High Court Of Madhya Pradesh
JUSTICE A. K. SHRIVASTAVA
NATIONAL INDIA RUBBER WORKS LTD. - Appellant
Versus
EMPLOYEES STATE INSURANCE CORPORATION, THRO ITS REGIONAL DIRECTOR, INDORE - Respondents
APPEAL 763 Of 2003
Decided On : 03/15/2007
Employees State Insurance Act - Applicability to Contractors' Employees - Section 2(13), Section 2(9), Section 75 - [Employees State Insurance Act, 1948] - [Section 2(13), Section 2(9), Section 75]
Fact of the Case:
The appellant company, engaged in manufacturing rubber products, contested the demand notice for ESI contributions for workers engaged by contractors. The company argued that it had no supervision or control over the contractors' employees and therefore should not be liable for ESI contributions.
Finding of the Court:
The court found that the appellant company did not supervise the contractors' employees and therefore was not the 'immediate employer' as per Section 2(13) of the Act. It also held that the employees of the contractors did not fall under the definition of 'employee' as per Section 2(9) of the Act. The court quashed the demand notice and set aside the impugned order.
Issues: The issues revolved around the applicability of ESI contributions to contractors' employees and whether the appellant company could be considered the 'immediate employer' or if the contractors' employees fell under the definition of 'employee' as per the Act.
Ratio Decidendi: The court relied on the evidence that the appellant company had no supervision or control over the contractors' employees, as well as the interpretation of 'supervision' from the Supreme Court's decision in C.E.S.C. Limited. It also referenced the decision in Patel Printing Press to support its finding regarding necessary repairs of the building.
Final Decision: The appeal was allowed, the impugned order was set aside, and the demand notice was quashed. Each party was directed to bear their own costs.
( 2 ) THE instant appeal has been filed under section 82 of the Employees State Insurance act, 1948 (in short "the Act" ). The appellant company is registered under the Indian companies Act, 1926 having its registered office at Katni and is also having a factory. The appellant company is engaged in the business of manufacturing of articles made of Rubber used in surgical, medical and laboratory, soda water, accessories and also article which are used in various industrial units such as Vehicle Factory, jabalpur, Ordnance Factory, Jabalpur, ITI, railway etc.
( 3 ) ACCORDING to the appellant in its factory premises, there are various process of manufacturing, mixing, molding, extruding, vulcanizing, buffing etc. and there are approximately 200 number of workers working in the factory premises. Admittedly, the provisions of the Act are applicable to the workers in the company premises engaged by the appellant company and according to the learned counsel the company has been regularly depositing its contribution arising out of the liability under the Act with respect of their workers employed in the factory for last several years.
( 4 ) THE manufacturing process in the factory starts from mixing of raw rubber with chemicals. Thereafter, the mixture goes through different process known as molding, extruding, vulcanizing and after which the product undergo finishing process and then packed and dispatched to its destination (sic ). All these processes are being carried out in the factory premises of the company connected with the work of the factory, contribution for the workers engaged therein have been regularly and sincerely paid by the company to the respondent corporation.
( 5 ) THE contention of learned counsel for the appellant is that the and demand notice which has been given in regard to the cutting and polishing of the rubber items which was challenged in the ESI Court and which has also been filed as Annexure A-2 to A-4 in this Court is without jurisdiction because in regard to the cutting and polishing the rubber item is being given on contract basis to the different contractors and the company has no connection in that regard. The company has also no supervision in that regard. The contractors engages their own workers to carry out the work and after cutting and polishing the items, the same is given to the appellant company and therefore since the appellant company is not supervising the work done by the employees of the contractors, therefore, the appellant company would not come under the ambit and sweep of "immediate employer" in terms of section 2 (13) of the said Act. It has also been put forth by learned counsel for appellant that those contractors' employees would not come under the ambit and sweep of definition of "employee" as envisaged under Section 2 (9) of the said Act. By strongly placing reliance on the decision of Supreme Court in C. E. S. C Limited and Others v. Subhash Chandra Bose and others AIR 1992 SC 573 : (1992) 1 SCC 441 : 1992-I-LLJ-475, it has been argued by learned counsel for the appellant that the ordinary dictionary sense "to supervise" means to direct or oversee the performance of operation of an activity and to oversee it, watch over and direct. It is work under eye and gaze of someone who can immediately direct a corrective and tender advise. The contention of learned counsel is that since all these activities are not being done by the appellant company, and since these activities are done totally by the contractors, therefore, the employees' of the contractors cannot be said to be the employees of the appellant company and their ESI contribution is
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