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Employees' State Insurance Corporation Vs. Narayanaswami and Sons (14.10.1966 - KARHC) - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtKarnataka High Court
Decided On
Case NumberMiscellaneous First Appeal No. 124 of 1966
Judge
Reported in(1968)IILLJ106Kant
ActsEmployees' State Insurance Act, 1948 - Sections 2(9), 2(12), 2(13), 2(17) and 75(2)
AppellantEmployees' State Insurance Corporation
RespondentNarayanaswami and Sons
Excerpt:
.....employees under section 2 (9) (ii) - contractors were executing work which was ordinarily part of work of factory and within premises of respondent-factory - as such contractors were immediate employer under section 2 (13) and respondent-factory was principal employer under section 2 (17) - evidence show employees were employed in connection with work of respondent-factory as such employee's covered under section 2 (9) (ii) - held, respondent-factory liable to pay employees' contribution. held see paras 12 and 18. - [s. abdul nazeer, j.] code of civil procedure, 1908 — order 23 rule 3-b -representative suit — compromise of — leave of the court - the suit in question is a representative suit which comes within the explanation(d) of order 23 rule 3-b of c.p.c...........contribution payable by the principal employer, viz., respondent-factory, for the benefits of the workers employed by the immediate employers. 3. the respondent is a partnership-firm constituted by two brothers by name laxmanamurthi and srinivasamurthi. the respondent-factory manufactures and exports polished granite memorial stones. the factory is situate at the south-end area, basavangudi, bangalore. exhibit p. 1 is the plan and the entire area shown in the said plan belongs to the respondent firm. there are two areas marked in the plan. in the area marked a, employers numbering 35 work directly under the respondent-firm which pays employees' contribution for them; in the area marked b, about 50 workers have been employed by two contractors, chidambarachari and shankarasubbachari. the.....
Judgment:

Per Bhimayya, J.

1. The above appeal arises out of the order passed by the Employees' State Insurance Court at Bangalore, in Application No. 16 of 1964 rejecting the application filed by the appellant under S. 75(2) of the Employees' State Insurance Act, 1948, to be hereinafter called the Act, for the recovery of employees' contribution payable by the respondent-factory.

2. The application was filed by the Employees' State Insurance Corporation through its manager against the respondent-factory to recover a sum of Rs. 8,893 for the period commencing from 27 July 1958 to 31 January, 1964, being the employees' contribution payable by the principal employer, viz., respondent-factory, for the benefits of the workers employed by the immediate employers.

3. The respondent is a partnership-firm constituted by two brothers by name Laxmanamurthi and Srinivasamurthi. The respondent-factory manufactures and exports polished granite memorial stones. The factory is situate at the south-end area, Basavangudi, Bangalore. Exhibit P. 1 is the plan and the entire area shown in the said plan belongs to the respondent firm. There are two areas marked in the plan. In the area marked A, employers numbering 35 work directly under the respondent-firm which pays employees' contribution for them; in the area marked B, about 50 workers have been employed by two contractors, Chidambarachari and Shankarasubbachari. The respondent's lorry-drivers bring granite from the surroundings areas and unload them outside the portions A and B which places also belong to the respondent. The contractors get them to the portion B for cutting purposes. Those stones are cut and dressed in B portion of the plan and sent to the A portion of the factory where they are designed, polished and thereafter exported. The appellant has laid claim for contribution from the respondent in respect of those employees also as their principle employer.

4. The learned Judge, while deciding the question whether the two contractors are only 'immediate employers' within the meaning of S. 2(13) of the Act and the workers employed by them can be construed as workmen falling within the meaning of S. 2(9)(ii) of the Act, has come to the conclusion that Chidambarachari and Shankarasubbachari cannot be considered as immediate employers within the meaning of S. 2(13) of the Act; they are independent contractors; hence, respondent-factory cannot be considered as the 'principal employer'; consequently that factory is not liable to pay any employees' contribution for the benefit of the workers employed by the contractors. Thus he rejected the claim of the appellant. It is against this order that the above appeal has been filed.

5. In this appeal mainly two questions arises for determination. Firstly, whether the respondent-factory is the 'principal employer' as defined in S. 2(17)(i) of the Act. Secondly, whether persons working under them are employees within the meaning of S. 2(9)(ii) of the Act.

6. Sri Govindarajulu, the learned advocate for the appellant, contended that the two contractors are immediate employers falling within the definition of 'immediate employer' in S. 2(13) of the Act, and that the workers employed by them are employees falling within the definition of 'employees' in S. 2(9)(ii) of the Act. He further contended that the learned Judge was wrong in rejecting the claim of the appellant in spite of having given the following findings :

'All that can be said have been proved in this case is that the contractors are doing some work which would be the foundation for the work that is finally done by the respondent.'

7. He argues that the workers employed by the contractors are for the execution of the work which is ordinarily part of the work of the respondent-factory, and that portion B in which these workers are employed is part of the building in which the respondent-factory is situate. There is force in these contentions.

8. Section 2(13) of the Act defines 'immediate employer' thus :

'(13) 'immediate employer' in relation to employees 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 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 or service with him are temporarily lent or let on hire to the principal employer.'

9. The meaning of 'employee' is found in S. 2(9)(ii) of the Act which reads thus :

'(9) 'employee' means any person employed for wages in or in connexion with the work of a factory or establishment to which this Act applies and -

(i) * * * (ii) who is employed by or through an immediate employer on the premises of the factory or establishment of the principal employer or his agent on work which is ordinarily part of the work of the factory or establishment or which is preliminary to the work carried on in or incidental to the purpose of the factory or establishment; or

(iii) * * * but does not include -

(a) any member of the Indian naval, military or air force; or

(b) any person employed on a remuneration which in the aggregate exceed four hundred rupees a month.'

10. It is also relevant to note the definition of 'factory' under the Act. Section 2(12) of the Act defines the expression 'factory' as under :

'(12) 'factory' means any premises including the premises thereof wherever twenty or more persons are working or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power or is ordinarily so carried on but does not include a mine subject to the operation of the Indian Mines Act, 1923 (4 of 1923), or a railway running shed.'

11. Section 2(17)(i) of the Act defines 'principal employer' thus :

'(17) 'principal employer' means -

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

12. According to the definition, 'immediate employer' in relation to employees employed by him, is a person who has undertaken the execution, on the premises of a factory, to which the Act applies, of the whole or any part of any work which is ordinarily part of the work of the factory or is preliminary to the work carried on in, or incidental to the purpose of, any such factory.

13. In the instant case, it is not disputed that the provisions of the Act apply to the respondent-factory. In fact they are paying contributions for the benefits of their employees. What was disputed by Sri E. S. Venkataramayya for the respondent is that the two contractors have registered their factory as an independent factory after 1963; having taken on lease some portions of B premises, they are themselves principal employers falling within the meaning of S. 2(17) of the Act. However, the above argument of Sri. Venkataramayya does not apply at least to the period prior to 1963, since the two contractors had not registered their factory earlier to 1963. Exhibit P. 1 makes it abundantly clear that B portions of Ex. P. 1 are within the premises of respondent-factory marked as A in Ex. P. 1. There is a wall separating the two with a door in between. Further, the recitals in Ex. P. 2 leave no doubt about the conclusion that the two contractors have employed workers to do the work in the factory premises of the respondent-factory.

14. The following are the findings of fact given by the learned Judge :

'All that can be said to have been proved by the applicant Corporation in this case is that R. Ws. 2 and 3 work at a place belonging to the respondent and executive part of the work which is necessary to manufacture the final finished product for sale. All that can be said to have been providing this case is that the contractors are doing some work which would be the foundation for the work that is finally done by the respondent.'

15. According to the finding of the learned Judge, the contractors are executing the work, viz., cutting and dressing the stones, which is ordinarily part of the work of the factory, viz., designing and polishing for the purpose of export.

16. From the foregoing, it is clear that the contractors have been executing the work which is ordinarily part of the work of the factory and that within the premises of the respondent-factory. It is immaterial if the contractors have separately registered their factory or not so long as they are executing the work which is ordinarily part of the respondent-factory. It may be to evade the payment of employees' contribution that such an arrangement is agreed to by the parties. The learned Judge, having given current findings of fact based on evidence, has misdirected himself and has wrongly applied the law in reaching the conclusion that Chidambarachari and Shankarasubbachari cannot be considered as 'immediate employer' within the meaning of S. 2(13) of the Act. It is a wrong conclusion based on erroneous interpretation of law. Hence, it is unsustainable. The contractors are therefore held to be the immediate employed within the meaning of S. 2(13) as the respondent-factory is 'principal employer' under S. 2(17) of the Act as contended by Sri Govindarajulu. For the above reasons we answer the first question in the affirmative.

17. With regard to the second question, the learned Judge has not given any express finding in the course of his order.

18. The fact that the workers in question are employed by the contractors for cutting and dressing the stones is not disputed. According to the definition of S. 2(9)(ii) of the Act, 'employee' means any person employed in connexion with the work of a factory through an immediate employer on the premises of the factory on work which is ordinarily part of the work of the factory.

19. Sri E. S. Venkataramayya, the learned advocate for the respondent, strongly relied upon the words 'in connexion with the work of a factory' found in S. 2(9) of the Act and argued that the employees in question are employed in a separate registered factory and, therefore, they do not come within the meaning of S. 2(9)(ii). The language of S. 2(9)(ii) does not appear to justify the contention of Sri Venkataramayya. His interpretation ignores the vital ingredients, namely, the work which is ordinarily part of the work of the respondent-factory, is being done by these employees. As long as the manufacturing process carried on by the employees is in connexion with the work of the respondent-factory within the premises of the respondent-factory, it is immaterial even if the immediate employer has registered his factory separately.

20. We have in the evidence of P.W. 1, P. K. Shama Rao, that the work of the respondent-factory consisted of manufacturing granite stones for export. The raw stones left all over the surrounding area were moved to the premises marked B in the plan Ex. p. 1. Fifty persons were working at that spot. They were employed by two or three contractors. Those workers out and dressed the stones. He found there sandblasting machine belonging to the respondent-factory and electric blower. Power was used in those machines. After the stones are cut and dressed, they are removed to the premises A for designing and polishing. Final touches are then given to them in the premises B. They are again brought back to premises A for packing and dispatching. Premises A and B belonging to the partners of the respondent-factory with a wall separating the two premises, but connected by a door which appears to have been closed.

21. This evidence remains unchallenged in the course of cross-examination. There is evidence to show that these employees are employed in connexion with the work of the respondent-factory. Therefore, we are unable to accept Sri Venkataramayya's contention as sound. The employees in question fall within the meaning of S. 2(9)(ii) of the Act. We answer the second question also in the affirmative.

22. In view of the above findings, we hold that the respondent-factory is liable under the law to pay employees' contribution and the appellant is entitled to recover the same.

23. For the reasons stated above, the order passed by the Court below is hereby set aside. Suit is decreed as prayed for. The appeal is allowed with costs throughout.


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