Madras High Court
The Employees'S State Insurance vs Adisankara Spinning Mills Pvt. Ltd on 4 March, 2025
C.M.A.(MD)No.959 of 2023
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
Dated : 04.03.2025
CORAM:
THE HONOURABLE MRS.JUSTICE L.VICTORIA GOWRI
C.M.A.(MD)No.959 of 2023
The Employees's State Insurance,
(Sub-Regional Office), 2nd West Street,
K.K.Nagar, Madurai – 625 020,
represented by its Deputy Director ... Appellant
Vs.
Adisankara Spinning Mills Pvt. Ltd.,
Kottaiyur, Agaram Village,
Thadicombu, Dindigul District,
represented by its Executive Director ... Respondent
PRAYER : Civil Miscellaneous Appeal filed under Section 82 of the ESI Act,
1948, to set aside the judgment and decree dated 22.01.2022, passed in
E.S.I.O.P.No.26 of 2012 on the file of the ESI Court (Labour Court), Madurai.
For Appellant : Mr.I.Pinaygash
For Respondent : Mr.K.Hema Karthikeyan
JUDGMENT
This Civil Miscellaneous Appeal has been filed by the appellant,
challenging the judgment and decree passed by the ESI Court (Labour Court),
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Madurai, in E.S.I.O.P.No.26 of 2012 dated 22.01.2022.
2.For the sake of convenience, the parties are arrayed herein as per the
ranking in E.S.I.O.P.No.26 of 2012.
3.The petitioner therein was the Adi Sankara Spinning Mills Private
Limited, who is the respondent herein. The respondent therein is the appellant
herein. The said E.S.I.O.P. was laid by Adisankara Spinning Mills Pvt. Ltd.,
challenging the order passed by the Sub Regional Office (Madurai), Employees'
State Insurance Corporation, under Section 45A of the ESI Act, 1948, as
against the petitioner.
4.The crux of the order was with respect to directing Adisankara
Spinning Mills Pvt. Ltd., E.S.I. Code No.57-00-00-047751-000-0699, situated
at Dindigul, covered under Employees's State Insurance Act, 1948, were
required to pay the contribution in accordance with Section 40 of the said Act
read with Regulations 29 and 31 of the Employees's State Insurance (General)
Regulations, 1950, framed under the Act. Since the employer failed to pay
contribution as required by law, notice was issued to the Principal employer by
the ESI Office, vide letter No.57-00-00-047768-000-0106, dated 30.12.2009,
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to show cause notice within 15 days as to why contribution of Rs.6,54,277/- for
the period from 04.02.2006 to 30.09.2007, be not recovered from the employer.
ESI Code with respect to Adisankara Spinning Mills (Knitting Division) is
57-47768-106. The Deputy Director of the Sub Regional Office in the aforesaid
order made it clear that Adisankara Spinning Mills Pvt. Ltd., and Adisankara
Spinning Mills (Knitting Division) having availed separate ESI Codes and
separate factory registration and licence number, i.e., Adisankara Spinning
Mills (Knitting Division) not being a party in the case before this Court in
W.P.No.24875 of 2007, dated 08.07.2008, cannot claim to extent the benefit of
the said order to the Knitting Division as well. It was also mentioned that the
registered office of Adisankara Spinning Mills Pvt. Ltd., is situated at
Ottakanpatti, Vedachendur, whereas the registered office, Knitting Division is
situated at Tiruppur. Likewise, the unit of Adisankara Spinning Mills Pvt. Ltd.,
was situated at Vedachendur and the unit of Adisankara Spinning Mills
(Knitting Division) is at Kottaiyur, Agaram Village, Thadicombu, Dindigul
District, which is 6 km away from Spinning Mills. On that basis, it was made
clear in the aforesaid order under Section 47A of the ESI Act, the Court
judgment dated 08.07.2008, was not applicable to the Knitting Division of the
Adisankara Spinning Mills, which has a separate ESI Code number.
Challenging the same, ESI OP was laid by the Adisankara Spinning Mills
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before the Labour Court, Madurai.
5.No witness was examined on either side. However, Ex.P1 to Ex.P11
were marked by the Labour Court. On the basis of the arguments on either
parties and materials available on record, the Labour Court came to conclude
that M/s.Adisankara Spinning Mills (Knitting Division) is not separate entity
and the same is a branch unit. The impugned order under Section 45A dated
20.12.2012 is liable to be set aside. The petitioner is entitled to get the benefit
of order passed by this Court dated 08.07.2008. Challenging the same, ESI is
before me.
6.The learned counsel appearing for the appellant categorically submitted
that since M/s.Adisankara Spinning Mills and M/s.Adisankara Spinning Mills
(Knitting Division) possess separate ESI Code and separate factory licence and
factum that the units of Adisankara Spinning Mills as well as Knitting Division
are also separately situated in different destinations, the learned Labour Court
ought not to have negated that the same are separate entities and as such, the
Knitting Division not having preferred any Writ Petition before this Court,
challenging the order under Section 45A of the Act, claiming contribution
under ESI Act for the period from 04.02.2006 to 30.09.2007, cannot claim the
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benefit of the clarification order dated 08.07.2008, passed by this Court under
the cover of the order passed in favour of Adisankara Spinning Mills.
For which, he relied upon two orders passed by this Court. He pointed
out that this Court in the case of Brakes India Ltd., v. Employees's Provident
Fund Organization reported in 2015 (1) CWC 376, has dealt with similar case
wherein this Court has categorically held that “when the Contractor was
allotted with separate EPF Numbers for two different works registered with the
PF Department with independent code number, even after work undergone by
the same Contractor, the same has to be treated as an independent employer
for the purpose of benefit under the welfare Act”. He further pointed that in
W.P.No.28387 of 2017 dated 01.03.2024, this Court has dealt with case of
Indian Oil Corporation v. Assistant Provident Fund Commissioner and
another, wherein this Court has held that “even if the single Contractor is
allotted with two different PF Allotment numbers for two different works, in
that case, on the basis of independent code number, the benefit of legislation
has to be extended to the employees of two different registration separately”
and on that basis, he categorically contended that the aforesaid judgment will
squarely cover the instant lis in hand. Though the Knitting Unit claim to have a
branch of Adisankara Spinning Mills, having available separate ESI codes and
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factory licence, the same has to be dealt with separately and hence, the Knitting
Division cannot claim the benefit of the order passed by this Court dated
08.07.2008 and the learned Labour Court miserably failed in appreciating the
same, by considering the same as single entity and pressed for setting aside the
order passed by the learned Labour Court.
7.Per contra the learned counsel appearing for the respondents
categorically submitted that the arguments put forth by the learned counsel for
the appellant is not at all sustainable because the learned Labour Court has well
appreciated the facts available on the basis of documents before the learned
Labour Court and only relying upon the judgments of two cases dealt with by
the Hon'ble Division Bench of this Court and another judgment of the Hon'ble
Kerala High Court, the learned Labour Court has rightly came to a conclusion
that Adisankara Spinning Mills (Knitting Division) is also covered under the
order passed by this Court on 08.07.2008 in favour of Adisankara Spinning
Mills Pvt. Ltd.
8.Heard the learned counsel for the appellant, the learned counsel for the
respondent and carefully perused the materials available on record.
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9.Though the learned counsel for the appellant forcefully tried to
convince this Court that M/s.Adisankara Spinning Mills and M/s.Adisankara
Spinning Mills (Knitting Division) are separate entities, since both posses
separate factory licences and separate ESI Codes, I am of the considered view
that dictum of the Hon'ble Division Bench of this Court in the case of the
Management of Antiseptic v. A.Gangadharan and the Government of India
reported in (1984) 2 LLJ 232, cannot be brushed aside and the relevant portion
of the same is extracted as follows:-
“8. The following factual features are admitted : (i) Both the
press and the publication are owned by the same firm; (ii) the control
and supervision of both the units are by one and the same agency, may
be by different partners; (iii) regarding finance, the bank account is
one; and the tax assessments are common; (iv) in the press, no outside
job is undertaken; (v) only to cater to the needs of the publication and
to serve its cause, the press was started; (vi) the maintenance of the
press as well as the publication is from and out of the subscription and
advertisement revenue from the publication; and (vii) the press cannot
be carried on but for the publication and the needs of the publication
with regard to printing are being fulfilled by the press. In our view, as
held by the learned judge, these factual features clinchingly establish
the financial, managerial and functional integrality between the two
units and they constitute one integrated whole.
9. Coming to the factors that have been mainly taken note of by
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the first respondent to hold that the press and the publication are
independent units, they are; the location of the two units; their
registration under different status (the Press, under the Factories Act
and the Publication, under the Tamil Nadu Shops and Establishments
Act); and the existence of two separate unions, one for the employees
of the press and one for the emloyees of the publication. It is also urged
before us that the employees of the two units stand on separate muster
rolls; the wage structures are different; and there is no element of
transferability from one unit to another. As rightly held by the learned
judge, these features are of much consequence and the major features
with regard to financial, managerial, and functional integrality besides
common ownership having been established, they clinch the issue and
we have to hold that the first respondent has not appreciated and
applied the correct principles to the admitted facts and has not drawn
the invariable conclusion in law. The purpose must be to find out the
true relation between the two units, as to whether they constitute one
integral whole. Unless there are other clinching factual features which
completely militate against this integrality; financially, managerially
and functionally, besides common ownership, the conclusion is
inescapable that the two units constitute one and the same
establishment. The first respondent did find as a matter of fact that
there is financial, managerial and functional integrality between the
two units. Yet, the first respondent chose to ignore these crucial
features, taking note features, which are not very germane on the facts
of the present case. The other features taken note of by the first
respondent are likely to be there, even when the same establishment is
to man two or more parts of its own and, on the facts of the present
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case, they are not decisive.”
10.The Hon'ble Kerala High Court in the case of Eddy Current Controls
(India) Ltd., v. R.Provident Fund Commission and Another reported in
(1994) 1 LLJ 522, has dealt with the similar case and the relevant portion of the
same is extracted as follows:-
“16........A broad criteria emerging out of the above
conspectus of case law are: In order to hold that different parts,
units, branches and so forth are merely constituents of one
establishment, the salient features, which are enumerated below,
must be satisfied; this is, however, by entering a caveat that no hard
and fast rule could be laid down as to how many of the following
shall have to be satisfied - in other words, each case has to be
considered in the light of its own circumstances as to whether it is a
new establishment or a branch, part or constituent of the old
establishment. There cannot however be a straight-jacket formula:
(1) The unity of ownership, management and control, unity of
employment and conditions of service, functional integrality and
general unity of purpose.
(2) The connection between the two activities is not by itself
sufficient to justify an answer one way or the other, but the
employer's own conduct in mixing up or not mixing up the capital,
staff and management may often provide a certain answer.
(3) The real purpose of the tests is to find out the true relationship
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between the two parts, branches, units, etc. If they constitute one
integrated whole, we say that the establishment is one. If it is to the
contrary, then each unit is a separate one.
(4) In one case the unity of ownership, management and control may
be the important test; in another case functional integrality or
general unity may be the important test; and in still another case the
important test may be the unity of employment.
(5) Many enterprises may have functional integrality between
factories which are separately owned; some may be integrated in
part with units or factories having the same ownership and in part
with factories or plants which are independently owned. In the midst
of all these complexities, it may be difficult to discover the real
thread of unity.
17. In the light of the above principles the Andhra Pradesh
High Court considered the facts of that case and came to the
conclusion that on the facts of that case Visakha Cement Works is a
branch of the petitioner-company, and, therefore, cannot claim the
benefit of exemption as postulated under Section 16 of the
Employees' Provident Funds Act for the infancy benefit. It was
further held that the fact that Visakha Cement Works has been
registered separately, licensed separately, granted interest-free
sales tax loans as well as a rebate of 25% in power tariff cannot be
reckoned as contributing factors to be taken as guidelines in finding
whether the unit is a separate establishment or a branch of the main
unit.
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18. We are also of the view that the mere fact that separate
licences were obtained under the Factories Act for the two factories
in question is not a relevant consideration at all. Applying the
principles deducible from the aforesaid decisions to the facts of this
case, we are clearly of the view that the Coimbatore factory is only
a branch of the establishment at Chalakudy, for the reasons which
we have already mentioned.”
11.Fully fortified by the judgments extracted supra, I am of the
considered view that Adisankara Spinning Mills Pvt. Ltd., and Adisankara
Spinning Mills (Knitting Division) has satisfied the salient features enumerated
of the judgment reported in (1984) 2 LLJ 232. No doubt, both the factories are
managed by a single owner, Single Board of Directors, Single GST, single pan
number and if both the units are tested under parameteres of judgment reported
in (1984) 2 LLJ 232, the same will be squarely covered by the said judgment.
The fact in issue in the present case is that several factories filed batch of Writ
Petitions in W.P.Nos.24875 of 2007, batch, which was dealt together by this
Court in which, all those factories sought exemption from the applicability of
ESI Act, which was outrightly dismissed by this Court, however, when
clarification was sought for by the aforesaid entities before this Court, this
Court by order dated 08.07.2008, made it clear that those institutions would be
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covered under ESI Act and the contributions are liable to be paid by the entities
from the date of Writ Petition, i.e., 03.10.2007. It is only on that premise,
Adisankara Spinning Mills, which is one of the writ petitioner in the aforesaid
branch is entitled to pay contribution from 03.10.2007, claiming the same
benefit however, excluding the branch unit of Adisankara Spinning Mills
(Knitting Division), the impugned order came to be passed by the Deputy
Director of Sub Regional Office, ESI, Madurai, under Section 45A of the ESI
Act, 1948. The same was rightly set aside, on the basis of the judgments of the
Hon'ble Division Bench extracted supra. Hence, I am not inclined to interfere
with the order of the learned Labour Court.
12.Accordingly, the Civil Miscellaneous Appeal is dismissed. There shall
be no order as to costs.
04.03.2025
NCC : Yes / No
Index : Yes / No
Internet : Yes
Mrn
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To
1.The ESI Judge, ESI Court (Labour Court), Madurai.
2.The Section Officer,
V.R. Section,
Madurai Bench of Madras High Court,
Madurai.
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L.VICTORIA GOWRI, J.
Mrn
04.03.2025
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