[107] IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH FAO-2256-2000 (O&M) Reserved on 03.11.2025 Pronounced on 15.01.2026 Uploaded on 15.01.2026 Whether only operative part of the judgment is pronounced? Yes/No Whether full judgment is pronounced? Yes/No The Regional Director, Employees State Insurance Corporation, Madhya Marg, Chandigarh and others …Appellants versus K.R. Theatre, Meerut Road, Karnal and others ….Respondents Coram : HON’BLE MR. JUSTICE PANKAJ JAIN Present: Mr. Ashwani Talwar, Senior Advocate with Mr. Nikhil Sehrawat, Advocate and Mr. Deepak Goyat, Advocate for the appellants.

Mr. M.K. Taya, Advocate for the respondents.

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PANKAJ JAIN, J.

[1] The present appeal arises out of Order passed by the ESI Court in a petition filed under Section 75 of the Employees State Insurance Act, 1948 by an establishment questioning the recovery ordered by ESI Corporation for the period commencing from 01.06.1980 till 23.08.1980.

[2] The establishment is a partnership firm running a cinema house at Karnal. The issue relates to inclusion of the employees of contractor running cycle stand and canteen. The establishment claims that they only had 15 employees working with them. At no point of time they had more than 20 employees.

[3] The ESI Court allowed the petition, holding that the Corporation failed to prove that the employees under the petitioner’s establishment was 20 or more so as to attract the provisions of ESI Act. Court held that the workers employed by the contractors to run cycle stand and canteen cannot be held to be the employees of the establishment, as the contractors themselves are paying to the establishment to run their business in the complex.

[4] Learned Senior Counsel for the appellants-Corporation relies upon ‘Royal Talkies, Hyderabad and others versus Employees’ State Insurance Corporation through its Regional Director, Hill Fort Road, Hyderabad, reported as 1978 AIR Supreme Court 1478, to contend that the operation of cycle stand as well as canteen being incidental to the primary purpose of the theatre, the employees employed by the contractors have been rightly included by the Corporation to hold establishment liable to pay contribution under 1948 Act. He submits that the reasoning adopted by the ESI Court being in teeth of ratio of law laid down by Supreme Court in the case of Royal Talkies, Hyderabad and others (supra) cannot be sustained. [5] Per contra, Mr. Taya, learned counsel appearing for the respondents, would contend that ratio of law laid down by Supreme Court in the case of Royal Talkies, Hyderabad and others (supra) is not applicable to the present case. It has been contended that the contractors themselves were carrying out work and nobody was drawing wages. The site was never inspected in the present case.

[6] I have heard learned counsel for the parties and have carefully gone through record of the case.

[7] The precise issue as to whether the workers employed by the contractors hired to run cycle stand and canteen in cinema theatre fall within the definition of ‘employee’ as contemplated under Section 2(9) of 1948 Act came up for consideration before Supreme Court in the case of Royal Talkies, Hyderabad and others (supra). Supreme Court after considering the bare provisions and the scheme of that concluded as under:- “15. The primary test in the substantive clause being thus wide, the employees of the canteen and the cycle stand may be correctly described as employed in connection withthe work of the establishment. A narrower construction may be possible but a larger ambit is clarly imported by a purpose-oriented interpretation. The whole goal of the statute is to make the principal employer primarily liable for the insurance of kindred kinds of employees on the premises, whether they are there in the workor are merely in connection withthe work of the establishment.

16. Merely being employed in connection with the work of an establishment, in itself, does not entitle a person to be an 'em