2010(4) ALL MR 115
IN THE HIGH COURT OF JUDICATURE AT BOMBAY(PANAJI BENCH)

N.A. BRITTO, J.

Regional Director, Employees State Insurance Corporation Vs. M/S. Kohinoor

Appeal Under E.S.I. No.1 of 2009

9th April, 2010

Petitioner Counsel: Mrs. A. A. AGNI
Respondent Counsel: Shri. V. PALEKAR

(A) Employees' State Insurance Act (1948), S.1(5) - E.S.I. Act must receive a liberal construction so as to promote its objects. (2009)9 SCC 61 - Rel. on. (Para 11)

(B) Employees' State Insurance Act (1948), S.2(g) - Word "power" - It includes any other form of energy which must be transmitted mechanically - Use of LGP satisfied the definition of power as it is mechanically transmitted and is not something generated by human or animal agency - Held, E.S.I. Act would apply to such establishments. 2010(1) ALL MR 968 (S.C.) - Rel. on. (Para 14)

Cases Cited:
E.S.I.C. Vs. M/s. Harrison Malayalam Pvt. Ltd., AIR 1993 SC 2655 [Para 10]
Bombay Anand Bhavan Restaurant Vs. Deputy Director, Employees' State Insurance Corporation, 2010(1) ALL MR 968 (S.C.)=(2009)9 SCC 61 [Para 11,14,15]
The Usha Prints India Private Ltd. Vs. The Employees State Insurance Corporation, AIR 1964 Bombay 94 [Para 13]


JUDGMENT

JUDGMENT :- Heard.

2. Admit on the following substantial question of law :-

"(c) Whether the impugned judgment of the E.S.I. Court is perverse in as much as it ignores the evidence on record pertaining to use of gas lighter by the respondent ?"

3. By consent heard forthwith.

4. This is an appeal filed under Section 82 of the Employees' State Insurance Act, 1948 (Act, for short) and is directed against Judgment/Order dated 13-10-2008 by which the Employees' State Insurance Court (Court, for short) has allowed the application filed by the Respondent under Section 75 r/w. Section 77 of the said Act.

5. The Respondent has an establishment engaged in the business of selling ready made garments, leather goods, ornaments, etc.. The said establishment was inspected by the Insurance Inspector on 13-3-2002. In the course of the said inspection, the said Inspector found that there were 16 employees drawing less than Rs.6,500/- per month. He also found that there was a polishing machine used in the said establishment and he was told by the daughter of the Proprietor that the said polishing machine was working on electric power. On the basis of the same, a show cause notice was issued to the Proprietor of the said establishment. A reply was filed and thereafter the Respondent raised a dispute regarding the applicability of the Act in terms of Section 75 r/w. Section 77 of the Act contending that the provisions of the Act were not applicable to their establishment. The said application was filed on 1-12-2003 contending that the establishment of the Respondent was not engaged in any manufacturing activity as well as right from the commencement of their business they had not employed more than 20 persons. The Respondent contended that they had started their business in January, 2001 and were engaged only in the business of selling ready made garments, leather goods, ornaments and other durable goods. It was stated that the finished goods were brought from the distributors and sold by their establishment. They reiterated that they were not engaged in any manufacturing activity.

6. The application was contested by the Regional Director of the Employees' State Insurance Corporation (Appellant herein).

7. The learned E.S.I. Court framed two issues. The Respondent examined three witnesses including their Manager. The E.S.I. Corporation examined their Inspector. The learned E.S.I. Court came to the conclusion that the establishment had not employed more than 19 employees at any time. As regards this aspect, the Respondent's Manager had stated that the establishment had not employed more than 19 employees at any point of time and had further stated that the wages of 4 persons were within the exempted limit i.e. above Rs.6,500/-, and, therefore they could not be included as employees for the purpose of coverage which required minimum of 20 employees. However, in cross-examination he had admitted that as per the wage register for the month of February, 2001, there were 20 employees employed in the said establishment of the Respondent. He had also stated that his name was recorded in the said wage register, and he was shown with a designation of sales executive which according to him was a managerial post. He had also produced the attendance register as well as the wage register. He was re-examined on behalf of the Respondent and in the said re-examination he had explained that even in the month of February, 2001 the Respondent's establishment had not employed more than 16 employees at any time. It was contended on behalf of the Corporation before E.S.I. Court as well as before this Court that in view of his admission that there were 20 employees in the establishment of the Respondents, the establishment was covered under the provisions of the Act particularly in terms of the Notification issued under Section 1(5) by which the Act has been extended to an establishment having 20 or more employees. Admittedly, when the Corporation's Inspector had visited the establishment he had found only 16 employees. In the affidavit also the Manager had stated that there were 19 employees and out of those, 4 employees were within the exempted limit. The wage register produced by him, and, as observed by the learned E.S.I. Court, showed that only 16 employees were drawing wages below Rs.6,500/- per month. On the basis of the evidence given by the said Manager, the inspection report of the Inspector, and the wage register, it could not be said that the Respondent's establishment had employed 20 or more employees being the minimum requirement, to invoke the provisions of the Act. Therefore, the conclusion of the learned E.S.I. Court that the establishment of the Respondent had not employed more than 20 employees cannot be faulted.

8. The next question is whether any manufacturing process was going on in the said establishment with the aid of power ?

9. Section 2(12) of the Act defines the expression "Factory" to mean any premises including the precints thereof -

(a) whereon ten or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power or is ordinarily carried on, or

(b) whereon twenty or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power or is ordinarily so carried on.

but does not include a mine subject to the operation of the Mines Act, 1952 or a railway shed.

Section 2(14-AA) defines "manufacturing process" to mean a process within the meaning assigned to it in the Factories Act, 1948, and in terms of Section 2(k)(i) of the Factories Act "manufacturing process" means any process for -

(i) making, altering, repairing, finishing, packing, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal, or

(ii) pumping oil, water, sewage or any other substance; or

(iii) generating, transforming or transmitting power; or

(iv) composing types for printing, printing by letter press, lithography, photogravure or other similar process or book binding; or

(v) constructing, reconstructing, repairing, refitting, finishing or breaking up ships or vessels; or

(vi) preserving or storing any article in cold storage.

10. Before going to find out whether there was any manufacturing process or not with the aid of power, reference could be made to the decision of the Apex Court in the case of E.S.I.C. Vs. M/s. Harrison Malayalam Pvt. Ltd. (AIR 1993 SC 2655) wherein the Apex Court has noted that the obligation to make contribution does not depend upon whether the particular employee or employees cease to be employee or employees after the contribution period and the benefit period expire. The scheme under the Act for insuring the workmen for conferring on them benefits in case of accident, disablement, sickness, maternity etc. is distinct from the contract of insurance in general. Under the Act, the scheme is more akin to group insurance. The contribution paid entitles workman insured to the benefit of the Act. However, he does not get any part of the contribution back if during the benefit period, he does not qualify for any of the benefits. The contribution made by him and/or by his employer is credited under the Act and it becomes available for others or for himself, during other benefit periods, if he continues in employment. What is more, there is no relation between contribution made and the benefit availed of. The contribution is uniform for all workmen and is a percentage of wages earned by them. It has no relation to the risks against which the workman stands statutorily insured. It is for this reason that the Act envisages automatic obligation to pay the contribution once the factory or the establishment is covered by the Act, and the obligation to pay the contribution commences from the date of the application of the Act to such factory or establishment.

11. Reference could also be made to the case of Bombay Anand Bhavan Restaurant Vs. Deputy Director, Employees' State Insurance Corporation and another ((2009)9 SCC 61 : [2010(1) ALL MR 968 (S.C.)]) wherein the Hon'ble Supreme Court has held that the scheme of the E.S.I. Act is a piece of beneficial legislation, namely a social legislation and the Courts must not countenance any subterfuge which would defeat the provisions of social legislation. The Courts must even, if necessary, strain the language of the Act in order to achieve the purpose which the legislature had in placing this legislation on the statute book. The E.S.I. Act must receive a liberal construction so as to promote its objects.

12. Keeping in mind, the object sought to be achieved, I will revert to the question whether there was any manufacturing activity going on in the establishment of the Respondent with the aid of power. The learned E.S.I. Court came to the conclusion that no power was used in the process of making of jewellery and all work was done purely with manual labour. This conclusion the learned E.S.I. Court based on the evidence of the three witnesses examined on behalf of the Respondent which according to the learned E.S.I. Court was not shaken in cross-examination. However, Smt. A. Agni, the learned Counsel appearing on behalf of the Corporation has submitted that this conclusion is perverse. Learned Counsel pointed out to the evidence of AW-3/Mohammed Yasin Bhat. This witness stated in his affidavit in evidence that no power was used in the process of making of the jewellery and all the work was done with manual labour with the manually operated instruments and machines. However, in cross-examination, he admitted that the establishment made jewellery of all types manually. At the same time, he admitted that soldering of jewellery was done by means of a gas lighter. He stated that jewellery which is made is normally of gold and some times silver. He stated that two to three persons are engaged in manufacturing jewellery. He denied the suggestion that the manufacturing of the jewellery was not done with manual labour or with manually operated instruments. In re-examination he further admitted that a gas lighter was only used to melt gold and join the gold ornaments. Smt. Agni, the learned Counsel on behalf of the Corporation submits that the admission secured in the evidence of AW-3/Bhat have entirely been overlooked by the learned E.S.I. Court, and in my opinion, it is rightly so. There is no dispute that a gas lighter with a flame was being used in the establishment of the Respondent by about two to three persons engaged in the making of jewellery and a gas lighter with flame was used for melting and soldering the gold and other ornaments.

13. Shri. V. Palekar, learned Counsel on behalf of the Respondent submits that the said gas lighter with flame is used only to ignite coal and with coal fire the melting of gold was done, and, therefore learned Counsel submits that more power is used in the manufacturing process. That is not the explanation given by the witness. Learned Counsel further submits that it cannot be conceived that with a gas flame it will be possible to melt any gold. Learned Counsel further submits that in the manufacturing unit only two to three employees were employed but at least minimum of 10 such employees were required to bring the establishment under the coverage of the Act. Smt. Agni, the learned Counsel submits that gas energy which is not generated by human or animal agency was used for the purpose of heating gold or silver ornaments and to melt the same and as such the Respondent's establishment was carrying out manufacturing process with the aid of power. The learned Counsel has placed reliance on a Division Bench Judgment of this Court in the case of The Usha Prints India Private Ltd. Vs. The Employees State Insurance Corporation and another (AIR 1964 Bombay 94). That was a case where a boiler was used to generate steam and the pressure in the boiler drove the hot steam through pipes to the drying tables. The learned Division Bench held that clause (g) of Section 2 of the Factories Act, 1948 defined "power" to mean "electrical energy or any other firm of energy which is mechanically transmitted and is not generated by human or animal agency" and the question was whether the said case fell within that definition. It was argued that the steam like water is tangible thing which can be seen and felt by anyone and everyone. Mere use of steam or water cannot be regarded as use of power even if it is used for the manufacturing process. The learned Division Bench then observed that one must bear in mind that the word "power" includes any other form of energy which must be transmitted mechanically. It cannot be gain said, and would be proved to be so by any elementary book of science, that heat is always considered to be a form of energy. In that case, the heat energy was transmitted to the drying tables through the vehicle of steam though it need not always to be so. Even hot air can transmit heat for the same purpose. The learned Division Bench further noted that a boiler was used to generate steam and the pressure in the boiler drives the hot steam through pipes to the drying tables since steam in the boiler is not generated by human agency, the only question was whether it is transmitted mechanically. According to science of elementary mechanics, mechanical process of transmission may consist of a sudden or steady pull from the front or a sudden or steady push from behind. In that case, if constant pressure is maintained in the boiler which transmits the steam and along with it the heat energy to the printing tables then it follows that the definition is satisfied.

14. Learned Counsel on behalf of the Corporation had also relied on the case of Bombay Anand Bhavan Restaurant Vs. Deputy Director, Employees' State Insurance Corporation and another [2010(1) ALL MR 968 (S.C.)] (supra). That was a case where the number of workers in the establishment was 12. The establishment was preparing sweets, savouries and other beverages. LPG was stored in a cylinder fitted with a tube. The Apex Court held that the LPG cylinder would qualify as an appliance which provides power. This power is transmitted by a tube which upon careful reading of the definition qualifies as "transmission machinery" as it is an appliance or device by which the motion of a primary mover is transmitted. The Apex Court noted that a analogy between the transmission of electricity and transmission of LGP can be drawn. The movement or transfer of electrical energy takes place over an interconnected group of lines and associated equipment between points of supply and points at which it is transformed for delivery to consumers or is delivered to other electric systems. Transmission is considered to end when the energy is transformed for distribution to the consumer. In many countries transmission of LGP also takes place in a similar manner from a large fixed tank. In case of LGP stored in a cylinder the mechanism of transmission is essentially the same as the gas travels from the cylinder where it is stored to the gas cooking stove. While transmission of electricity involves a switch, transmission of LGP involves a valve mechanism or a regulator to ensure smooth flow. The Apex Court therefore held that LGP is a source of energy which is mechanically transmitted by way of the tube attached to the machinery. The Apex Court also noted that the definition of "power" is wide enough to include all forms of energy which is mechanically transmitted. The use of LGP satisfies the definition of power as it is mechanically transmitted and is not something generated by human or animal agency. Since the establishments of the appellants involve a manufacturing process with the aid of LGP, which can now be termed as power, the establishments of the appellants can be termed as factory, and, therefore the ESI Act would apply to such establishments.

15. The law laid down by the Apex Court in Bombay Anand Bhavan Restaurant Vs. Deputy Director, Employees' State Insurance Corporation and another [2010(1) ALL MR 968 (S.C.)] (supra) is applicable with equal vigor to the facts of the case at hand. A gas lighter with a flame is a miniature appliance compared to a LGP with regulator and tube and cooking stove. In a gas lighter with flame the cylinder, the tube and the stove are all rolled in one. There is generally a provision to control the flame. Its functions are essentially the same as that of a gas stove i.e. heating. In the case at hand, the gas lighter with a flame was used to solder gold and silver ornaments and also to melt the same. In other words, it was used in the process of manufacturing gold and silver ornaments. In my view, it is not necessary that all the 10 employees should be engaged in such activity. Suffice it to say, that some of the employees are engaged in the process of manufacturing of gold and silver ornaments with the aid of power. It is true that the Insurance Inspector had not found the polishing machine being used with electric power at the time of inspection on 13-2-2002. But he had found an electric polishing machine. The inference would be that the same was also being used, in the absence of any other explanation, in connection with manufacture of gold and silver ornaments. This is a case where the Respondent himself had applied to the Court contending that their establishment was not a factory and they were not making use of any power in the manufacturing process. The onus to prove the same was on the Respondent but in the course of their own evidence, through their witnesses admissions were obtained by the Respondent to show that they were preparing gold and silver ornaments and using a gas lighter with flame to melt and/or join the gold. The Respondent had failed to prove the case set out by him. The Respondent's establishment was a factory where manufacturing process was going on with aid of power. The learned E.S.I. Court did not at all consider the admissions secured by the Corporation through the Respondent's witness, and in that the finding has to be considered as perverse.

16. Consequently, the appeal succeeds and the impugned Order is hereby set aside.

17. Learned Counsel on behalf of the Respondent submits that there is no evidence to show that manufacturing activity with the aid of power was going on prior to 13-3-2002 i.e. prior to the inspection, and, therefore the provisions of the Act be made applicable from that date. This submission is opposed by Smt. Agni, the learned Counsel on behalf of the Corporation stating that once the Respondent had failed to prove that the provisions of the Act are not applicable, the coverage of the establishment must be considered from 1-2-2001 being the date of notice issued to the Respondent.

18. In my view, since the Respondent has failed to prove that their establishment cannot be covered under the Act then the consequence of that should be that they should be covered from the date the claim was made on behalf of the Corporation.

19. With the above observations, the appeal is allowed, the impugned Order is set aside and consequently the application filed under Section 75 r/w. Section 77 of the Act is hereby dismissed.

Appeal allowed.