Madras High Court
M/S.Shri T.P.Textiles Private Ltd vs The Deputy Director on 24 March, 2025
C.M.A.(MD).No.657 of 2024
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 24.03.2025
CORAM:
THE HONOURABLE Mrs.JUSTICE R.KALAIMATHI
C.M.A.(MD).No.657 of 2024
and C.M.P.(MD).No.7858 of 2024
M/s.Shri T.P.Textiles Private Ltd.,
359/W-6, Srivilliputhur Road,
R.Reddiapatti-626 136,
Through its Executive Director. … Appellant / Petitioner
vs.
1.The Deputy Director,
Sub-Regional Office,
Employees' State Insurance Corporation,
''Panchdeep Bhavan'' 4th Main Road,
K.K.Nagar, Madurai-625 020.
2.Director & Additional Commissioner,
Sub-Regional Office,
Employees' State Insurance Corporation,
''Panchdeep Bhavan'' 4th Main Road,
K.K.Nagar, Madurai-625 020. …Respondents /
Respondents
PRAYER: Civil Miscellaneous Appeal is filed under Section 82(2) of
Employees' State Insurance Act against the Award of the Employees'
State Insurance Court, [The Presiding Officer, Labour Court], Madurai,
dated 02.11.2023 passed in E.S.I.[O.P] No.46 of 2013 dismissing the
same.
For Appellant : Mr. S.Seenivasagam
For Respondents : Mr.I.Pinoy Gosh
JUDGMENT
This Civil Miscellaneous Appeal has been preferred by the
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appellant/T.P.Textiles, challenging the order dated 02.11.2023 passed
by the Employees' State Insurance Court, Madurai made in
E.S.I.O.P.No.46 of 2013.
2. Heard Mr.S.Seenivasagam learned counsel for the appellant
and Mr.I.Pinoy Gosh, learned counsel appearing for the respondents
1 and 2 herein and perused the relevant records.
3. The appellant/Textiles namely T.P.Textiles Pvt.Ltd., is a
factory producing textile yarn and is attracted by Factories Act. The
appellant unit is governed under the Employees' State Insurance
Act, 1948 and they are paying contributions in accordance with
Section 40 of the above said Act r/w. Regulations 29 and 31 of the
ESI Act (General Regulations), 1950 framed under the Act. The
appellant/petitioner received notice through Form C-18 dated
09.01.2012 from the ESI Corporation alleging that the appellant
Factory has not paid the contribution for conversion charges for the
period from 2006-07 to 2009-10 and personal hearing was afforded
and attended by the Advocate and by the Executive Director of the
appellant Company on 23.02.2012, 12.03.2012, 18.04.2012,
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02.05.2012 and 03.05.2012. Thereafter, the Deputy Director upon
consideration of the records produced by the employer and the
written objections given by the employer, fixed the contribution at Rs.
57,718/- under Section 45A of the ESI Act, 1948.
4. Aggrieved the employer preferred appeal before the
Appellate Authority namely, the Director and Additional
Commissioner. Upon hearing the employer and considering the
objections raised in the counter, passed an order to pay Rs.
1,19,436/- instead of Rs.59,718/- assessed by the Authorised Officer
in Section 45A order dated 24.07.2012.
5. The learned counsel for the appellant would vehemently
contend that the conversion charges is reeling charges paid to job
work units. The infrastructure available in their Mill was insufficient to
carry out the reeling work. It is not their duty to verify whether the job
work parties are covered under ESI or not. Among the 18 job work
units, only 4 units have been covered under the ESI Act. He would
further contend that the premises of the job work unit will not fall
under the definition of factory. Social Security Officer has opined in
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the inspection report that no contribution was payable on job work
charges and conversion charges. It is his further argument that the
job work was done without supervision of the employer.
6. Whereas the learned counsel for the respondents would
vehemently contend that out of 18 job work units, 14 are not covered
under ESI Act and principal employer has the power to supervise
their work and therefore, the orders passed by the Authorities are
valid in the eye of law and the ESI Court has also affirmed the order
of the Appellate Authority.
7. Upon inspection, the Social Security Officer has opined in
the inspection report that no contribution was payable on job work
charges and conversion charges. He has also opined that job work
was done without supervision of the principal employer.
8. During the enquiry before both the Authorities namely,
Deputy Director and the Additional Commissioner, principles of
natural justice have duly been followed.
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9. However, it is pertinent to note that in the written objection, it
is mentioned by the employer that they are not interested to produce
the records.
10. The observations made by the Hon'ble Supreme Court in
Silver Jubilee Tailoring House v. Chief Inspector of Shops and
Establishments and another reported in AIR 1974 SC 37. As
regards supervision in control of the job work, the Hon'ble Supreme
Court has opined that ''It is in its application to skilled and particularly
professional work that control test in its traditional form has really broken
down.'' It is, therefore, not surprising that in recent years the control test as
traditionally formulated has not been treated as an exclusive test. Control
is obviously an important factor and in many cases it may still be the
decisive factor. But it is wrong to say that in every case it is decisive.
11. In Poonam Easwardas, Proprietrix, M/s.Kaleel
Corporation, 27, Mukkur Nallamuthu Street, Chennai-600 001 vs.
Employees' State Insurance Corporation, rep.by the Regional
Director, 143, Sterling Road, Nungambakkam, Chennai-600 034
reported in 2003-1-LW-685, the conclusion of learned Single Judge
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to the effect that the employer is liable to pay contribution on the
amounts paid to the persons who did tailoring work though such
work was done outside the premises of the appellant by using tools
which did not belong to the appellant was affirmed by the Division
Bench of this Court and the appeal filed by the employer was
dismissed.
12. The law is well settled that a person can be a servant of
more than one employer. The servant need not be under the
exclusive control of one master.
13. In this case, the work of reeling has been outsourced. From
the records, it is made clear that the appellant provided machineries
at the premises of reeling job work. Through the said machineries,
the reeling work got completed and the finished products are
obtained. This Court is of the view that in reeling works, question of
exercising control would not play a significant role because unlike in
tailoring work, if the stitching is not done properly, then the proprietor
of the garments unit cannot do any successful business and in that
situation supervision and control plays a vital role.
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14. As per Section 2(12) of ESI Act, ''Factory'' means any
premises including the precincts thereof whereon ten or more
persons are employed or were employed on any day of the
preceding twelve months, and in any part of which a manufacturing
process is being carried on or is ordinarily so carried on, but does
not include a mine subject to the operation of the Mines Act, 1952
(35 of 1952) or a railway running shed.''
15. It is relevant to note that the employer has entered into an
agreement of job work with various job work parties, some 18
parties, among them, only four units have ESI registration numbers.
Therefore, the arguments of the learned counsel for the appellant to
the effect that the job work parties have registered under Employees'
State Insurance Act does not hold water and untenable.
16. The job work parties do their work outside the premises of
the principal employer. When the job work units are not covered
under Employees' State Insurance Act, then the principal employer
is duty bound to pay compensation for them as per the conversion
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charges paid by the principal employer to the job work units. Levying
of contribution on conversion charges by the Employees' State
Insurance Corporation throughout the country is uniform as
regulated by the instruction dated 25.10.2007. As per the
instructions in respect of the cases, where the job work is done
outside the factory premises and such job work units do not have
separate and independent ESI code numbers but supervision is
exercised by the principal employer the relevant workers doing the
job work are to be covered as employees and contribution has to be
charged on conversion charges.
17. This Court is of the considered view that in this case,
reeling process is concerned, exercise of supervision does not play a
significant role and claim by the employer that he does not have any
supervision or control over the worker cannot be taken as a strong
defence, as the nature of work is a simple one. The conversion work
is the part of manufacturing process. The job work units also doing
manufacturing process namely reeling, doubling of the yarn spinning
and bleaching of yarn. They also involve in manufacturing process.
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18. The officer has taken 25% of the conversion charges as
wages. But, the Appellate Authority has assigned the reasons to the
effect that reeling and doubling the yarn are labour operations 50%
can be treated as wages in the business of any fabrications provided
by the appellant and remaining 50% to be sent to him for cost of
power, cost of equipment and usage and profit margin.
19. The legislation in ESI Act is a labour welfare legislation and
the contribution that are being paid to the coffins of the ESI
Corporation will ultimately go to the workers to maintain their health
and this Court is of the firm view that impugned orders of the learned
ESI Court does not suffer from any perversity or infirmity.
20. Based on the records of the employer, the finding of the
Appellate Authority, ultimately no substantial question of law arises.
21. Based on the aforesaid discussions and observations, this
Civil Miscellaneous Appeal stands dismissed. The employer is
permitted to pay the contribution within a period of four weeks from
the date of receipt of a copy of this judgment as the matter pertains
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to the year 2012. No costs. Consequently connected miscellaneous
petition is closed.
Index : Yes/No 24.03.2025
Speaking / Non-speaking order
ssn
To:
1.The Deputy Director,
Sub-Regional Office,
Employees' State Insurance Corporation,
''Panchdeep Bhavan'' 4th Main Road,
K.K.Nagar, Madurai-625 020.
2.Director & Additional Commissioner,
Sub-Regional Office,
Employees' State Insurance Corporation,
''Panchdeep Bhavan'' 4th Main Road,
K.K.Nagar, Madurai-625 020.
3. The Section Officer,
V.R.Section,
High Court of Madras,
Chennai.
R.KALAIMATHI, J.,
ssn
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and
24.03.2025
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