Dismissed

The Joint Director v. M/S Albuquerque and Sons

Karnataka HC16 Dec 2021MFA/9586/2011

Case brief

AI extract

What is this about?

This Miscellaneous First Appeal challenges an order allowing an ESI application and set aside a contribution demand. The High Court held the respondent was not a principal employer as no work was done on its premises under its supervision. The appeal was dismissed.

What did the court decide?

The order under Section 45-A was set aside by the lower court as it was based on an inspection report that did not cover the relevant period, and no employer-employee relationship existed.

The Joint Director Vs M/S Albuquerque and… — Pension and Retirement Benefits | Karnataka HC (2021)

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M.F.A.NO.9586/2011

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 16^TH DAY OF DECEMBER 2021

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BEFORE

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THE HON’BLE MRS JUSTICE K.S.MUDAGAL

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MISCELLANEOUS FIRST APPEAL NO.9586 OF 2011 (ESI)

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BETWEEN:

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THE JOINT DIRECTOR THE E.S.I. CORPORATION REGIONAL OFFICE (KARNATAKA) NO.10, BINNY FIELDS BINNYPET BANGALORE – 560 023 …APPELLANT

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(BY SRI.K.KRISHNAPPA, ADVOCATE)

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AND:

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M/S.ALBUQUERQUE & SONS ‘SEA VIEW’, HOIGEBAZAR MANGALORE – 575 001 REPRESENTED BY ITS MANAGING PARTNER MR.GEORGE ALBUQUERQUE PAI …RESPONDENT

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(BY SRI.A.R.HOLLA, ADVOCATE)

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THIS MFA IS FILED UNDER SECTION 82(2) OF THE E.S.I. ACT, PRAYING TO SET ASIDE THE ORDER DATED 25.08.2011 PASSED IN E.S.I. APPLICATION NO.1/2010 ON THE FILE OF THE PRESIDING OFFICER, LABOUR COURT-CUME.S.I. COURT, D.K., MANGALORE, ALLOWING THE APPLICATION FILED UNDER SECTION 75 OF ESI ACT.

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THIS MFA COMING ON FOR FURTHER HEARING THIS DAY, THE COURT THROUGH VIDEO CONFERENCE DELIVERED THE FOLLOWING:

M.F.A.NO.9586/2011

J U D G M E N T

Heard.

Aggrieved by the order of E.S.I. Court, D.K., Mangalore in E.S.I. Application No.1/2010, E.S.I. Corporation has preferred this appeal.

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By the impugned order, the trial Court has allowed the application of the respondent under Section 75 of Employees State Insurance Act (for short ‘the E.S.I. Act’) and set aside the order passed by the appellant under Section 45-A of the E.S.I. Act.

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The respondent is an establishment engaged in manufacture of tiles, covered under ESI scheme and was allotted a code number. RW.1-M.Suresh, the Insurance Inspector inspected the respondent’s establishment on 21.08.2007, 21.09.2007, 28.11.2007 and 10.12.2007 and claimed to have verified the records for the period 1994-95 to 1999-2000. He furnished a copy of the observations as per Ex.A.1 dated 10.12.2007. As per the said observations, respondent was liable to

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M.F.A.NO.9586/2011

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pay contribution on various heads for the period from 1999 to 2000.

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Based on Ex.A.1, the notice dated 24.04.2009 as per Ex.A2 was issued to the respondent claiming Rs.28,718/- as arrears of ESI contribution for the period from 1994 to 2000. The respondent replied the said notice as per Ex.A.3 denying its liability. The said claim was made towards Employer and Employees share of contribution to ESI fund regarding workers who attended repairs, maintenance, trade charges, firewood, building expenses repair of electrical, kiln, machinery etc.

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The appellant issued another notice as per Ex.A5 dated 23.06.2009 again reiterating the same claim. Thereafter, the appellant issued another notice as per Ex.A6 dated 03.07.2009. The respondent claimed that he could not appear before the appellant for want of sufficient time. Ultimately, the appellant passed order Ex.A.7 dated 24.12.2009 under Section 45-A of the E.S.I. Act claiming Rs.28,718/as the arrears of ESI contribution for the period from 1994 to 2000.

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M.F.A.NO.9586/2011

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The respondent challenged that order before E.S.I. Court in E.S.I. Application No.1/2010 denying his liability and also on the ground that the said order was passed without giving proper time. The appellant contested the said application. The parties adduced the evidence.

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The trial Court on hearing both parties, by the impugned order allowed the application and set aside the order under Section 45-A of the Act on the following grounds:

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(i) The Inspector’s report Ex.A.1 states that he verified the records for the period October 2003 to August 2007 and April 2002 to March 2005. But the liability assessed is for the period 1994-1995 to 1999-2000.

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(ii) The evidence of the ESI Inspector with regard to verification of the records for the period covering 19941995 to 1999-2000 is not acceptable.

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(iii) The contribution demanded relates to the employees of the contractors to whom the respondent had given work contract. Their relation was not covered under Section 2(9), (13) & (17) of the E.S.I. Act.

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M.F.A.NO.9586/2011

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Therefore, there was no relationship of employer and employee between respondent and those employees.

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Sri.K.Krishnappa, learned counsel for the

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appellant submits that though the employees in question were not directly employed by the respondent, they were attending the work of the respondent through his contractor, therefore, respondent became the principal employer. He further submits that there was no reason to disbelieve the evidence of R.W.1 and Ex.A.1 regarding the verification of the records for the years 1994-1995 to 1999-2000.

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Per contra, Sri A.R.Holla, learned counsel for the respondent referring to the admission of R.W.1 himself in his cross-examination submits that there was no nexus between the workmen employed by the contractors and the respondent. Therefore, he submits that the trial Court rightly held that there is no jural relationship. He justifies the findings of the trial Court with regard to verification of the records for the year 1994-1995 to 1999-2000.

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M.F.A.NO.9586/2011

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Having regard to the rival contentions and the

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facts and circumstances stated above, the questions that arise for consideration of this Court are:

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(i) Whether there was relationship of employer and employee with regard to whom the ESI contribution was sought?

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(ii) Whether the claim of the appellant based on Annexure-A1 for contribution for the period 1994-95 to 1999-2000 was sustainable?

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Regarding Point No.1

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It is the claim of the appellant that respondent has employed certain employees for attending to the repair works of his establishment, therefore, he becomes the principal employer as per Section 2(17) of E.S.I. Act. Therefore, according to appellant, respondent is liable to pay the contribution.

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Respondent claims that he had given the work of attending the repairs to the contractors and those contractors were getting work done at their premises and only providing services to the respondent. He claims that those workmen were in no way connected to the

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M.F.A.NO.9586/2011

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establishment of the respondent, therefore, he does not become the ‘employer’ nor those workmen are covered under the definition of ‘employee’.

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R.W.1 in his cross-examination admitted that as per vouchers, the respondent had entrusted repairs and maintenance works to the independent contractors. He further admitted that those independent contractors executed the work employing their own workmen. He admits that in Ex.R7, there is no mention how the works are concerned to the workmen, how they carry out the work. He also admitted that the respondent had no control over the workmen so appointed by the contractors and the contractors were paying the wages to those workmen after completion of the work.

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Admittedly, after the work was completed, the respondent was only paying the contract amount to the contractors. Such admission goes to show that neither the respondent got work done in his premises nor he had any control over those workmen remotely also or he was supervising the work of those workmen.

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In the similar circumstances, a question whether such workmen become employees fell for consideration before the Hon’ble Supreme Court in Hassan Coop. Milk Producer’s Society Union Ltd. Vs. ESI Corpn.¹ , the Hon’ble Supreme Court on analyzing Sections 2(9) and 2(17) of the E.S.I. Act which deal with the definitions of employee and principal employer, Section 2(22) of the E.S.I. Act which deals with definition of wages and relying on Sections 26 and 75 of the E.S.I. Act and several other earlier judgments in para 16, 17, 30 and 31 of the judgment, held as follows:

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“ 16 . Section 2(13) defines “immediate

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employer” while Section 2(17) defines “principal employer”. The definitions of “immediate employer” and ”principal employer” in the 1948 Act are as follows :

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"2(13)."immediate employer", in relation to employees employed by or through him, means a person who has undertaken the execution, on the premises of a factory or an establishment to which this Act applies or under the supervision of the principal employer or his agent, of the whole or any part of any work which is ordinarily part of the work of the

1 (2010) 11 SCC 537

M.F.A.NO.9586/2011

factory or establishment of the principal employer or is preliminary to the work carried on in, or incidental to the purpose of, any such factory or establishment, and includes a person by whom the services of an employee who has entered into a contract of service with him are temporarily lent or let on hire to the principal employer and includes a contractor;

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(17) ‘principal employer’ means--

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(i) in a factory, the owner or occupier of the factory and includes the managing agent of such owner or occupier, the legal representative of a deceased owner or occupier, and where a person has been named as the manager of the factory under the Factories Act, 1948 (63 of 1948), the person so named;

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(ii) in any establishment under the control of any department of any Government in India, the authority appointed by such Government in this behalf or where no authority is so appointed, the head of the Department;

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(iii) in any other establishment, any person responsible for the supervision and control of the establishment;"

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17 . Section 2 (22) defines `wages'

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thus :

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"2. (22).- ‘wages’ means all remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express or

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implied, were fulfilled and includes any payment to an employee in respect of any period of authorized leave, lock-out, strike which is not illegal or lay-off and other additional remuneration, if any, paid at intervals not exceeding two months, but does not include --

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(a) any contribution paid by the employer to any pension fund or provident fund, or under this Act;

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(b) any traveling allowance or the value of any traveling concession;

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(d) any gratuity payable on discharge;"

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30 . Although the ESI Court in respect of the appellants in separate orders has recorded a finding that such workers work under the supervision of the principal employer and the said finding has not been interfered with by the High Court but we find it difficult to accept the said finding. The ordinary meaning of the word “supervision” is “authority to direct” or “supervise” i.e. to oversee . The expression “supervision of the principal employer” under Section 2(9) means something more than mere exercise of some remote or indirect control over the activities or the work of the workers .

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31 . As held in CESC Ltd. That supervision for the purposes of Section 2(9) is “consistency of vigil” by the principal employer so that if need be, remedial measures may be taken or suitable directions given for satisfactory completion of work. A direct disciplinary control by the principal employer over the workers engaged by the contractors may also be covered by the expression “supervision of the principal employer”.”

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(Emphasis supplied)

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Therefore, it becomes clear that once the

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work is entrusted to the contractors for execution, the respondent had no control or supervision over the workmen employed by the contractors.

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Having regard to the clear admission of

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R.W.1, this case is squarely covered by the aforesaid judgment of the Hon’ble Supreme Court. Therefore, the trial Court was fully justified in holding that there was no relationship of employer and employee between respondent and workmen of the contractors.

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M.F.A.NO.9586/2011

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Regarding Point No.2

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So far as inspection report Ex.A.1, R.W.1 himself admitted that on his inspection, he issued Annexure-A1. He has also admitted that under Ex.A1, he has mentioned the documents he inspected and that contains reference to the verification of the records only

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for the period October 2003 to August 2007 and April, 2002 to March, 2005. In Ex.A1, there is no reference to the verification of the records for the year 1994-1995 to 1999-2000.

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The order at Annexure-A7 passed under Section 45-A of the E.S.I. Act was based on Ex.A1. But, Ex.A1 had no basis for the claim for the years 1994-95 to 1999-2000. Therefore, the trial Court has rightly held that the said claim was baseless and unacceptable. There is no illegality in the order of the trial Court.

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The appeal is dismissed.

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pgg

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Sd/JUDGE

The Joint Director v. M/S Albuquerque and Sons

Case brief

What is this about?

What did the court decide?

The Joint Director v. M/S Albuquerque and Sons

Case brief

What is this about?

What did the court decide?

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