The determination of whether employees are considered employees of a particular factory under the Employees' State Insurance Act is based on their principal engagement in the sale of products of that factory.

1. The order of the Employees' Insurance Court, Calicut, in E. I. C No. 49 of 1971 is challenged in this appeal The only question which arises for consideration is whether the employees in the sales office of the appellant are liable to be covered under the Employees' State Insurance Act, 1948 [Hereinafter called 'the Act "].

2. The appellant is a company incorporated under the Companies Act. It has a factory at Tatapuram, Ernakulam, among other places in India. In the Tatapuram factory it manufactures mainly soaps and hair oils. It has a sales office at M. G. Road, Ernakulam, which, according to the appellant, is an establishment distinct and different from the factory at Tatapuram and it is controlled by the Head Office at Bombay. The sales office is concerned with distributing and marketing the various products manufactured by the appellant in its factory at Tatapuram as well as in its other factories. Apart from the products manufactured by the factories belonging to the appellant, the sales office also distributes the products of various other manufacturers such as Tata Finlay, Ltd., Lakme Ltd, etc.

3. When the authorities directed the appellant to take steps to insure the persons employed by it in its sales office under the Act, the appellant approached the Employees' Insurance Court, Calicut, under S.77 read with S.75 of the Act for a declaration that such persons were not employees within the meaning of the Act, and that no contributions were due from the appellant in respect of those persons. The Court by its judgment dated 18 121972 held that the sales office of the appellant had no connection with the factory at Tatapuram except that it sold the products of that factory That judgment was challenged in appeal before this Court in A. S. No. 67 of 1973. After hearing the parties the case was remanded to ascertain whether the persons employed in the sales office could be regarded as employees within the meaning of S.2 (9) of the Act as construed in the decision of this Court in Regional Director, E. S. I. Corporation, Trichur v. Ruby Rubber Works Ltd, Changanacherry: ILR.1974-II Kerala 536. Thereupon the appellant adduced evidence before the Employees' Insurance Court in support of its contention that the sales office in Ernakulam sold the products manufactured not only at the appellant's factory at Tatapuram but also at various other factories belonging to it. The appellant further adduced evidence to show that apart from the products of its own factories, products of various other factories such as Tata Finlay Ltd., and Lakme Ltd., were also sold by the sales office. It was contended before the E. I. Court that the Manager of the Tatapuram factory had nothing to do with the sales office at M G. Road, Ernakulam and that the sales office is an independent establishment under the control of the General Manager (Sales) of the Head Office at Bombay.

4. Rejecting the appellant's contentions, the E. I. Court held by its order dated 21st July 1976 that the persons attached to the sales, office at Ernakulam were also employees within the definition under S.2 (9). The Court stated:

"The applicant contends that this sales office at Ernakulam is engaged not merely in the sales of products manufactured by the company but also in the sale of products manufactured by other companies. The question whether staff engaged in the sales depot was considered by the High Court in Employees State Insurance Corporation v. Ruby Rubber Works and their Lordships held that the workers are liable to be insured. The only additional factor in this case is that they are selling products of other companies. Does it make any change in the character of the sales depot. It is now doubtless that employees in the sales depot are liable to be covered under the ESI Act. There is no case that the other companies whose products are also sold are not liable to be covered under the ESI. Act. The reason behind the contention of the appellant is not made c