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2010 Supreme(P&H) 3026

PUNJAB & HARYANA HIGH COURT
T.P.S.Mann, J.
Employees State Insurance Corporation
Versus
M/s.Nirankari Bus Service (Regd.), Patiala
F.A.O. No. 520 of 1983,
Decided On : NOVEMBER 11, 2010

Important Points

The central legal point established is the interpretation of the definition of employees under the Employees State Insurance Act and the application of the principle of unity of purpose and functional integrality in determining coverage of the firm.

Subject

Employment Law - Employee Benefits and Insurance

Act Referred

EMPLOYEES STATE INSURANCE ACT : S.75

Headnote

Employees State Insurance Act - Coverage of Firm - Section 75 - Section 2(12) - Section 2(9)

Fact of the Case:

The respondent-firm challenged a demand for contribution under the Employees State Insurance Act, claiming it was not covered as it did not employ 20 or more persons. The firm argued that the partners did not fall within the definition of employee under Section 2(9) of the Act.

Finding of the Court:

The Employees Insurance Court held that the firm was not covered under the Act as the employees of each partner were not to be considered together, and the number of employees did not exceed 20. The demand for contribution was quashed.

Issues: The main issue was whether the employees kept by the partners of the firm should be considered as employees of the firm or of the respective partners themselves.

Ratio Decidendi: The court considered the unity of purpose and functional integrality between the different units of the firm, and relied on precedents to justify treating all employees hired by the partners as employees of the firm.

Final Decision: The appeal was accepted, the order of the Employees Insurance Court was set aside, and the demand for contribution from the respondent-firm was upheld.

Judgment

T.P.S.Mann, J.

1. Instant appeal filed under Section 82(2) of the Employees State Insurance Act, 1948 (for short the Act) is directed against the judgment passed by Employees Insurance Court, Chandigarh on 10.3.1983, whereby application filed by the respondent under Section 75 of the Act was accepted and order dated 29.6.1979 claiming contribution amounting to Rs.26,605.70p. from the respondent was quashed.

2. In its application filed under Section 75 of the Act, the respondent had averred that it was a registered firm and its partner Karamjit Singh was competent to maintain the said application. It was alleged that the respondent-firm was not covered under the Act as it never employed 20 or more persons. The buses owned by the respondent were driven by the partners themselves and the partners did not fall within the definition of employee, as contained in Section 2(9) of the Act. Therefore, the demand made by the appellant vide order dated 29.6.1979 claiming contribution amount to Rs.26,605.70p. from the respondent-firm was illegal and liable to be set aside.

3. The appellant had contested the application on the grounds that the respondent- firm stood legally covered under the Act; the order dated 29.6.1979 was passed in accordance with law; and, as per the survey report, the respondent-firm had employed 22 persons for wages as on 1.4.1976. Accordingly, it was prayed that the application be dismissed with costs.

4. On the basis of the pleadings of the parties, the following issues were framed :-

1. Whether the order dated 29.6.1979 passed by the respondent claiming contribution amounting to Rs.26,605.70p. on ad hoc basis is illegal as claimed? OPD.

2. Relief.

5. After hearing learned counsel for the parties and going through the material available on the file, the Employees Insurance Court, Chandigarh held that the respondent-firm was an association of many persons and all the persons had employed their own employees separately and income tax returns were being submitted separately. Thus, the employees of all the persons could not be said to be the employees of the respondent-firm. It was also held that if all the persons working for the respondent-firm were considered as its employees, then the said firm had 20 or more employees and covered under the ESI Act but the employees of each person were not to be considered together and, therefore, the number of employees did not exceed 20 nor it came to 20 and, therefore, the respondent-firm could not be said to be covered under the Act. Accordingly, the application was accepted and the demand raised by the appellant vide order dated 29.6.1979. claiming contribution amounting to Rs.26,605.70p, from the respondent-firm was quashed.

6. The appeal was admitted on 23.9.1983. Upon being served, the respondent was represented by Mr. R.L. Chopra, Advocate. The appeal was set down for hearing for 22.7.2008. However, none appeared for the respondent on. that date. Accordingly, the hearing was adjourned to 24.9.2008 with a direction to the office to inform the counsel for the respondent. On 24.9.2008, the Court noticed that Mr. R.L. Chopra, Advocate, who had earlier represented the respondent had unfortunately expired. Accordingly, notice was issued to the respondent for 18.11.2008 so as to enable it to make alternative arrangements for its representation in the appeal. On 18.11.2008, the Court perused the office report, as per which notice issued to the respondent had been received back unserved with the request that it be supplied a copy of the appeal as it had no knowledge regarding the case. Accordingly, fresh notice was issued to the respondent for 8.1.2009 and the office was directed to attach a copy of the opening sheet, grounds of appeal and the impugned order with the notice. The appeal, however, could not be taken up for hearing on 8.1.2009. However, the notice issued for that date was received back with the remarks that respondent had refused to accept the same. The refusa













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