basis

that the Directors are the relatives, the Appellant Corporation arrived a

conclusion that the Management is one and the same. Even in cases,

where some of the relatives are Directors, the Management may be

different and in the present case, the units are functioning separately.

Therefore, there must be sufficient records to establish that all the

employees are appointed and working under the same Management.

However, the appellant could not able to establish such factor before the

Court and perusal of the order passed under Section 45-A also reveals

that there is no materials to establish the same.

6. In view of the fact that the units are functioning separately, that

does not indicate that the Management is one and the same. As per the

respondent, one unit is no way connected with other unit and mere fact

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that the Directors are relatives, are insufficient to arrive a conclusion

that the ESI Contribution to be paid jointly.

7. In view of the fact that the order passed under Section 45-A of

the Act is silent, the Appellate Court adjudicated these issues with

reference to the documents and evidences produced. The findings of the

Appellate Court reads as under:

“20..........consideration of facts and pleadings and other material evidence in this case this Court is of the view that the impugned order only states about the 'distant' of the 1st respondent has not explained the meaning for this word 'distant'. But the contention of the petitioners that those 10 outside firms were considered not coming under the supervision control of the petitioner industry only on the ground of 'distant' virtually the meaning given by the petitioner is those 10 firms were excluded on the ground of the distance which is also not disputed by the 1st respondent. However, the two firms namely Senthil Scoring Firm and Priya Slitters were brought within the purview of the petitioner's industry on the ground of close proximity situated within the small distance. It is not the object or purport of the

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ESI Act nor any notification, circular makes it mandatory to the 1st respondent to bring those outside firms if they are doing job works which are situated near to the principal employer is to be treated as immediate employer. Hence the impugned order is vague and it is not based upon material evidence and no acceptable reason was given by the 1st respondent for not excluding these two firms as they are allegedly not distant companies. Therefore in fine the 1st respondent before passing orders has not found the Senthil Scoring firm and Priya Slitters firm are situated within the premises of the petitioner factory nor considered the fact about the real employer, nor passed the order after satisfying the ingredients of employer and employee relationship but merely passed the order on the ground that those two firms are just situated near to the petitioner company.

Hence the petitioner cannot be considered as a principal employer nor immediate employer in respect of Senthil Scoring firm and Priya Slitters firm. Hence they are independent outside firms with separate registration certificates and having permanent income tax account number. Hence amount paid to them will not come under

answered accordingly.”

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8. This Court do not find any perversity as such in respect of the

findings of the Appellate Court as the appellant / officials could not able

to establish or substantiate the reasons cited in the 45A order and the

45A order did not contain the materials or the informations for the

purpose of imposing contribution in the manner done by the authorities.

Thus, the order and judgment dated 19.12.2017 passed in E.I.O.P.No.4

of 2013 stands confirmed and the Civil Miscellaneous Appeal in

C.M.A.No.1565 of 2018 is dismissed. However, the authorities of the

appellant / Corporation is at liberty to conduct fresh inspection and if the

materials are available, then they are empowered to proceed in