Appeal Under E.S.I. Act No.1 of 2001

12th September, 2008

Petitioner Counsel: Mr. G. K. SARDESSAI
Respondent Counsel: Ms. A. A. AGNI

Cases Cited:
Sylvester & Co. Vs. Their Workman, 2008(3) Bom.C.R. 395 [Para 16,17,19]
Madras Dock Labour Vs. Government of Tamil Nadu, 1997(2) L.L.N. 367 [Para 18]
Regional Director, Employees State Insurance Corporation Vs. Tulsiani Chambers Premises Co-operative Society, 2008(2) ALL MR 146=2008(II) LLJ 239 (Bom) [Para 22]
M/s. Cochin Shipping Co. Vs. E.S.I. Corporation, AIR 1993 SC 252 [Para 24]
Gaffar Jahangir Beedi Works Vs. Union of India, 1991(62) KAR 611 [Para 27]
M/s. Ramchand Onkarlal Agarwal Vs. Union of India, 2006(5) AIR Bom R 780 [Para 28]
Royal Western India Turf Club Ltd., Mumbai Vs. Employees' State Insurance Corporation, 2005(4) ALL MR 983=2005(III) CLR 947 [Para 30,32]
Employees' State Insurance Corpn. Vs. M/s. Harrison Malayalam Pvt. Ltd., AIR 1993 SC 2655 [Para 31]
E.S.I. Corporation Vs. C. C. Santhakumar, (2007)1 SCC 584 [Para 31]

JUDGMENT

JUDGMENT :- This appeal by an establishment is directed against an Order passed by the learned Judge, E.S.I. Court, South Goa, rejecting its application under Section 75 of the Employees State Insurance Act, (hereinafter referred to as the E.S.I. Act), for a declaration that provisions of E.S.I. Act do not apply to it.

2. The facts which led to filing of this appeal are as under :

On 07.03.1989, respondent directed appellant to submit particulars in prescribed format. On 28.03.1989, appellant informed respondent that provisions of E.S.I. Act did not apply to appellant-Company. Appellant supplied requisite information on 23.08.1989. Respondent informed appellant that it was covered under the E.S.I. Act 1948 w.e.f. 02.07.1977 in terms of Notification by Government of Goa under Section 1(5) of the Act. On 27.10.1989, the Corporation demanded contribution from July, 1977 to September, 1989 amounting to Rs.4,49,148.00 with interest @ 6% per annum In November, 1989, appellant challenged this demand by an application under Section 75 of the E.S.I. Act which was rejected by the impugned order.

3. According to the appellant, the establishment of the appellant is engaged in the sampling of iron ore and for the above said work the establishment engages chemist, samplers etc. The said employees are employed in the vicinity of a Major Port, namely Mormugao Port. Sample boys pickup particulars of samples from the vessels berthed at the harbour, fill the forms, carry the samples to the crushing shades situated in the vicinity of the port and such samples are thereafter sent to the laboratories situated away from the port for testing. The samplers, the assistant samplers and assistants chemist work under the instruction of the chemists.

4. According to the appellant, considering this nature of work which was entirely connected with activities of a major port, the "appropriate Government" in relation to appellant's establishment was the Central Government. Hence, notification dated 21.06.1977, published on 30.06.1977 issued by State Government was unhelpful for making provisions of the Act applicable. In any case, appellant is not a shop.

5. Appellant's workmen have been held to be dock workers, covered by the provision of Dock Workers (Safety, Health and Welfare) Act of 1986 and to whom benefits of various medical schemes are available. Therefore, according to appellant, the learned Judge, E.S.I. Court erred in not accepting appellant's contention that the provisions of E.S.I Act did not apply to it, and so seeks to have the said Judgment and Order quashed and set aside.

6. This appeal was admitted to consider the following substantial questions of law :

A. Whether appropriate Government in relation to the establishment of the petitioner is the Central Government ?

B. Whether the notification dated 30.06.1977 of the State Government extending the provisions of the Act to establishments referred to therein is applicable to the petitioner ?

C. Whether the establishment of the petitioner be termed as "Shop" ?

D. Whether the order of the respondent Corporation is in accordance with the provisions of the E.S.I. Act, 1948 ?

7. These questions are answered thus for the reasons that follow :

Question A : No

Question B : Yes

Question C : Yes

Question D : Yes

8. I have heard Shri. Sardessai for appellant and Smt. Agni for respondent, in support of their respective contentions. Though Clause 4 of Section 1 of the Act provides that the Act applies in the first instance to all factories, Clause 5 thereof enables appropriate Government to extend the provisions of the Act to any establishments. In exercise of these powers, the Government of Goa by notification dated 21.06.1977 extended the provision to certain establishments employing twenty or more persons. This list also enumerates "shops".

9. The learned Counsel for the appellant launched a multi pronged attack to the applicability notification dated 21.06.1977. He contended that the Government of Goa was not appropriate Government first, because the definition of appropriate Government indicates that in respect of major ports, the appropriate Government would be the Central Government. He submitted that the appellant establishment is working as a part of the operations in the major port of Mormugao and, therefore, in terms of definition itself, the appellant establishment is not amenable to regulations of Government of Goa.

10. "Appropriate Government" has been thus defined in Clause (1) of Section 2 of the Act :

"2. Definitions.-

(1) "appropriate Government" means, in respect of establishments under the control of the Central Government or [a railway administration] or a major port or a mine or oilfield, the Central Government, and in all other cases, the State Government;"

11. The contention that appellant is covered under "major port" has to be rejected because the appellant is obviously not an establishment of a major port. It may be an establishment operating in a major port, as distinguished from establishment of the port itself.

12. The learned Counsel for the appellant next submitted that in respect of employees of the appellant, an Industrial dispute had been raised and referred to Industrial Tribunal by the Government. The question was whether the employees of the appellant are Dock Workers for the purpose of applicability of recommendations of wages by the Central Board of Dock Workers. By Award dated 06.11.1985, the Industrial Court held that workers of the appellant were Dock Workers to whom relevant wage benefits had to pass. This Award was challenged before a Division Bench of this Court by Writ Petition no. 129/86 by some of the employers who were parties to the reference before the Industrial Court. The petition was dismissed by Order dated 24.11.1987. Therefore, according to the learned Counsel for the appellant, it cannot be disputed that employees of appellant are Dock Workers. Consequently, the appropriate Government in respect of the applicant would be the Central Government and not Government of Goa.

13. The learned Counsel for the respondent pointed out that even in respect of workers of Mormugao Port Trust itself by the same notification dated 21.06.1977, provisions of E.S.I Act were extended and submitted for perusal a letter dated 11.08.05 to this effect. Such a letter, of course, cannot be conclusive of the question as to whether Government of Goa was the appropriate Government, though it may have assumed jurisdiction to extend the provisions of the Act to an establishment under the Mormugao Port Trust.

14. While raising a challenge to the Award by the Industrial Court, the employers had urged that they were agencies recognised under the Export (Quality Control and Inspection) Act, 1963. It was also urged that the employees of the establishments were working in the port and even on board the ships for collecting samples, though they were not concerned with loading and unloading of vessels or with the movement or storage of Cargo. The activity of the employees was restricted to reporting the quality of goods being exported in order to satisfy the requirements and the purpose of the Export (Quality Control & Inspection) Act. After considering the definition of "Dock Workers" in the Dock Workers (Regulation of Employment) Act, Division Bench of this Court concluded that since the establishments were employing persons doing work "in connection with or in relation to" any activity concerning loading and unloading, they were rightly held as Dock Workers by the Industrial Tribunal.

15. Merely because the employees of appellant are held to be Dock Workers for a particular purpose, it does not follow that appropriate Government in respect of Dock Workers would be the State Government. Further, holding the appellant workers as Dock Work for one purpose, does not take them out of the purview of provisions of E.S.I. Act. A person though not actually employed in a Dock, may be deemed to be Dock Worker for the purpose of applicability of Dock Workers (Regulations of Employment) Act, and yet may not be treated as a Dock Worker for the purpose of another enactment. Pertinently, the definition of appropriate Government itself does not lay down in specific terms that Dock Workers would be amenable to extension of provisions of E.S.I. Act only by the Central Government. At the cost of repetition, let it be pointed out that though appellant's workers may be working in Docks, they are discharging functions incidental to operation of Docks and not the actual functions of navigation and berthing of ships or their loading and unloading.

16. The learned Counsel for the applicant relied on a decision of a Division Bench of this Court in Sylvester & Co. Vs. Their Workman & anr. reported at 2008(3) Bom.C.R. 395, in support of his contention that the appropriate Government is the Central Government. In that case arising out of the provisions of Industrial Disputes Act, the Court held that appropriate Government in respect of workers of a major port would be the Central Government. He, therefore, submitted that the "appropriate Government, in relation to the appellant establishment would be the Central Government.

17. First, it is not necessary that appropriate Government for the purpose of one enactment would also be the appropriate Government for the purpose of another enactment unless the provisions are in pari materia. It may be seen that the elaborate definition of appropriate Government under Section 2 Sub-section (a) of Industrial Disputes Act, is all together different and has to be read "in relation to Industrial Dispute". Therefore, the finding in Sylvester & Co. Vs. Their Workman & anr. (supra) could not be a good guide to resolve the present case.

18. In Madras Dock Labour Vs. Government of Tamil Nadu reported at 1997(2) L.L.N. 367, on which also the learned Counsel relied, the Madras High Court held that appropriate Government for the purpose of applicability of provisions of Employee's Insurance Act, would be the Central Government. This Judgment of Madras High Court does not help, because in that case, a learned Single Judge of the Madras High Court held in Para 18 of the Judgment on facts held that he did not find any distinction between the petitioners' workers and the port labourers or the dock labour workers. In fact, it was pointed out during the course of arguments before the Madras High Court that the petitioner's workers had been taken over by the Dock Workers during the pendency of the petition. Such is not the present case.

19. Learned Counsel for the Appellant submitted that the expression "in relation to" is milder as compared to "under the control of" used in Clause 1 of Section 2 of E.S.I. Act. There can be no doubt that control is decidely stricter and, therefore, envisages a closer relationship than that envisaged by the expression "in relation to" used while defining "appropriate Government" under Section 2-A of the Industrial Disputes Act. The control which the learned Counsel for the appellant sought to press in aid is related entirely to working of the appellant under the Export (Quality, Control and Inspection Act) 1963. The control has nothing to do with employer-employee relationship. In any case, it is not clear as to how the observation of the Division Bench of this Court in Sylvester & Co. Vs. Their Workman & anr. (supra) interpreting the expression "in relation to" would help the appellant in this case. Since that expression, even according to the learned Counsel for the appellant, is not as strict as "under the control of", it would obviously admit many more entities within its span as compared to those that would be covered when the expression used is under the control of. In view of this, the argument of the learned Counsel based on the comparative meaning of the phrases "under the control of" and "in relation to" takes us no where.

20. The learned Counsel for the appellant next submitted that appropriate Government as defined in Clause (1) of Section 2 of the Act, means the Central Government in respect of an establishment "under the control" of the Central Government. He submitted that the appellant establishment is one which is under the control of the Central Government. For this purpose, he took me through the provisions of the Export (Quality, Control and Inspection) Act, 1963. The Act provides for establishment of Export Inspection Council which is supposed to advise the Central Government regarding measures for enforcement for Quality Control in relation to commodities intended for export. The Central Government, after consulting the Council, may notify commodities which shall be subject to Quality Control, or Inspection, or both, prior to export, and specify the type of quality control or inspection which will be applied to a notified commodity. Section 7 of the Act enables the Central Government to establish or recognize agencies for Quality Control or Inspection or both. According to the learned Counsel, the appellant establishment has been recognised as an Agency under this provision. Therefore, according to him, the functions which the appellant is performing were in fact those supposed to be performed by the Central Government and, therefore, his establishment is one which is under the control of the Central Government.

21. As rightly countered by his learned adversary, this argument is far fetched. Power of the Central Government to recognize an agency for the purpose of performing functions which could have been performed by itself does not vest the Central Government with control on all aspects of functioning of such an agency. The Central Government would control, or rather be concerned with, such activities of the agency as relate to the discharge of functions for which it is recognised. As far as employer-employee relationship is concerned, the Central Government would have no control. Just as a Central Government may recognise an agency for the purpose of functions under Section 7, it may de-recognise such an agency for omissions in performing such functions, but not for omissions which have nothing to do with the provisions of Export (Quality Control and Inspection) Act. The control is not all pervasive and could not be so. The control would only enable the Central Government to ensure that the agency performs functions for which it has been recognised under Section 7 of the Act. The learned Counsel for appellant submitted that Section 15 of the Act provides that all the Officers of the Council and of any agency established or recognised under Section 7 and all Surveyors, employers and workers of testing houses shall be deemed to be public servant within the meaning of Section 21 of the Penal Code. Deeming the employees of appellant as public servant for the purpose of Section 21 of the Penal Code is absolutely irrelevant to conclude as to which would be the appropriate Government, for, "public servants", are not necessarily under the Control of Central Government or amenable to the jurisdiction of Central Government alone.

22. Relying on a Judgment of this Court in Regional Director, Employees State Insurance Corporation Vs. Tulsiani Chambers Premises Co-operative Society, 2008(II) LLJ 239 (Bom) : [2008(2) ALL MR 146], the learned Counsel for the appellant submitted that whenever an entity has to be subject to provisions of E.S.I. Act, it is necessary to do so by specifically including such entity. In Para 36 of that Judgment this Court did observe that unless the provisions are extended and made applicable specifically, a Society could not be treated as an establishment under the E.S.I. Act. Facts of that case are however quite different and, therefore, it would not be appropriate to apply an observation in that case for deciding whether the appellant's establishment is covered by the notification in question.

23. The learned Counsel for the appellant next submitted that the notification dated 21.06.1977 enumerates several establishments to whom the provisions of the Act have been extended. The respondent-Corporation seeks to fit the appellant in the entry "shop" in the said notification. He submitted that by very nature of activities of the appellant, which have been described in earlier part of this Judgment, the appellant could not be termed as a "shop" and, therefore, according to the learned Counsel even if Government of State of Goa were held to be the appropriate Government for the purpose of issuing notification dated 21.06.1977, the applicant would not be covered by that notification.

24. His learned Adversary submitted that this question need no longer detain this Court. She submitted that there are number of Judgments on the question of interpretation of expression "shop". In M/s. Cochin Shipping Co. Vs. E.S.I. Corporation reported at AIR 1993 S.C. 252, the Supreme Court specifically considered this question in the context of an establishment engaged in activity of clearing and forwarding in the port of Cochin. The notification which was being considered in the said case was reproduced in Para 16 of the Judgment and is worded similarly to the one issued by Government of Goa on 21.06.1977. The first column of the Schedule in the two notifications which are similarly worded reads as under :-

Description of establishments

The following establishments whereon twenty or more persons are employed for wages on any day of the preceding twelve months, namely:

(i) Hotels;

(ii) Restaurants;

(iii) Shops;

(iv) Road Motor Transport establishments

(v) Cinema including preview theatres;

(vi) Newspaper establishments as defined in S.2(d) of the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955 (5 of 1955)

25. The Supreme Court held that the establishment of Cochin Shipping Company was a shop. While so holding, the Court observed as under in Para 21 of the Judgment:

"In this case, the argument advanced on behalf of the appellant is slightly different, namely, other kinds of establishments which can easily fall within the definition of "shop" have been enumerated. Hence, a specific enumeration, so as to include the appellant's business activity, is to be insisted upon. In our considered view, this argument cannot be accepted. First of all, merely because other establishments which are akin to shop are enumerated, it does not, it any manner, oblige us to give a narrow meaning to the word "shop" nor does it in any way dilute the meaning of "shop". As rightly contended by the learned Counsel for the respondent, the object is to envelope as many establishments as possible without leaving any room for doubt. That is precisely what the notification intends to do."

26. It is not necessary to refer to several other Judgments on the same point on which the learned Counsel for the respondent sought to place reliance, in view of this categorical pronouncement in Cochin Shipping Co.'s case.

27. The learned Counsel for the appellant next submitted that the regime under Dock Workers (Regulations of Employment) Act, is adequate to provide necessary safeguards and facilities for the welfare of appellant's employees. Therefore, according to him, an additional provision for similar facilities under the E.S.I. Act was not needed. Similar argument was considered in Gaffar Jahangir Beedi Works Vs. Union of India reported at 1991(62) KAR 611, where a Division Bench of Karnataka High Court held that if all the benefits which are required to be extended under the E.S.I. Act are extended under the Act enacted for Welfare of Beedi Workers (which was the subject matter of the petition), there would have been justification to hold that by necessary implication, the application of E.S.I. Act to Beedi and Cigar Workers stood excluded. The Court had compared the provisions of the said Acts and found that such was not the case and ruled that provisions to E.S.I. Act would, therefore, apply.

28. A Division Bench of this Court in M/s. Ramchand Onkarlal Agarwal Vs. Union of India & Ors. (2006(5) AIR Bom R 780), considered, inter alia, this very question of applicability of provisions of E.S.I. Act to Beedi and Cigar Workers and reached similar conclusions. The appellant has not been able to show that facilities provided to appellant's employees as dock workers cover all facilities which are available under the E.S.I. Act. Therefore, the appellant cannot contend that applicability of E.S.I. Act is excluded by provisions of Dock Workers Act.

29. To sum up, the appellant has not been able to show that Government of State of Goa lacked the competence to issue notification dated 21.06.1977. The appellant also failed to make out a case that its establishment does not fall within the entries enumerated in the said notification. Therefore, since by the notification provisions of E.S.I. Act are extended to the appellant's establishment w.e.f. 02.07.1977, the applicant was not entitled to a declaration under Section 75 that the provisions of the Act do not apply to its establishment.

30. The learned Counsel for the appellant lastly submitted that since his client had not made contribution from 02.07.1977 under the bonafide belief that his establishment was not covered by the provisions of E.S.I. Act, and since this question is being settled only by this Judgment, the appellant should not be saddled with liability to pay contribution right from 1977. He submitted that the liability from 1977 till the present adjudication ought to be waived. For this purpose, he sought to rely on a Judgment of this Court in the case of Royal Western India Turf Club Ltd., Mumbai Vs. Employees' State Insurance Corporation & Ors. reported at 2005(III) CLR 947 : [2005(4) ALL MR 983]. In that case, the establishment had placed reliance on a Judgment of the Supreme Court in the Civil Appeal No.4686/1999 in Employee State Insurance Corporation Vs. Hyderabad Race Course case. The learned Single Judge of this Court had quoted from the said Judgment in Para 22 of its Judgment as under:

"....However learned counsel for the appellant contended that assuming for argument sake that the club is an establishment for the purpose of the Act even then it was obligatory on the part of the authorities below to have factually examined the liability of the Club which as contended by the learned Counsel for the Club was not done by the authorities below. We find no merit in this argument also. Since it is found on record that inspite of the opportunity being granted to the appellant club, no material was produced or evidence led to prove what exactly was the number of workmen in the club who are entitled to the benefit of the Act. Per contra, the authorities below including the High Court has relied on the report of the Inspector who made a spot inspection and submitted a report to the authorities which has gone unchallenged. Therefore this factual finding also cannot be disturbed it his appeal. So far as the contention of the Corporation in their Appeal C.A. No.4686/99 is concerned, the same is confined to the question of limiting the liability of the Club for the period after 1985. It is argued that once the applicability of a statute is declared by a court of law, the same applies from the date of the said law being brought into force, hence, in the instant case by the notification of 1975 the Club was brought within the purview of the Act, therefore, the liability of the Club started from the said date. Therefore, in this background, the High Court erred in exonerating the Club from its liability between the period 1975 to 1985.

It is true as contended by the learned Counsel on behalf of the Corporation that once a court of law declared the applicability of a statute the said declaration in the ordinary course should apply from the date the law in question was brought into force, but there could be exception to this principle depending upon the facts of the case. IT is undisputed that till the judgment of this Court in the case of M/s. Hindu Jea Band, Jaipur Vs. Regional Director, Employees' State Insurance Corporation, Jaipur (1987(I) CLR 228 SC) the law in regard to the institutions like a Club coming within the purview of the definition of establishment for the purpose of the Act was nebulous. It was so understood even by the Corporation itself which is evidence from the fact that the action against the appellant for non-compliance of its liability was not taken for nearly 15 years until the visit of the Inspector of the Corporation on 17.6.1990. In that background even the Corporation was not very certain whether the word establishment used in the concerned notification of 26.3.1975 included a Club. Therefore, in our opinion, the High Court was justified in coming to the conclusion to call upon the Club to make contribution for a period between 1975 to 1986 would be somewhat reasonable. Thus in the peculiar facts of this case, we are in agreement with the finding of the High Court that the demand under the Act was against this Club can be enforced only from the year 1987 onwards."

The learned Single Judge then concluded in Para 25 of the Judgment as under:

"25. .....In view of the aforesaid judgment of the Supreme Court in Hyderabad Race Club, the portion of which, I have reproduced above. Demand in this case for payment of contribution from 1978-79 to 1982-83 came to be made by the Corporation for the first time in 1987 i.e. 4 notices dated 6.1.1988 and 1.12.1987. Admittedly, the demand is for all the period prior to 1987 and therefore considering the Supreme Court judgment, I am constrained to take the same view in the facts and circumstances of the case."

The learned Counsel for the appellant, therefore, submitted that there is no reason to treat the appellant in this case differently.

31. His learned Adversary submitted first that the liability to furnish information and making contribution is on the establishment itself and the establishment has to approach the Corporation. It is only because the appellant did not, on its own, furnish requisite returns that the respondent was required to seek information and inform the appellant of its liability to pay contribution. Relying on a Judgment of Supreme Court Employees' State Insurance Corpn. Vs. M/s. Harrison Malayalam Pvt. Ltd., reported at AIR 1993 S.C. 2655, she submitted that the question whether the appellant's employees have been benefited by the scheme is utterly irrelevant and the appellant will be obliged to make a contribution, since it is an Insurance fund where contribution by an establishment or an individual employee need not necessarily match the benefits reaped. There can be no doubt about the proposition that the liability to contribute is on the establishment itself and that this liability has nothing to do with receipt of benefits. The learned Counsel for the respondent submitted that there is no limitation for recovery of arrears of contribution and for this purpose, relied on a Judgment of Supreme Court in E.S.I. Corporation Vs. C. C. Santhakumar reported at (2007)1 S.C.C. 584.

32. Though there may be no limitation for recovery of contribution from an establishment, the fact remains that the employees of the appellant were not covered by benefits of the E.S.I. Act. All the same, it would not be proper to exempt the appellant from the liability to pay contribution with interest merely because the appellant had chosen to challenge the demand of contribution and the lis remained pending for a long time. Taking a pragmatic view in light of the Judgment of this Court in Royal Western India Turf Club Ltd., Mumbai Vs. Employees' State Insurance Corporation & Ors. [2005(4) ALL MR 983] (supra), it would be appropriate to direct the respondent to restrict the claim for recovery of contribution with interest to a period commencing from 07.03.1989 when the respondent first asked the appellant to submit particulars in prescribed format if the appellant deposits this amount without demur within a month of this Judgment, failing which, appellant would be liable to pay the entire amount of dues w.e.f. 02.07.1977. With this direction, the appeal is dismissed.

Appeal dismissed.