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1989 Supreme(Ker) 71
Judges : BALAKRISHNA MENON,KRISHNAMOORTHY
KUNNATHUNAD C.S.CO-OP.SOCIETY - Appellant
Versus
REGIONAL DIRECTOR - Respondent
Case No : M.F.A. No. 618 of 1983
Decided On : 02/16/1989
Advocates Appeared :
B.S. Krishnan; For Appellant T.P.M. Ibrahimkhan; For Respondent
The legal entity status of a society and the nature of employment are crucial factors in determining the applicability of the Employees' State Insurance Act to the society and its members working for wages.
Headnote:
Employees' State Insurance Act - Industrial Co-operative Society - S.1, S.2(12), S.2(9) - The court discussed the applicability of the Employees' State Insurance Act to an Industrial Co-operative Society and its employees, interpreting the definitions of 'factory' and 'employee' under the Act. The court relied on the legal entity status of the society and the nature of employment to conclude that the society and its members working for wages are covered under the Act.
Fact of the Case:
The appeal is against the decision that the Industrial Co-operative Society is covered by the Employees' State Insurance Act from a certain date and its employees are liable to be insured under the Act from that date onwards. The society is engaged in a manufacturing process with more than 20 workers, including its members working for wages.
Finding of the Court:
The Division Bench relied on the legal entity status of the society and the nature of employment to conclude that the society and its members working for wages are covered under the Act.
Issues: The main issue was the applicability of the Employees' State Insurance Act to the Industrial Co-operative Society and its employees.
Ratio Decidendi: The court's decision was based on the legal entity status of the society, the nature of employment, and the definitions of 'factory' and 'employee' under the Act.
Final Decision: The appeal was dismissed, affirming that the Industrial Co-operative Society is covered under the Employees' State Insurance Act.
1. This appeal by an Industrial Co-operative Society is against the decision of the Employees' Insurance Court, Alleppey that the society is covered by the Employees' State Insurance Act, 1948 (the Act for short) from 8-1-1970 and its employees are liable to be insured under the Act from that date onwards. The Society is registered under the Kerala Co-operative Societies Act. The Society provides employment for its members and the members work in the premises of the society for wages paid by the society. There is no dispute that the society is engaged in a manufacturing process with the aid of power and if the members who work for wages are also taken into account the society employs more than 20 workers in its manufacturing process.
2. Sub-section (4) of S.1 enacts that the Act applies to all factories 'including factories belonging to the Government other than seasonal factories. The expression 'factory' is defined in S.2 (12) to mean "any premises including the precincts thereof whereon twenty or more persons are employed of 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 so carried on but does not include a mine subject to the operation of the Mines Act, 1952". S.2(9) defines the expression "employee". The relevant cart of the definition is extracted below:
"2(9) "employee" means any person employed for wages in or in connection with the work of a factory or establishment to which this Act applies and -
(i) who is directly employed by the principal employer on any work of, or incidental or preliminary to or connected with work of, the factory or establishment,
whether such work is done by the employee in this factory or establishment or elsewhere; .
3. A society registered under the Kerala Co-operative Societies Act as per S.9 is a body corporate known by the name under which it is registered having perpetual succession and a common seal and with power to bold property, enter into contracts, institute and defend suits and other legal proceedings and to do all things necessary for the purpose for which it is constituted. The society is a legal entity distinct from its shareholders. A Division Bench of this court in Regional Director E.S.I. Corporation v. T.T.I, Co-op. Society Calicut (1980 KLT.199:1980 Lab. IC. 1301) following an earlier decision in Kerala State Handloom Ltd. v. State of Kerala (1964 KLJ.1) has held that a society employing its members for wages in its manufacturing process is liable to be covered under the Act for the following reason stated at page 1302:
"A member of a Co-operative Society is separate and distinct from the society as such which is a legal person. The property of a Co-operative Society does not belong to the members but to the society though such members have an interest in the society"
4. In arriving at the above conclusion, the Division Bench relies on the following observation of the Supreme Court in R. C. Cooper v. Union of India (AIR 1970 SC 564):
'A Company registered under the Companies Act is a legal person, separate and distinct from its individual members, Property of the Company is not the property of the shareholders. A shareholder has merely an interest in the Company arising under its Articles of Association, measured by a sum of money for the purpose of liability, and by a share in the profit.
The Division Bench differs from the view expressed by the Madras High Court in S. A Co-op. Motor Transport Society v. Syed Batcha (AIR 1964 Mad. 103). In that case a Division Bench of the Madras High Court bad considered the question whether the claim made by a retrenched member employee of a Co-operative Society under S.25-F of the Industrial Disputes Act can be adjudicated upon by the Labour Court as a dispute under S.33(c)(2) of the said Act. The Madras High Court in reversal of the decision of the Labour Court had held:
"The object of the society among ot
