LPA/79/1999 of Vs on 3 December 2002

:J U D G M E N T

(Judgment of the Court wasdelivered by R. JAYASIMHA BABU, J. )

The employer is in appeal. The employer contends that the wages paidto casual labour employed in unloading raw hides and skins brought to itsfactory premises by the transporter is not an expenditure on which an employeris liable to pay any contribution. The employer claims that it is the driverof the lorry who brings workmen required for unloading the raw hides andskins, such unloading being done within the premises of the factory and thatthe transportation charges which includes the payments to be made to thoselabourers is paid to the driver who in turn disburses the wages to the casuallabourers employed for the purpose of unloading.2. The learned single Judge has disbelieved the claim of the appellant that the casual labourer engaged for unloading were in fact hired bythe driver of the lorry. The learned Judge has taken the view that as the bringing of raw hides and skins to the appellant's factory premises is acontinuing requirement in order to keep the appellant' s factory functioning.The business of the appellant being that of processing of raw hides and skins,the engagement of workmen for unloading the raw hides and skins brought to itspremises by lorries is a continuous requirement and the wages paid to suchpersons is part of the total wages paid out by the employer on whichcontribution is payable.

3. Learned counsel for the appellant submitted that the evidence of the witness who claimed that the money was paid to those workmen by the driverand not by the appellant should have been believed and on that basis the claimfor contribution should have been rejected. Even if we were to agree with thesaid submission that the driver had disbursed the wages to those persons whodid the unloading work, that would only make him the immediate employer andthe liability for payment of wages would still remain on the principalemployer.

4. Section 2.9 of The Employees' State Insurance Act, 1948,hereinafter referred to as the 'Act', defines 'employee' as meaning any personemployed for wages in or in connection with the work of a factory orestablishment to which this Act applies and -- "(i) ......

(ii) who is employed by or through an immediateemployer on the premises of the factory orestablishment or under the supervision ofthe principal employer or his agent on workwhich is ordinarily part of the work of thefactory or establishment or which ispreliminary to the work carried on in orincidental to the purpose of the factoryor establishment; or

(iii) ...."

This definition makes it abundantly clear that the persons engaged through animmediate employer are also employees for the purpose of the Act and thereforethe liability for payment of contribution on the wages paid to such employeesis on the employer.

5. We may also, in this context, notice the definition of theimmediate employer in Section 2.13 of the Act which reads as under:" 2 (13) "immediate employer" in relation to employees employed by or throughhim, means a person who has undertaken the execution on the premises of afactory or an establishment to which this Act applies or under the supervisionof the principal employer or his agent, of the whole or any part of any workwhich is ordinarily part of the work of the factory or establishment of theprincipal employer or is preliminary to the work carried on in, or incidentalto the purpose of, any such factory or establishment and includes a person bywhom the services of an employee who has entered into a contract of servicewith him are temporarily lent or let on hire to the principal employer [andincludes a contractor]. "

That definition is in wide terms and includes persons who are engaged in doingany work which is even preliminary to the work carried or incidental to theperformance of the factory or establishment.

6. The Supreme Court considered this definition in the case of M/s.

Rajakamal Transport & another vs. The Employees' State Insurance Corporation,Hyderabad, [1996(2) L.L.J. 435]. That was a case of a transporter who hadengaged casual labourers for the purposes of loading the lorries. The Courtafter referring to the earlier decision of the Apex Court in the case of RoyalTalkies Hyderabad & Others vs. Employees' State Insurance Corporation [1978(2) LLJ 390], E.S.I. Corporation vs. South Flour Mills [1986 (2) S.C.R.863] and Kirloskar Brothers Ltd. vs. Employees' State Insurance Corporation[1996 I L.L.J. 1156 ] held that even though the transporter collected thewages paid to the labourers from those who had entrusted the goods for thepurpose of transport, what was important for deciding as to whethercontribution was payable on such payment was as to whether the loaders hadworked "in connection with the work of the establishment".7. In the case of Royal Talkies, Hyderabad and others vs. EmployeesState Insurance Corporation (1978 II LLJ 390) the Court held that theemployees of a cycle stand and in a canteen of a cinema theatre are employeescovered by the Act. While so holding the Court took note of the fact thatnarrow construction of the definition of the employee was possible but thedefinition had to be interpreted having regard to the object of the statuteand that object was to make the principal employer primarily liable for theinsurance of all kinds of employees on the premises where they are there inthe work or are merely in connection with the work of the establishment.8. In the case of South Flour Mills, cited supra, it was held thatcasual employees are covered by the definition in Section 2(9) of the Act.9. Learned counsel for the appellant / employer sought to rely on thedecision of the Supreme Court in the case of Employees State InsuranceCorporation vs. Premier Clay Products [1995 S.C.C. (L & S) 162]wherein by a short order the Court held that where the work itself was of asporadic nature and the coolies engaged in performing that work worked forseveral others, such coolies could not even be called casual workmen and henceno contribution would be payable on the wages paid to such persons. Counselalso relied on a judgment of the High Court at Bombay in the case of ParleBottling Company (Private) Ltd. vs. Employees' State Insurance Corporation,Bombay, [1989 II LLN 494]. It was held therein that coolies are sel femployed labourers acting on their own responsibility, that there is no masterand servant relationship between such coolies and the persons who engage them,and that such fleeting labourers can never avail themselves of the benefitsunder the Act. It was observed by the Court by Sawant, J. in that case that,"It will be ridiculous to expect that every time the salesmen engage coolies,they require them to fill in the declaration form for the issue of temporaryidentification certificate which would ultimately be converted into anidentity card entitling them to the benefits under the Act."

10. Learned counsel for the Corporation invited our attention in thiscontext to the judgment of the Supreme Court rendered by the very same learnedJudge, in the case of Employees' State Insurance Corporation vs. M/s.Harrison Malayalam Pvt. Ltd. ( A.I.R. 1993 S.C. 2655 ). The Court in thatdecision rejected the argument of the employer that the obligation to makecontribution cannot be enforced when the person in respect of whose wages thecontribution is made is not able to avail the benefits provided under theE.S.I. Act. The Court observed that, " On the admitted fact that the respondent-Company had engaged the contractor

to execute the work, it was also the duty of the respondent-company to get thetemporary identity certificates issued to the employees as per the provisionsof regulations 12, 14 and 15 of the Employees State Insurance (General)Regulations, 1950 and to pay the contribution as required by Section 40 of theAct. Since the respondentcompany failed in its obligation, it cannot be heardto say that the workers are unidentifiable. ...... Since the workmen in factwere engaged by the contractor to execute the work in question and therespondent-company had failed to pay the contribution, the appellantCorporation was entitled to demand the contribution although both thecontribution period and the corresponding benefit period had expired. ......"

In the same decision the Court further observed that, " The scheme under the Act for insuring the workmen for conferring on thembenefits in case of accidents, disablements, sickness, maternity, etc. isdistinct from the contract of insurance in general. Under the Act, the schemeis more akin to group insurance. The contribution paid entitles the workmeninsured to the benefits under the Act. However, he does not get any part ofthe contribution back if during the benefit period, he does not qualify forany of these benefits. The contribution paid by him and by his employer iscredited to the Insurance Fund created under the Act and it becomes availablefor others or for himself, during other benefit periods, if he continues inemployment. What is more, there is no relation between the contribution madeand the benefit availed of. The contribution is uniform for all workmen andis a percentage of the wages earned by them. It has no relation to the riskagainst which the workmen stands statutorily insured. It is for this reasonthat the Act envisages automatic obligation to pay the contribution once thefactory or the establishment is covered by the Act, and obligation to pay thecontribution commences from the date of the application of the Act to suchfactory or establishment."

It is thus evident that even in a case where the person, to whom wages waspaid and on which the contribution is sought, is not in a position to availthe benefits provided under the Act, nevertheless the employer is not relievedfrom the obligation to pay the contribution. The benefit of the contributionwould become part of a fund available for use for the benefit of workmen whoare eligible to claim the benefit under the Act.

11. In the case of the appellant, the work of unloading the lorries in which the raw hides and skins are brought is a work which is connectedwith, incidental to, and is also preliminary to the work carried on in thefactory. Without raw hides and skins the appellant's factory cannot functionat all. The bringing of the raw hides and skins is not a one time affair; isnot an event which is sporadic in nature but, is a continuous one as withoutregular supply of raw material the factory cannot possibly function andmanufacture the end product for making of which, the factory itself has beenestablished. It is for the Corporation to work out a proper scheme so as toenable such casual labourers also to secure the benefits provided under theAct.

13. The employer cannot, on the score that such casual labourers

presently do not benefit from the provisions of the Act, gain immunity frompaying the contribution on the wages paid to such workmen. The appeal isdismissed. Consequently, connected miscellaneous petition is also dismissed.

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To,

1. The Addl. District Judge,( E.S.I. Judge)Erode. ( with records)

2. The record keeper,VR Section, High Court,Madras.