1999 Supreme(SC) 1327

1999(9) Supreme 370
Supreme Court of India
(From Bombay High Court)
S.B. Majmudar, M. Jagannadha Rao & M.B. Shah, JJ.
Transport Corporation of India -Appellant
versus
Employees’ State Insurance Corpn. & Anr. -Respondents
Civil Appeal No. 810 of 1995
Decided on 5-11-1999
Counsel for the Parties :
For the Appellant : G.B. Pai, Sr. Advocate, Ms. Shally Bhasin Mahesh­wari, R.K. Maheshwari, Advocates.
For the Respondents : N.S. Mehta, Vijay K. Mehta, Advocates.

Important Point
Once a notification is issued by a State Government u/s 1(5) of the ESI Act covering a particular establishment of the State, automatical­ly the said notification would take in its sweep all branches of such an establishment situated even outside such state which are having complete functional integrality with the main activity of the estab­lishment.

Headnote:Employees State Insurance Act, 1948-Section 1(5) r/w Sections 2, 38, 39 and 40-Andhra Pradesh State issued notification covering Road Transport Undertakings-Appellant’s head office situated in Andhra Pradesh-It has its branch office located at Bombay-At relevant time road transport under­takings, in Maharashtra State not covered by ESI Act-Appellant’s plea that notification issued by A.P. Government could not cover branch office at Bombay-Held : Plea unsustainable-Once a notification is issued by a State Government u/s 1(5) covering a particular establish­ment of a State, automatically said notification would take in its sweep all branches of such an establishment situated even out side such state which are having complete functional integrality with main activities of the establishment.

        The Act, which is a Central Act having all India operation, covers from the very inception, factories situated in any part of India. So far as the term ‘establishment’ is concerned, it is not defined under the Act, but the term ‘employee’ as defined under the Act has a direct connection with the term ‘establishment’ in which he or she may be employed for wages in or in connection with the work of the establishment. The term ‘principal employer’ as found in Section 2(9)(i) defining ‘employee’ is also required to be noted in this connection. (Para 9)

       If a person is employed on wages in connection with the work of establishment to which the Act applies and if the establishment is ‘immediate employer’ of such a person under whose supervision he has to undertake the work and can be said to be employed by or through the establishment concerned, the immediate employer, being such establishment, under whose supervision or under whose agent’s supervision the employee works will get covered by the sweep of the Act. The term ‘principal employer’ is found in Sub-section 17 of Section 2. A conjoint reading of Sub-sections 9, 13, & 17 of Section 2, therefore clearly shows that if the head office or the registered office of the appellant is controlling its Bombay branch, the employee working in its Bombay branch can obviously be treated to be an ‘employee’ working under the supervision of the principal employer or his agent. Conse­quently, once such ‘principal employer’ like the appellant, having head office at Secunderabad in the State of Andhra Pradesh, is covered by the sweep of the Act, automatically employees working in its branches, may be anywhere in India, including the branch at Bombay would get covered by the sweep of the Act. That would be the direct consequence of the applicability of the Act by the notification of the ‘appropriate Government’, namely, the Andhra Pradesh Government under Section 1(5) of the Act. It is not in dispute that the Andhra Pradesh Government was the ‘appropriate Government’ so far as the appellant’s head office situated at Secunderabad was concerned. It is easy to visualise that if the head office of the appellant was not situated in Andhra Pradesh but in any other State say Tamil Nadu or Gujarat, then the ‘appropriate Government’ in that case would have been either Tamil Nadu or Gujarat. But once its head office, being registered office, is admittedly situated in Andhra Pradesh, it was only that ‘appropriate Government’ which could apply the provisions of the Act to all its employees whether working at the head office or any of its branches in any part of the country, being the very limb and interconnected organs of the very same establishment of the appellant. Once the provisions of the Act got applied to the appellant’s establishment by virtue of the aforesaid notification issued by the State of Andhra Pradesh, the appellant becomes liable to be registered under the Act as per Section 2A. (Para 9)

       Once the definition of the term ‘employee’ as found in Section 2(9)(i), read with the inclusive part thereof, is read in juxtaposition with Section 38, it becomes at once clear that as the appellant’s establishment, namely, road motor transport establishment is covered by the Act, all its employees, whether working in the head office or at its branch offices in any part of the country, including the State of Maharashtra, would get entitled to be insured as per the beneficial provisions of Section 38. (Para 9)

       When Section 40(1) is read in the light of the definition of the term ‘immediate employer’ as found in Section 2(13) and the term ‘principal employer’ as found in Sub-section 17 (iii) of Section 2, it would be clear that the appellant, being the principal employer of the employ­ees at Bombay branch, cannot escape from its liability to pay contribution, in the first instance, even though the Bombay branch employees are employed by the immediate employer, being local agent of the appellant principal employer stationed at Secunderabad in Andhra Pradesh. In fact, so far as the appellant is concerned, employees of its Bombay branch, even though working under its local manager, have a direct nexus with the appellant being the principal employer or the main employer who can be said to be directly employing the employees at the Bombay branch. In fact there is no immediate employer in between the appellant on the one hand and its Bombay branch employees on the other. The question of immediate employer would arise only when the employees are working under a contractor who carries out the work of the principal employer under the contract. On the facts of the present case, therefore, we are not concerned with any such immediate employer. So far as the employees at Bombay branch are concerned, for them, the appellant is the employer and they are the employees and, therefore, they will be directly governed by Sections 38 & 39 of the Act. (Para 9)

       Further the appellant has got employer’s code number allotted under Regulation 2(g) and (h) of ESI Regulation because it is covered by the sweep of the notification issued by the State of Andhra Pradesh as its regis­tered office is situated in Secunderabad in Andhra Pradesh. The branch at Bombay is given a sub-code number. It, therefore, becomes obvious that so far as the employer’s code number is concerned, it is given only to the appellant, being governed by the Act, having its head office at Secunderabad in Andhra Pradesh which admittedly is within the sweep of the notification issued by the State of Andhra Pradesh. When we turn to Form-01 prescribed in Appendix A to the Regulations, we find that the name of the factory or establishment and full regis­tered address and employers code no, etc. are to be mentioned in the form. Location of the establishment is found at item No. 4 of the said form which deals with the State and the District and the town or village where the establishment is situated. Item No. 11 of the said Form-01 requires the establishment to furnish information whether any branch office of the establishment is functioning for sale, purchase advertisement and their business at places other than the place men­tioned at item 4 or anywhere in India. This clearly shows that infor­mation regarding branch office of such establishments functioning in any part of India has also to be furnished by the establishment seek­ing employer’s code number. When Form-6 is read with Sections 38, 39 and the definition Section 2(9) defining the ‘employee’ and Section 2(17) dealing with ‘principal employer’, it becomes at once clear that the appellant, being the main employer of its employees working in the Bombay branch, would squarely get covered by the relevant provisions of the Act and the Regulations framed thereunder. It would be liable to collect and remit the relevant contributions of the employees and the employer to the authorities to enable the employees at its head office and its branch­es to get the medical benefits as insured persons covered by the benevolent scheme of the Act. In the light of the aforesaid statutory scheme there is no escape from the conclusion that the employees of Bombay branch of the appellant’s establishment would get covered by the beneficial sweep of the Act or not, expressly in the light of well establishment factual data on the record of this case. (Para 10)

       The appellant concern is a concern which operates on all India level through its branches which are its part and parcel and are its own limbs. It is through the branches that its main ob­jects as an all India public carrier, get fructified and achieved. Maybe, for accounting purposes, different branches may be maintaining separate accounts regarding administrative set up under the local offices, but ultimately complete control, supervision and management is by the principal head office at Secunderabad. All the activities of the appellant-Corporation are obviously carried out through the active working and co-operation of all the branches and the employees working at these branches. Even a copy of general power of attorney produced with the additional documents shows that the regional managers controlling the branches in different regions of the country have to act only on the basis of the general power of attorney given to them by the appellant-Corporation and the appellant-Corporation is stated as the principal, while the power of attorney holders-regional manag­ers are shown as merely its agents at regional offices under which the branches work, obviously for carrying out the essential objects and purposes of the appellant-Corporation itself. All this factual data which remains well sustained and admitted on record, leaves no room for doubt that the branches of the appellant, though spread over different parts of the country, are part and parcel of the main estab­lishment of the company which remains the ‘employer’ and the employees in different branches remain its ‘employees’. There is unity of relationship between the employees working in different branches and those working at the head office on the one hand and the management of the appellant-Corpora­tion on the other. There is complete integrality of working of the employees in different branches and those working in the head office vis-a-vis the single and solitary management being the appellant-Corporation. In view of this admitted position on record, there is no escape from the conclusion that once the appellant-Corporation having its registered head office at Andhra Pradesh is governed by the Act, its branch offices would also automatically get covered by the sweep of the Act by the very same notification. (Para 12)

       If the Maharashtra Government, being ‘appropriate Government’, does not think it fit to apply the Act to transport undertakings in the State of Maharashtra by exercising powers under Section 1(5) of the Act, it would only mean that those independent establishments carrying on transport business in the State of Maharashtra may not be governed by the Act but such a situation would cover only those transport undertaking whose head office and registered offices and branches are situated within the State of Maharashtra. They would form entirely a different class of establishments as compared to the undertakings similar to the appel­lant’s undertaking which are covered by the sweep of the notification issued by the ‘appropriate Government’ like the Andhra Pradesh Government where their head offices are situated and which would, cover all the branches in different parts of the State and outside the State, being part and parcel of the very same establishment. It is easy to visualise that the Act applies to all factories wherever situated in India. That is the legislative intention. But so far as the other establishments are concerned, the ‘appropriate Government’ within whose territorial jurisdiction the main establishment is situ­ated, meaning thereby, its head office being registered office is located will get covered by the sweep of the notification issued by such ‘appropriate Government’ acting as delegate of the legislative power entrusted by the Parliament to it. Once the appropriate Govern­ment exercises that power, all the establishments situated within the territories of that State will get covered by such a notification. Their branches within the State, admittedly, will be covered by the sweep of the notification read with the proviso of Section 1(5) of the Act. So far as the branches situated outside the State are concerned, if the establishment is covered by the notification being situated within the territories of the State and if on facts it is found that such outside branches have functional integrality with the activities of the main establishment and are directly under the control and supervision of the main establishment, it could not be said that such notification issued by the State has any extra territorial operation. It has only territorial operation. Meaning thereby, it covers within its sweep all establishments situated within the State and covered by the notification and also automatically covers all the branches situated outside the State which are factually found to be mere ap­pendages and limbs and part and parcel of the very same establishment. The Act seeks to bring in its sweep by notifications issued from time to time by appropriate State Governments all the relevant establish­ments which are required to be covered by the sweep of the Central Act having all India operation. The Bombay branch of the appellant being part and parcel of the main establishment, covered by the Act will stand entirely on a dif­ferent footing and will form a separate class of establishments as compared to those transport establishments which are not covered by the Act by any notification of ‘appro­priate Government’ and whose head office and branches are situated within the State of Maharashtra. Such independent establishments may not get covered by the Act in the absence of appropriate notification under Section 1(5) to be issued by the State of Maharashtra. They will form entirely a different class. There is no question of equals being treated unequally under such circumstances. (Paras 14 & 15)

       In the light of the statutory scheme envisaged thereunder there is no escape from the conclusion that each branch, having functional integrality and being under the direct supervision and control of the parent office, would be part and parcel of the main establishment and all such branches have to be treated as miniatures of the main office. Once the registered office or the principal office of the appellant is covered by the Act, all its branches in any part of the country would be covered by the Act, if such branches are under the supervision and ultimate control of the principal office at Secunderabad, as factually found herein-above. (Paras 19 & 20)

       As per Section 2(9) of the Act an employee of the establishment whether working within the precincts of the main establishment or outside, if carrying on the work of the establishment would be covered by the sweep of the Act moment the main establishment is covered by the Act. It is easy to visualise that after the aforesaid amendment by Act 44 of 1966 Section 2(9) would cover employees working anywhere in branches in connection with the purchase of raw-materials or distribution or sale of products or dealing with administration of the establishment though stationed outside the precincts of the main establishment. Accordingly, the employees who were connected with the administration of the Bombay branch of the appellant-Corporation would be covered by the sweep of Section 2(9) after the aforesaid amendment. If that is so, it would be too incongruous to contend that though the administrative staff of the Bombay branch would be covered, employees actually working for the establishment and directly connected with its main function namely, transport of goods throughout the country and inspecting the goods to be despatched for the appellant from Bombay to outside stations and also connected with receipt and unloading of goods coming from outside Bombay for being further carried within the State of Maharashtra or outside, would not be covered by the sweep of the Act. Such an incongruous and contradictory situation cannot be countenanced by the scheme of the Act especially in the light of clear wording of the definition Section 2(9) along with its relevant amended provisions. The express phraseology of Section 2(9) of the Act defining an ‘employee’ read with Section 38 of the Act clearly projects the legislative intention of spreading the beneficial network of the Act sufficiently wide for covering all employees work­ing for the main establishment covered by the Act even though actually stationed at different branches outside the State wherein the head office of the establishment is located. In any case, the said construction can reasonably flow from the aforesaid statutory provisions. If that is so, any other technical or narrower construction, even if permissible, cannot be countenanced, as that would frustrate the legislative intent underlying the enactment of such a beneficial social security scheme. (Paras 22 & 26)