Skip to content


Hyderabad Asbestors Cement Products Limited Vs. E.S.i. Court and anr. - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtAndhra Pradesh High Court
Decided On
Judge
Reported in(1976)IILLJ385AP
AppellantHyderabad Asbestors Cement Products Limited
RespondentE.S.i. Court and anr.
Excerpt:
- maximssections 2(xv) & 3(1) & (3): [v.v.s. rao, n.v. ramana & p.s. narayana, jj] ghee as a live stock product held, [per v.v.s. rao & n.v. ramana, jj - majority] since ages, milk is preserved by souring with aid of lactic cultures. the first of such resultant products developed is curd or yogurt (dahi) obtained by fermenting milk. dahi when subjected to churning yields butter (makkhan) and buttermilk as by product. the shelf life of dahi is two days whereas that of butter is a week. by simmering unsalted butter in a pot until all water is boiled, ghee is obtained which has shelf life of more than a year in controlled conditions. ghee at least as of now is most synthesized, ghee is a natural product derived ultimately from milk. so to say, milk is converted to dahi, then butter......a.v. krishna rao, j. 1. this full bench has been constituted to hear the writ petition by reason of an order of reference made on the 25th november, 1974 by the hon'ble the chief justice and punnayya, j. the order of reference states:in view of the conflicting views expressed in two different bench judgments of this court in e.i.s. corporation v. sri krishna bottlers (p) ltd. (1974) 1 aplj 409 : (1974) 2 andh wr. 59 and in c.m.a. no. 187/71, dated 8-8-1972 (andh. pra.) (unreported) and also in view of the conflicting views between some high courts and this court, we consider that this writ petition should be posted before a full bench of three judges for disposal.2. in the writ petition the petitioner prayed that the high court may be pleased to issue an order, direction or a writ.....
Judgment:

A.V. Krishna Rao, J.

1. This Full Bench has been constituted to hear the writ petition by reason of an order of reference made on the 25th November, 1974 by the Hon'ble the Chief Justice and Punnayya, J. The order of reference states:

In view of the conflicting views expressed in two different Bench judgments of this Court in E.I.S. Corporation v. Sri Krishna Bottlers (P) Ltd. (1974) 1 APLJ 409 : (1974) 2 Andh WR. 59 and in C.M.A. No. 187/71, dated 8-8-1972 (Andh. Pra.) (unreported) and also in view of the conflicting views between some High Courts and this Court, we consider that this writ petition should be posted before a Full Bench of three Judges for disposal.

2. In the writ petition the petitioner prayed that the High Court may be pleased to issue an order, direction or a writ particularly one in the nature of mandamus directing the 1st respondent the Employees Insurance Court, Hyderabad, to refer a question of law for the decision of the High Court under Section 81 of the Employees' State Insurance Act, 1948 (hereinafter referred to as 'the Act', i.e., whether the employees working in establishments which are not factories within the meaning of Section 2(12) of the Act can be said to be covered under the Act.

3. The facts giving rise to the filing of the writ petition may now be set out briefly. In Sanatnagar, Hyderabad, there is an industrial estate. The petitioner, Hyderabad Asbestos Cement Products Limited, has a factory located at Sanatnagar. In the said factory, asbestos sheets are manufactured. There are a large number of employees in the said factory. They are all covered by the E.S.I. Act. The petitioner-company has zonal sales office in several States of the country. In the State of Andhra Pradesh, they have such zonal office at Vijayawada and Visakhpatnam. The factory located at Sanatnagar is registered as a factory under the Factories Act. The several zonal offices which, according to the petitioner are establishments were registered under the relevant Shops and Establishments Act in the several States where they are located. These sales offices are not factories within the meaning of the E.S.I. Act as no manufacturing process or work incidental to it is carried on in the zonal sales office. While, so, the Regional Director, Employee's State Insurance Corporation, Hyderabad had by his letter dated 13-3-1970 informed the petitioner with regard to the coverage under the Act of the contract labour engaged by the various contractors for loading and unloading of goods at the factory permises of the company. The letter also informed that with regard to the staff of the zonal sales offices, the provisions of the Act are applicable with effect from 28-1-1968. The letter required that those employees should all be covered under the Act. The petitioner - company filed application No. 6 of 1970 before the 1st respondent, the Employees' Insurance Court under Section 75 of the Act. That application was dismissed by the E.I. Court. The petitioner-company had preferred C.M.A. No. 187 of 1971 to this Court. The appeal was heard by Obul Reddi, J. (as he then was) and Madhava Rao, J. By their judgment dated the 8th August, 1972, the Bench had allowed the appeal and the matter was remitted to the E.I. Court for disposal in the light of the observations contained in the judgment. In the course of the judgment, it was observed by the Bench that there was a distinction between a 'factory' and an 'establishment' and that initially the Act applied only to factories. The Act would cover 'establishments' only in case a notification was issued by the Central Government under Section 1(5) of the Act. In the absence of such a notification, establishments are not covered by the Act. It was opined by the Bench that as the distinction between a 'factory' and an 'establishment' was not maintained by the E.I. Court while dealing with the case, the case was remanded. While the matter was pending before the E.I. Court after remand, a Division Branch of this Court in C.M.A. No. 45 of 1973, E.S.I. Corporation v. Sri Krishna Bottlers (P) Ltd. (1974) 2 Andh. W.R. 59, had to consider a similar question. In that case, Sri Krishna Bottlers (P) Ltd. had a factory at Hyderabad for manufacturing soft drinks under the name of 'fanta' and 'Coca Cola'. The company had a sales office at Vijayawada for selling the soft drinks manufactured by the factory at Hyderabad. The E.S.I. Corporation demanded the company for payment of insurance contribution in respect of the employees of the sales office at Vijayawada. This was challenged by Sri Krishna Bottlers (P) Ltd. before the E.I. Court. The E.I. Court purporting to follow the judgment of the Division Bench in C.M.A. No. 187 of 1971 (Andh. Pra.) held that the employees of the sales office at Vijayawada could not be deemed to be covered by the Act, The E.S.I. Corporation preferred the appeal to this Court. The learned Judges constituting the Division Bench delivered separate judgments allowing the appeal. The difference between the two learned Judges was on the question whether the employees at the Vijayawada sales office came within the definition of an 'Employee' under Section 2(9)(i) of the Act as it stood originally or whether they came under the amended and inclusive definition added to the original definition of an 'employee' by Act 4 of 1966. While both the learned Judges concurred in the view that the employees of the sales office at Vijayawada were covered by the amended definition of Section 2(9) of the Act, they differed on the question whether the unamended definition covered the employees of the sales office at Vijayawada. Venkatrama Sastry, J., expressed the view that even without the amendment, the employees were covered by Section 2(9)(i) of the Act, while Kondaiah, J., held they were not so covered.

4. The petitioner-company after the above Bench decision was rendered on 6th December, 1973 filed an application M.P. No. 4 of 1974 in E.I. case No. 6 of 1970 before the E.I. Court under Section 81 of the E.S.I. Act seeking a reference to the High Court for a decision on the question of law involved in view of the conflict between the decisions of the High Court of Andhra Pradesh referred to earlier. It was found by the E.I. Court in M.P. No. 5 of 1974 that there was no conflict in the decisions of this Court and the petition was dismissed. Hence the petitioner filed the present writ petition for issuing a mandamus to the E.I. Court to make a reference to this Court under Section 81 of the Act.

5. In the counter-affidavit filed in the writ petition on behalf of the 2nd respondent, it was inter alia contended that there was no conflict at all between the judgments of this Court in C.M.A. No. 45 of 1973 and C.M.A. No. 187 of 1971, that no writ of mandamus could be issued directing the 1st respondent to refer a question of law to the High Court and that there was no question of law at all in the case. It was further urged that it is in the discretion of the E.I. Court to refer a case to the High Court or not, having regard to the language of Section 81 of the Act. It was urged that the petitioner's remedy was only by way of an appeal under Section 82 of the Act and that, therefore, the writ petition was not maintainable.

6. Before preceeding to discuss the case, we may, however, mention that the order of reference does not refer any particular question for the opinion of the Full Bench. The order expressed the view that the two Bench judgments of this Court in E.S.I. Corporation v. Sri Krishna Bottlers (P) Ltd. (1974) 2 Andh. W.R. 59 and C.M.A. No. 187 of 1971, dated 8-8-1972 (Andh. Prad.) (unreported) contained conflicting views. It was also felt that on the question involved there was a conflict in the views between some High Courts and this Court.

7. We may also mention that the counsel has not urged the question of the applicability of the Act to contract labour employees.

8. The question on which we have to express an opinion is whether the employees of the petitioner - company in its zonal sales office at Vijayawada are covered by the E.S.I. Act of 1948? In other words, the question is whether the employees of the zonal sales office at Vijayawada are liable to be insured as per the provisions of Chapter IV of the E.S.I. Act.

9. The Employees' State Insurance Act, 1948 (Act 34 of 1948) as the preamble would show was enacted with a view to provide certain benefits to employees in case of sickness, maternity and employment injury and to make provisions for certain other matters in relation thereto. It is a piece of welfare and social security legislation conceived soon after the end of the Second World War. It extends to the whole of India. It was to come into force on the date or dates as the Central Government by notification in the Official Gazette appoint. The Central Government may appoint different dates for different provisions of the Act to come into force and also for different States or parts thereof Section 1(4) of the Act states that in the first instance the Act is applicable to all factories including factories belonging to the Government, other than seasonal factories. Section 1(5) of the Act provides that the appropriate Government may in consultation with the E.S.I. Corporation and in the case of a State Government with the approval of the Central Government after giving six months' notice of its intention of so doing by notification in the Official Gazette extend the provisions of the Act or any of them to any other establishment or class of establishments, industrial, commercial, agricultural or otherwise. Section 2(9) of the Act defines an 'employee'. This definition was enlarged with effect from 28-1-1968 by Act 44 of 1966 which added an inclusive definition. Section 2(12) of the Act defines 'factory' and 'seasonal factory'. Section 2(13)(a) defines 'insurable employment.' Section 3 of the Act provides for the establishment of the Employees' State Insurance Corporation. Section 38 of the Act enacts that subject to the provisions of the Act, all employees in factories or establishment to which the Act applies shall be insured in the manner provided by the Act. Section 39 of the Act enacts in what manner the contribution under the Act was to be paid to the Corporation. It states that contribution shall comprise of contribution payable by the employer and contribution payable by the employee. Section 40 states that the principal employer shall pay contribution in the first instance.

10. We have already stated that the factory of the petitioner - company is located at Sanatnagar, Hyderabad and one of its several zonal sales offices is located at Vijayawada and that the question is whether the employees of the zonal sales office at Vijayawada can be said to be covered by the Act?

11. The contention of Sri K. Srinivasa Murthy appearing for the petitioner is that the Act as per Section 1(4), in the first instance is made applicable only to factories. The zonal sales office is an establishment apart from the factory. Though the appropriate Government is empowered under Section 1(5) of the Act extend the provisions of the Act to other establishments, so as to cover an establishment like the sales office at Vijayawada, no such notification having been issued the Act is not made applicable to the employees at the zonal sales office, We have already referred to the preamble of the Act. The Act was enacted as it was found expedient to provide for certain benefits to employees in case of sickness, maternity and employment injury and to make provision for certain other matters in relation thereto. The preamble to an Act cannot be relied on as an aid to the construction of its provisions. It is nevertheless a key to open the mind of the Legislature with regard to the purpose of the enactment. While the preamble cannot be used to control or qualify the clear language of an enactment, it can be referred to in case of an ambiguity or any doubt to discover the true legislative intendment. In construing the provisions of the present Act, which is piece of welfare legislation, the rule of interpretation should be liberal enough to achieve the legislative purpose without doing violence to the language employed by the Legislature.

12. The main argument of Sri K. Srinivasa Murthy for the petitioner is based upon Section 38 of the Act and the definitions of 'employee' and 'factory' defined in the Act. Section 38 of the Act states:

Subject to the provisions of this Act, all employees in factories or establishments to which this Act applies shall be insured in the manner provided by this Act.

It is contended by the learned Counsel that as per Section 38, the employees to be insured are those employed in factories or establishments to which the Act is made applicable. The sales office at Vijayawada, though it is an establishment, is not one covered by any notification under Section 1(5) of the Act. In other words, it is an establishment to which the Act is not made applicable. The question, therefore, according to the learned Counsel is: Can it be said that the employees in the sales office are employees in a factory? The question can be answered only having regard to the definitions of an 'employee' and of a 'factory' in the Act.

13. Section 2(9) of the Act as it stands now after the amendment made by the Act 44 of 1966 is as follows:

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

(i) who is directly employed by the principal employer on any work of, or incidental or preliminary to or connected with the work of, the factory or establishment, whether such work is done by the employee in the factory or establishment or elsewhere, or

(ii) who is employed by or through an immediate employer on the premises of the factory or establishment or under the supervision 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) whose services are temporarily lent or let on hire to the principal employer by the person with whom the person whose services are so lent or let on hire has entered into a contract of service;

and includes any person employed for wages on any work connected with the administration of the factory or establishment or any part, department of branch thereof with the purchase of raw material for, or the distribution or sale of the products of the factory or establishment; but does not include

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

(b) any person so employed whose wages (excluding remuneration for overtime work) exceed five hundred rupees a month:

Provided that an employee whose wages (excluding remuneration for overtime exceed five hundred rupees a month at any time after (and not before) the beginning of the contribution period, shall continue to be an employee until the end of that period.

14. The above definition when broken up into its component parts brings out the following as its ingredients:

(1) the employee must be one whose employment must be for wages in a factory or an establishment to which the Act applies. Such employment must be in connection with the administration or purchase of raw materials for or distribution or sale of the products of a factory or establishment;

(2) The employment may be directly with the principal employer or by or through an immediate employer or let on hire by the principal employer.

(3) Where the employee is directly employed by the principal employer, the employment must be on any work which should be incidental to or preliminary to of connected with the work of the factory or establishment or place of work. In the case of direct employment by the principal employer, such work may be done in the premises of the factory or establishment or elsewhere.

(4) In cases where the employment is by or through an immediate employer, the employment must be in the premises of the factory or establishment and any work which is ordinarily part of the work or preliminary to or incidental to the purposes of the factory or the establishment.

(5) In the case of an employee whose services are lent or let on hire, the letting or hiring must be by the person who has entered into a contract of service with the person whose services are so lent or let on hire.

(6) The definition excludes any member of the naval, military or air force and also an employee drawing over Rs. 500 in wages.

15. After the introduction of the inclusive definition by way of amendment by Act 44 of 1966 which came into force from 28-1 -1968 the definition of the work 'employee' is made very comprehensive. After the amendment, any person employed for wages on any work connected with the distribution or sale of the products of the factory or establishment also becomes an 'employee'.

16. That takes us to the question whether the employees of the sales office at Vijayawada can be said to be employed in a factory or an establishment. As admittedly there is no notification under Section 1(5) of the Act covering the sales office as an establishment coming under the purview of the Act the only question is whether they are employees in a 'factory'?

16-A. Now 'factory' under Section 2(12) of the Act is defined as follows:

'factory' means any premises including the precincts thereof whereon twenty or more persons are employed or were employed for wages 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 Mines Act, 1952, (32 of 1952) or a railway running shed.

The essentials of definition of a 'factory' are that (1) A factory is premises including the precincts thereof (2) At least in a part of the premises, manufacturing process should be carried on with the aid of power; and (3) Twenty or more persons should be working in the premises. Neither the word 'premises' nor the word 'precincts' has been defined in the Act. The Supreme Court in Ardeshir v. Bombay State (now Maharashtra) AIR 1962 SC 29 observed:

This expression 'premises including precincts' does not necessarily mean that the premises must always have precincts. Even buildings need not have any precincts. The word 'including' is not a term restricting the meaning of the word 'premises' but is a term which enlarges the scope of the word 'premises'.

The Delhi High Court in B.C.S. and W. Mills v. E.S.I. Corporation AIR 1970 Delhi 167 (1970) L.I.C. 1108, has expressed the view that the 'precincts' would be the adjunct of the premises.

17. Though the amended definition of 'employee' takes in any person employed for wages on any work connected with the sale of the products of the factory can it be said that they are employees in a factory?

18. Having regard to the definition of 'factory' where within the same premises or within the precincts which form a geographical area, a number of departments function and the departments are engaged in the work in connection with or incidental to the manufacturing process of the factory, they all would form part of the factory. An employer may for the sake of efficiency or convenience of management may divide the factory into various departments. So long as the efforts of all the departments are co-ordinated with a view to achieve the main object of the factory, viz., manufacturing, even though the various departments are not situated in a single building, but in a number of buildings within the precincts together, they would constitute a factory. Sri Srinivasa Murthy does not dispute that if a sales office is located within the premises of the petitioner-factory, then the sales personnel would be employees in a factory and would be entitled to the benefits of the contributions for insurance as provided in Chapter IV of the Act. His contention is that the employees at Vijayawada sales office or any other sale office could not be said to be employees in a factory, as the sales office is located nowhere within the premises of the factory. He urges that the whole scheme of the Act was only to cover those employees who are employed for work on the premises of the factory. He urges that the definition of a 'factory' starts by saying that a 'factory' means 'any premises including the precincts thereof whereon twenty or more persons are employed, etc. Therefore, any employee must be working on the premises of the factory. Section 38 cannot include any employee, who does not work on the premises, but works elsewhere. According to him, the sales office of the petitioner at Vijayawada is an extablishment which is not covered by any notification under Section 1(5) of the Act which empowers the appropriate Government to include an establishment. He urged that though the enlarged definition of an 'employee' is made to include any person employed for wages on any work connected with the distribution of sale of the products of the factory, as no amendment was effected to the definition of a 'factory' in the Act, it cannot be said that the sales office personnel are employees in factories who shall be insured within the meaning of Section 38 of the Act.

19. We are of the view that the argument cannot be given effect to. We have earlier observed that the Act is a piece of social security legislation and was expressly enacted for the purpose of securing certain benefits to the employees in case of sickness, maternity and employment injury. The Legislature thought that the unamended definition of an 'employee' was not of sufficient width or amplitude and the definition had to be enlarged with a view to give effect to the true legislative intendment. As per the amended definition of 'employee', only person employed for wages on any work connected with the distribution or sale of the products of the factory was included. In so amending, the Legislature must be imputed with the knowledge of the definition of a 'factory' as it stood in the Act at the time the definition of an 'employee' was enlarged. The very purpose of the enlarged definition is to give effect to the intendment of the Act, viz., to provide the benefits to employees in case of sickness, maternity and employment injury. That being the purpose of introducing the enlarged definition not withstanding the fact that the definition of a 'factory' was not enlarged to take in its fold the category of employees who are included in the amended definition, the Court is bound to give effect to the intendment and the purpose behind the amendment. The amendment in the definition of the word 'employee' was apparently necessitated by certain rulings of the High Courts. We may refer to the decision of the Bombay High Court in E.S.I Corporation v. Raman 1957-1 L.L.J. 267, the decision of the Madras High Court in Reliance Motor Co. (P) Ltd. Madras v. Regional Director, E.S.I. Corporation, Madras (1971) L.I.C. 377 and Mahalaxmi Oil Mills v. E.S.I. Corporation, Madras 1970--II L.L. J. 528 : (1971) L.I.C. 825 (Mad). In the first of the cases the Bombay High Court held that clerks employed in the administrative office whose work mainly consisted of taking down dictations from the manager and other officers and typing out letters are not employees within the meaning of Section 2(9) of the Act. In the two decisions of the Madras High Court, the view was taken that the selling of products of the factory is not connected with the work of the factory and also the persons doing administrative work in respect of sale of products. These were decisions rendered prior to the amendment. The amendment to Section 2(9) which takes effect from 28-1-1968 renders these decisions ineffective, though they may continue to have effect with regard to cases arising prio to 28-1-1968. Section 38 states that 'subject to the provisions of this Act, all employees in factories or establishments to which this Act applies shall be insured in the manner provided by this Act'. No doubt the words used 'employees in factories' render some apparent sustenance to the argument of the learned Counsel for the petitioner. But it cannot be ignored that Section 38 is made subject to the provisions of the Act. Section 2 containing the definitions is also a provision of the Act. The words 'employees' and 'factory' occurring in Section 38 of the Act must be understood in the light of their definitions in Sections 2(9) and 2(12) of the Act. Considerable stress was laid by the learned Counsel on the ground that the words used in Section 38 are not 'all employees of factories', but 'all employees in factories' and having regard to the definition of a factory the sales personnel at Vijayawada office who are working elsewhere, other than in the premises of the factory, are excluded. Granting that the argument is plausible having regard to the language employed in Section 38, still the Court cannot ignore the amended definition of an 'employee' and the purpose behind it. We must construe Section 38 of the Act in a manner to give effect to the legislative intendment in amending Section 2(9) of the Act. A Court must avoid any interpretation which would defeat the purpose of the amendment. The various provisions have to be construed harmoniously with a view to give effect to the legislative intendment evidenced by the amended definition of Section 2(9) of the Act.

20. A reference to the statement of the objects and reasons for introducing the bill and for enacting Act 44 of 1966, among other things, to enlarge the definition of an 'employee' in Section 2(9) of the Act would be useful. It was stated as to why the amendment was necessitated as follows:

The existing definition of the term 'employee' does not cover administrative staff engaged in sale, distribution and other allied functions.

The definition is being amended to cover such employees.

By amendment, the definition of Section 2(9) is enlarged and made an inclusive one.

21. It is well-settled that when in the definition clause given in any statute the word 'means' is used, what follows is intended to speak exhaustively. When the word 'means' is used in a definition, it is a hard and fast definition and no meaning other than that given in the definition can be assigned to the same. In other words, the Legislature intends to exhaust the significance of the term ''defined'. When the word 'includes' is used in a definition, the Legislature intends that the definition should be enumerative, but not exhaustive. That is to say, the term 'defined' will retain its ordinary meaning. But its scope would be extended to bring within it matters which in its ordinary meaning may or may not comprise. For our purpose the definition that calls for our consideration removing the unnecessary portions of it may be read thus:

Section 2(9): 'Employee' means any person employed for wages or in connection with the work of a factory or establishment to which the Act applies and includes any person employed for wages on any work connected with the administration of the factory or establishment or any part, department or branch thereof or with the purchase of raw materials for, or the distribution or sale of the products of the factory or establishment.

This is the definition that has to be read in Section 38 for the word 'employee' in the present context. So read, we find no difficulty in holding that Section 38 of the Act should be understood to take in all persons employed in the sales office of the petitioner-company at Vijayawada. For, it cannot be disputed that they are persons employed for wages on a work connected with the distribution or sale of the products of the factory. They are employees in factories to which the Act applies and shall be insured in the manner provided by the Act. No doubt the word ''factory' defined in the Act states that 'factory' means any premises including the precincts, etc. To construe the expression 'in factory' in Section 38 of the Act as only meaning the premises or the precincts thereof would not give effect to the legislative intendment in amending the word 'employee' as defined in the Act.

22. The learned Counsel for the petitioner has laid certain stress on the definition of the expression 'insurable employment' as meaning an employment in a factory to which the Act applies. In other words 'insurable employment' must be in a factory as defined in Section 2(12) of the Act, which means any premises including the precincts thereof, etc. But in the light of our reasoning above, we cannot give any weight to the submission.

23. We, therefore, opine that the employees of the sales establishment at Vijayawada are employees in a factory within the meaning of Section 38 and, therefore, entitled to the benefits of Chapter IV of the Act. This conclusion we have come to on a consideration of the facts and the relevant provisions of the E.S.I. Act, unhampered by a consideration or any of the authorities cited before us.

24. We will now notice the decisions of this Court and certain other High Courts, the opinions expressed wherein have given rise to the reference to a Full Bench.

25. We shall first refer to the unreported decision of this Court consisting of a Division Bench, Obul Reddi, J. (as he then was) and Madhava Rao, J. The judgment was rendered in C.M.A. No. 187 of 1971 on 8-8-1972 (Andh. Pra.) This case was decided in the appeal arising out of E.I. Case No. 6 of 1970 on the file of the Employees' Insurance Court, the very case which is the subject-matter of our present consideration. In that case, the Insurance Court had dismissed E.I. Case No. 6 of 1970 which was filed under Section 75 of the Act. The present writ petitioner filed the appeal. The Regional Director of the E.S.I. Corporation, Hyderabad, called upon the appellant, the Hyderabad Asbestos Cement Products Ltd. Hyderabad by his letter dated 13-3-1970 requiring them to cover the contract labour engaged by the various contractors of the appellant-company for loading and unloading the goods at the factory premises. It was stated that the provisions of the Act were applicable to its employees. It was also stated in the letter that the staff of the zonal sales offices of the appellant-company should also be covered with effect from 28-1-1968 (which is the date when the amended definition of the word 'employee' in the Act came into force). The appellant-company was also directed to produce the records in respect of the various sales offices and of contract employees and canteen employees for assessment of dues. The appellant-company was also warned that penal consequences would flow under Section 45(2) of the Act if there was no compliance with the requirements of the letter dated 13-3-1970. Thereupon an application under Section 75 of the Act was filed by the appellant before the E.I. Court. From the order of the E.I. Court, an appeal in C.M.A. No. 187 of 1971 was preferred to this Court and before the Division Bench two contentions were raised: (1) The E.I. Court misconstrued the scope of Section 2(9) of the Act without regard to the provisions of Sub-section (5) of Section 1, and (2) The Court had failed to give any finding regarding the question before it that the provisions of the Act were not applicable to the staff of the zonal sales offices. The learned Judges stated that so far as the second of the questions was concerned, they did not find any reference to it in the judgment of the E.I. Court. That Court also without deciding whether the beneficial provisions of the Act would be extended to contract labour so as to demand contribution from the employer straightway directed the production of the accounts and other relevant records by the employer for collecting the dues payable. It was conceded by the learned Counsel for the E.S.I. Corporation that the material on record did not justify the giving of a finding as to the applicability of the provisions of the Act to the staff of the zonal sales office and an enquiry in that behalf would have to be held and a finding called for. It was urged by the counsel for the appellant that the E.I. Court had not borne in mind the difference between a 'factory' and an 'establishment' and felt that the expression 'factory' is synonymous with the expression 'establishment' and, therefore, what applies to a factory would also equally apply to an establishment, The argument was that the zonal sales office is only an establishment and that there was no notification issued under Sub-section (5) of Section 1 extending the provisions of the Act to establishments like sales offices. The learned Judges, after noticing the provisions contained in Sections 1(4) and (5), 2(9) and (12) of the Act and also Section 2(10) which defined the word 'establishment' in the Shops and Establishments Act, opined that the expression 'establishment' is used in the Act in contra-distinction with the expression 'factory' and that no notification under Sub-section (5) of Section 1 of the Act was placed before them. The Division Bench allowed the appeal and remanded it to the E.I. Court for a disposal, after making the following observations:

In the absence of any evidence on the record that the employees of the zonal sales offices are persons employed for wages on any work connected with the administration of the factory or any part, department or branch thereof or with the purchase of raw materials for, or the distribution or sale of the products of the factory, it is not possible to give a finding that those employees also come within the meaning of 'employees' employed in a factory for the purpose of attracting the provisions of the Act. Since the distinction between an employee in an establishment and an employee in factory has not been borne in mind by the learned Judge of the Employees' State Insurance Court and his finding is based on inadequate evidence without any enquiry having regard to the clause added by Act 44 of 1966, we are constrained to set aside the finding recorded against the appellant on this question. Since no finding has been recorded on the first question referred to above and the other finding has been recorded without any enquiry keeping in view the clause introduced by the amending Act, we are constrained to set aside the order under appeal and remit the matter back to the Court below for disposal afresh according to law after giving an opportunity to both sides to adduce such oral and documentary evidence as they may desire.

26. From the aforesaid decision, it appears that the Division Bench did not really decide any question, except to say, that as there was no notification under Sub-section (5) of Section 1, the sales office cannot be treated as an establishment to which the Act applies. The further question whether the inclusive definition introduced by the amendment to Section 2(9) of the Act has applied to the employees of the zonal sales office was not decided by them due to lack of any evidence. The appeal was accordingly remanded.

27. The next decision to be considered is the one reported in E.S.I. Corporation v. Sri Krishna Bottlers (supra). The appeal came to be heard by the Division Bench consisting of Kondaiah and Venkatrama Sastry, JJ. by reason of an order of Madhava Rao, J. referring the appeal to a Division Bench. The Division Bench had to consider a question very similar to the one which we are now considering. M/s. Sri Krishna Bottlers (P.) Ltd. bottles and sells soft drinks called 'Coca Cola' and 'Fanta' in the State of Andhra Pradesh. Their factory is located at Hyderabad where these soft drinks are manufactured. They have various depots at various places. The company was paying the Employees State Insurance under the Act for the employees of the factory at Hyderabad. The company has no factory at Vijayawada but only a sales depot dealing with the sale and supply of Coca Cola and Fanta. There was a depot manager and a few sales men employed at the depot. The petitioner-company was not, therefore, collecting the employees' contribution at the sales depot, nor was it paying its own contribution. The employees at the sales depot were, however, covered by the provisions of the Andhra Pradesh Shops and Establishments Act. Notice was served upon the company requiring them to pay arrears of contribution for insurance in respect of the employees working at Vijayawada sales depot. That notice was questioned by the company on the ground that the sales depot at Vijayawada was not a factory and the employees therein were not employees under the Act. The question, therefore, that fell to be considered was whether the employees of the sales depot at Vijayawada were employees within the meaning of the Act.

28. Kondaiah, J. and Venkatrama Sastry, J. delivered separate judgments. On a consideration of the several authorities, which were also cited before us now, Venkatrama Sastry, J. held that the employees in the sales depot at Vijayawada are employees covered by the Act even as unamended without recourse to the amended definition of Section 2(9) of the Act and definitely so by Section 2(9) as amended in 1966. In that view, the appeal of the E.S.I. Corporation was allowed. Kondaiah, J., expressed the firm view that the persons working in the sales depot at Vijayawada are employees within the meaning of the inclusive definition introduced under Section 2(9) of the Act. The difference between the two learned Judges is that while Venkatrama Sastry, J., held that even without the amendment introduced by Act 44 of 1966 to the definition of an 'employee' in Section 2(9) of the Act, the employees at the sales depot at Vijayawada were employees covered by the Act. Kondaiah, J. did not so opine. Venkatrama Sastry, J. on a consideration of the several authorities (at page 73 of the report, para 30) stated as follows:

In the present case, it is admitted that one of the objects of the company is to establish a factory for the production of soft drinks like 'Coca Cola' and 'Fanta' and also to sell them. It has also been established on evidence in this case that the sales depots of the company are part of the company's activities in the same way as the factory. It has, therefore, in my opinion to be held that all employees engaged by the company in all its sales depots are also employees in the factory within the meaning of the word 'employee' even under the Act prior to the amendment in 1966 even though they are working outside the precincts of the factory. It may be noted that in order to be an employee under Section 2(9)(i) of the Act, the work need not be done by the employee in the factory alone. It can be done not also outside but also elsewhere, so long as the sales-depots are doing part of the work of the factory are owned by the company. Hence it has to be held that the work carried on by the employees in the sales depots is the work of the factory or the work in connection with the factory so as to bring the employees therein within the ambit of this Act.

The learned Judge in coming to the conclusion observed that one of the objects of the Krishna Bottlers in establishing the factory was for the production of soft drinks and also to sell them. There was also evidence before the learned Judge that the sales depot of the company and its activities are in the same way as that of the factory. Reliance was placed by the learned Judge upon Section 2(9)(i) of the Act that the work need not be done by the employee in the factory alone. We find it difficult to agree with the learned Judge that the persons employed in connection with the sales of the manufactured products are covered by Section 2(9)(i) of the Act. It is explicit in the language employed in Section 2(9)(i) that the employment must be on any work of the factory or it must be preliminary to, or incidental to or connected with the work of the factory. The employment must have a nexus with the work of a factory. In the work of a factory which carries on a manufacturing process, there may be employees directly connected with the manufacturing process. There may be employees who may not be engaged to do any manual labour but attend to administration work in connection with the work of the factory. But sale of manufactured goods can hardly be said to be any work of the factory or incidental or preliminary to or connected with the work of the factory. It has nothing to do in any manner with the manufacturing process which is carried on in the premises including the precincts of the factory. That is exactly the reason why it became necessary to amend Section 2(9) so as to include the presonnel of the sales depots of a factory. We are, however, in agreement with the observations of the learned Judge (at page 40, paragraph 75 of the report) where he stated as follows, after considering the amended definition of Section 2(9) of the Act:

It is, therefore, clear that this new definition enlarges the scope of the word 'employee' in a factory. According to this definition any employee working for wages in connection with the administration of a factory or any part, department or branch thereof or with the purchase of raw materials for or the distribution or sale of the products of the factory would also be covered by this Act. There is no dispute that the employees in the sales depots in this case are employed for the distribution or and sale of the products of the factory. This amended definition, therefore, in my opinion, puts the matter beyond any shadow of doubt and brings the employees in these sales depots within the purview of the new definition.

The definition was undoubtedly amended with a view to enlarge the scope of the word 'employee' in a factory so as to take in all those mentioned in the inclusive part of the definition. Without the enlarged, definition brought about by the amendment the original definition is not wide enough to take in its purview persons employed in the sales depots. We may now refer to certain observations made by Kondaiah, J. (at page 83, paragraph 66 of the report) with which we agree:

Section 38 requires all employees in factories to be insured in the manner provided by the Act. It must be borne in mind that the material part of Section 38 is subject to the provisions of the Act. The expression 'employees in' occurring before the term of 'factories' should not be construed to take in only such persons who carry on work within the premises of the factory. It admits of no doubt that the definition of 'factory' in Section 2(12) takes in 'any premises including the precincts thereof wherein twenty or more persons are working. Hence, the expression 'employee' used in Section 38 must be construed as defined under Section 2(9) of the Act. The provisions of Section 38 must be read harmoniously with the other provisions of the Act.

We also agree with the learned Judge that the submission of Sri Srinivasamurthy that the mere amendment of the definition of an 'employee' under Section 2(9) without suitably amending the expression 'in factories' occurring in Section 38 of the Act does not create any advantages or rights to the employees cannot be acceded to. We, however, do not agree with the observations of the learned Judge in paragraph 66 that Section 38 of the Act is not material for the determination of the question before them and that it only provides for insurance in respect of the employees in factories. This statement runs contrary to what the learned Judge stated and extracted above by us, namely, that the definition must be construed as defined in Section 2(9) of the Act and that the provisions of Section 38 must be read harmoniously with the other provisions of the Act.

29. Both the learned Judges are, however, in agreement that the employees of the sales depots are covered by the amended definition of Section 2(9). We agree with them. We are of opinion that the view of Venkatrama Sastry, J. that the employees of the Vijayawada sales depot are covered by Section 2(9)(i) of the Act is not correct and that the view of Kondaiah, J. is correct in holding that Section 2(9)(i) of the Act does not cover the employees of the sales office.

30. We shell now refer to the decisions of the Supreme Court cited before us. In N.E.L.P. Co. v. E.S.I. Corporation 1967-II L.L.J. 407 : AIR. 1967 SC 1364, the Supreme Court had to consider the question whether the employees of the Nagpur Electric Light and Power Company Ltd. are employees within the meaning of Section 2(9) of the E.S.I. Act of 1948. The Nagpur Electric Light and Power Company Ltd. occupied certain premises in Nagpur where it carried on the work of transforming and transmitting electrical energy. The premises were located within a compound wall. Inside the premises were several buildings, yards and open space. There was also the receiving station, the workshop, the general office and stores in different buildings inside the premises. The company did not generate electricity. It maintained a receiving station where electrical energy in bulk was received from the generating station of the Maharashtra Electricity Board situated elsewhere. From the receiving station,the energy of 11,000 volts received was carried through electric supply lines through a transformer and stepped down to 3300 volts and carried to various sub-stations in the city of Nagpur where it was further stepped down to 400 voltes and thereafter distributed to consumers through supply lines. The first question consider by the Supreme Court was whether the company was a factory and if so, where the factory was located. Their Lordships opined that the company was a factory and that it was located inside the premises whose boundaries were fixed by a compound wall. Their Lordships rejected the High Court's view that the manufacturing process is carried on by the company not only in the building called the workshop or the receiving station, but over the whole area over which the process of transmission is carried on including sub-stations where electricity is stored and supplied to the consumers by further transmission lines and that every part over which this process is carried on will be a factory within the meaning of the E.S.I. Act. The company had several categories of employees. The Supreme Court had to mainly concern itself with the question whether these various categories satisfy the definition of an 'employee' under Section 2(9)(i) of the Act. Their Lordships observed that all the authorised categories of employees, clerical or otherwise, were employed in connection with the work of the factory, that is to say, in connection with the work of transforming and transmitting electrical power. Some of the employees are clerks and they are not engaged in any manual labour but a person doing non-manual labour can be an employee within the meaning of Section 2(9)(i) of the Act. If he is employed in connection with the work of the factory. It was held that the duties of the administrative staff are directly connected with the work of the factory. With regard to some of the employees who work outside the factory, their Lordships held that their duties were connected with the work of the factory and that, therefore, they were also employees within the meaning of Section 2(9)(i) of the Act. Thus, employees at the sub-stations which are not independent factories, attend to work which is directly connected with the work of the factory at the main station. They are employees within the meaning of Section 2(9) of the Act. Their Lordships held that the case fell within Section 2(9)(i) of the Act. Their Lordships referred to the case of Employees, State-Insurance Corporation, Bombay v. Raman 1957-1 L.L.J. 267; and observed that it was distinguishable. They did not say that the decision was wrong. In the Bombay case, the company had a factory and an administrative office within the same compound. It was found that the work of the factory began with the collection of raw materials and ended with the production of finished articles. The selling of the products was not connected with the work of the factory. The administrative office handled sales of the products manufactured in the factory and also handled goods imported from abroad. The factory and the administrative office maintained separate muster and wage rolls and separate accounts. It was held by the Bombay High Court that the clerks employed in the administrative office whose main work was taking down dictation from the manager and other officers were not employees within the meaning of Section 2(9) of the Act. The tacit approval of the Bombay judgment by their Lordships holding it to be distinguishable from the case before them clearly shows that their Lordships were of opinion that clerical staff situated in an administrative office where the factory is located, both being within the same compound, cannot be called as employees within the meaning of Section 2(9) as it stood before amendment. We do not find anything in the decision of the Supreme Court which helps either the petitioner or the respondent. Their Lordships distinguished the Bombay case on the ground that the N.E. L.P. Company, the appellant before them, maintained one establishment for its factory and that the factory does the work of transforming and transmitting electrical energy. All the workers in question including the clerks and the administrative staff are engaged in connection with this establishment unconnected with the work of the factory. The reasoning of their Lordships would thus show that if the administrative office of a factory is a separate establishment, though located within the premises of the factory and if the work they do is unconnected with the work of the factory, they would not be employees within the meaning of the Act.

31. It is to remedy the consequences arising out of such a situation, that the inclusive definition was added by Act 44 of 1 966 to Section 2(9) of the Act.

32. The decision in B.M. Lakshmanamurthy v. Employees' State Insurance Corporation 1974-I L.L.J. 304 : (1974) 4 S.C.C. 365 : (1974) L.I.C. 536 is of no assistance in the present case. In that case, their Lordships had to consider the case of two separate factories adjoing each other. Raw materials used in one factory and finished goods were prepared in the other factory. There was a wall separating both with a door. One of the factories was on the appellant's land leased out to contractors. Raw materials which are granite stones from a quarry were brought into the factory of the contractors. They are cut and dressed in the factory of the contractors and sent to the appellant's factory where they are designed, polished and exported. Their Lord-ships had to consider the definitions of 'immediate employer' and 'principal employer,' in the context. They found that the work undertaken by the contractors in the other factory was preliminary or incidental to work in the principal employer factory which turned out the finished products for export. The work in the two cases has an intimate correlation and is a piece of an integrated whole. The contractors' factory was situated in the premises of the appellant's factory which according to the definition clause of a 'factory' included the precincts thereof. It was pointed out by the Court that the High Court's view of the definition of the word 'factory' under the factories Act is the same as the definition of the word 'factory' under the E.S.I. Act is not correct. The definition under E.S.I. Act was of wider amplitude with an expanding horizon of objectives in the latter Act.

33. We shall now deal with cases cited before us concerning Section 2(9) of the Act after its amendment in 1966. Andrew Yule & Co. v. E.S.I. Corporation (1974) 29 Fac. L.R. 275 (Cal), is a case after the amendment of Section 2(9) of the Act. The petitioner in that case is Andrew Yule & Co. Ltd. which had a head office and branch offices included the work connected with the purchase of raw materials and the sale of products of the petitioner's several factories. None of the staff employed either at the head office or branch offices signed any attendance registers at any of the factories. They were not on the muster rolls of any factory. The employees at the head offices and branch offices also were not subject to the control of any of the authorities of any factory. While so, the petitioner-company received a circular. In the said circular, it was stated that after the amendment of the definition of 'employee' in the E.S.I. Act of 1948, the provisions of the Act were applicable to the staff employed in head office, branch offices and sales offices. In May, 1972, by certain letters, the E.S.I. offices required the petitioner-company to comply with the requirements of the Act regarding the employee's at the head office and the branch offices by making contribution of the employers' special contribution for insurance. In the writ petition filed by the petitioner, it was contended on behalf the petitioner that the staff employed in the head office and the branch offices of the petitioner were not employees within the meaning of the Act. It was secondly contended that in any case they are not employees in the factory required to be insured under Section 38 of the Act. It was lastly contended that the head office or the branches of the petitioner did not come within the definition of a ''factory' under the Act and the Act would not be applicable unless a notification under Section 1(5) of the Act by the appropriate Government was issued. It would appear that not only the petitioner, but also the employees felt aggrieved by the action of the E.S.I. Authorities. The Court after noticing the amendment definition expressed the opinion that it was necessary for the purpose of the case before it to refer to Clauses (ii) and (iii) of Section 2(9) of the Act. The amendment is made so as to include any person employed for wages in any work connected with the administration of the factory or establishment or any part, department or branch thereof or with the purchase of raw materials for the distribution or sale of the products of the factory or establishment. Following other unreported decisions of that Court, the learned Judge held that the employees of the head office and the branch offices of the petitioner came within the definition of 'employee' under Section 2(9) of the Act after the amendment in 1966. With regard to the question whether the employees of the head office and the branch offices are employees in factories to which the Act applied, even though they may be employees within the meaning of Section 2(9) the Court had stated as follows after referring to Section 38 of the Act:

A person may be employed for wages in or in connection with the work of the factory or with the administration of the factory or with the purchase of raw materials or the distribution or sale of the products of the factory. Some of them may do work in the factory and some may work elsewhere but so long as they are employees in the factory they are to be covered under the Act in view of the amended definition of 'employee'.

The learned Judge then observed that the test to be applied was whether the employees are connected with the administration, sale and purchase of raw materials whose names appear oh the wages roll or whose wages are debited to the factory accounts. After referring to the definition of a 'factory' under Section 2(12), it was opined that the head office or the branch offices of the petitioner could not be treated as a factory under the Act. As no notification was issued under Section 1(5) of the Act, the E.S.I. had no jurisdiction to call upon the petitioner to make contribution under the Act in respect of its employees at its head office or the branch offices who could not be treated as employees in factory. Ultimately, the Court expressed the view that the head office and branch offices are not factories within the meaning of the Act and the employees cannot be covered by the Act and that they could be covered by the Act only in accordance with Section 1(5) of the Act. The result was that the rule nisi issued was made absolute by granting a writ in the nature of mandamus against the E.S.I. authorities. In so far as this decision lays down, the staff at the head office and the branch offices are employees within the meaning of Section 2(9), we are in agreement. But we do not agree that the head office and the branch offices are establishments and a notification under Section 1(5) of the Act is required for the Act to cover them. The learned Judge had merely referred to Section 28 and reading it with Section 2(12) defining a 'factory' and also the fact that no attempt was made before him to treat the head office and the branch offices to be a factory, held that the Act could not be applied to them.

34. During the course of the judgment, we have considered the language employed in Section 38 of the Act, having regard to the definitions of Sections 2(12) of the Act and came to a contrary conclusion. We respectfully disagree with this decision on points Nos. 2 and 3 decided by the Culcutta Court in the above decision.

35. In Hindustan Lever Limited v. E.S.I. Corporation 1973-1 L.L.J. 259 : (1973) L.I.C. 706, (Delhi), Kapur, J., had to consider the applicability of the Act to employees of a commercial office run by M/s. Hindustan Lever Ltd. at Delhi and registered under the Delhi Shops and Establishments Act, 1954. The learned Judge considering the amended definition of Section 2(9) of the Act expressed the opinion that the amendment was effected to cover persons who were carrying on the administration of the factories, but not necessarily doing so within the precincts of the factory and also persons who were engaged in the purchase of raw materials or the sales and distribution of the products of the factory. The amendment, according to the learned Judge, was not intended to be an amplification of the definition already existing but merely a clarification thereof. M/s. Hindustan Lever Ltd. has several factories in different parts of the country. The petitioner - company had an office at Delhi. It is a commercial office registered under the Shops and Establishments Act. The company has no factory at Delhi. The question in the writ petition only concerned the applicablity of E.S.I. Act to the commercial office run by the petitioner - company in New Delhi. The E.S.I. Corporation took the stand that after the amendment of the definition under Section 2(9) of the Act, the persons employed in the commercial offices of the petitioner-company should be deemed to be employees within the meaning of the definition in the Act. On the other hand the company took the stand that though the Act was intended only to factories as well as to commercial establishments, it was in the first instance brought into force only in relation to factories and not in relation to commercial establishments. The learned Judge laid down that the test to be applied is as follows:

Hence, for the application of the Act, we have only to examine the definition of 'employee' in relation to factories. If a question arises as to whether a person is an employee or not within the meaning of the Act, then, it is necessary to determine whether a person is an employee [working in connection with the work of the factory within the meaning of Section 2(9) of the Act. This test has to be applied in the case of every single person who is sought to be covered by the Act.

The question posed by the learned Judge was whether the persons working in the commercial establishment at Delhi are covered by the Act as it stood then? The petitioner-company had owned different factories in different parts of the country. The learned Judges opined that in order to apply the Act, one had to take the case of different factories owned by the petitioner-company at different places and find out whether the persons sought to be covered by the Act are employees in these particular factories. In order to determine that question, it was only necessary to find out whether the person concerned is working in the factory or working in some establishment and doing work which is incidental or preliminary to or connected with the work of the factory. For this purpose, the clarification dated 28-1-1968 (the amended portion of the definition of Section 2(9) of the Act) has also to be applied. It was felt by the learned Judge that on the material before him, the question whether the employees in the commercial offices at Delhi were employees within the meaning of Section 2(9) of the Act could not be determined by him. With reference to this decision, we are of the view that the amendment introduced to Section 2(9) is not in the nature of a clarification. The inclusive definition in Section 2(9) of the Act was introduced by way of amplification of the existing definition, as the existing definition did not cover the cases provided for in the inclusive definition, so as to bring those within the meaning of the definition of an ''employee'. The other views expressed by the learned Judge are not of any relevance in the present case before us.

36. In another Madras case, in Mettur Beardsell Ltd. v. E.S.I. Corporation (1973) 44 FJR 76 (1974) LIC 283, Ramaprasada Rao, J., had to decide a batch of writ petitions governed by Section 2(9) after its amendment. The petitioner in the writ petition was having a factory at Madras. There is also an independent administrative office in Madras. The E.S.I. authorities called upon the petitioner to make contributions under the E.S.I. Act in respect of the staff in the administrative office. A writ of mandamus was sought by the petitioner. It was contended on behalf of the petitioner that the respondent had no jurisdiction to call for contribution in the absence of a statutory notification under Section 1(5) of the Act on the ground that the administrative office was an establishment other than a factory. The learned Judge, after referring to the objects and reasons for the amendment, rejected the contention on behalf of the petitioner that the amended definition of Section 2(9) was only a clarification and that there was no expansion of the definition. He disagreed with the Delhi High Court on this aspect in Hindustan Lever Ltd. v. E.S.I. Corporation 1973-1 L.L.J. 259 : (1973) L.I.C. 706, (Delhi). The learned Judge took the view that because the opening words of Section 2(9) of the Act referred to factory or establishment to which the Act applied and that Section 1(4) of the Act made the Act applicable only to factories and as there was no notification under Section 1(5) of the Act, there was no jurisdiction on the part of the E.S.I. Corporation to issue any notice to the petitioner. The learned Judge was of the opinion that the inclusive definition brought about by the amendment in Section 2(9) did not cover administrative staff. The learned Judge stated that the staff must be presumed to be administrative staff within the meaning of the objects propounded by the Legislature when it sought the amendment. Yet, the learned Judge held that the staff in the head office or the branch offices of the petitioner can be presumed to be administrative staff in an establishment and a notification under Section 1(5) was necessary to make the Act applicable. We find ourselves unable to agree with the view of the learned Judge. The very purpose of introducing an inclusive definition of Section 2(9) of the Act as stated in the objects and reasons was that the existing definition of the term 'employee' did not cover employees connected with the administration of a factory or with purchase of raw materials or distribution and the definition was amended to cover such employees. That being so, there is no warrant for holding, as the learned Judge did, that a person engaged in sale, distribution and other allied function in a head office or branch offices was purely rendering service to promote the administration of the establishment and not the purpose of any work connected with a factory. In our view, the amended definition of Section 2(9) of the Act takes in the staff employed in administrative office, though it is located away from the factory. It is wholly unnecessary that any notification under Section 1(5) of the Act should have been issued in the case.

37. In Hemalatha Textile Mills v. E.S.I. Corporation 1975-1 L.L.J. 497 : (1975) 31, F.L.R. 237, (Mad.) Varadarajan, J., in considering a case after the amendment of the definition of 'employee' in Section 2(9) of the Act held that the inclusive definition would take in the employees of the head office of Hemalatha Textile Mills Ltd. and they were covered by the Act. Hemalatha Textile Mills Ltd. was having a factory at Pedakakani in Guntur Dist., and was having its head office at Madras. Two contentions were raised in the appeal before the learned Judge: (1) that the employees in the head office are not employees within the meaning of Section 2(9) of the Act and (2) That the provisions of the Act cannot be made applicable to the head office in the absence of a notification under Section 1(5) of the Act. The learned Judge rejected the contention and opined that the inclusive definition would take in the employees in the head office and that the head office at Madras was directly controlling the affairs of the factory in Guntur District. We agree with this decision of the learned Judge.

38. We shall now refer to the cases which have arisen before the amendment of Section 2(9) of the Act. There are two cases of this Court. One is the case reported in Sirsilk Ltd. v. Regional Director, E.S.I. Corporation 1964--I L.LJ. 71 : (1964) 1 Andh. W.R. 1, Chandra Reddy, C.J. and Narasimham, J., had to decide a case which arose before Section 2(9) of the Act was amended. In that case, there was a canteen located within the premises of a factory. The question was whether the E.S.I. Corporation could call upon the factory to make a contribution to the insurance fund for the staff of the canteen. It was held that the canteen workers are persons employed in connection with the work of the factory and thus they satisfy the definition of an 'employee' in Section 2(9) of the Act. The running of a canteen in a factory service the purpose of the factory in that it conduces to the efficiency of workmen employed in the factory, i.e., it feeds and entertains persons engaged in the process of manufacturing. In that view, the staff in the canteen and employees for the purpose of the Act and that management was liable to contribute to the insurance fund for the staff of the canteen.

39. In the other case of this Court reported in G. Subbarao v. G.M. A.P. State R.T.C., (1972) 1 Andh. W.R. 24 : (1972) L.I.C. 1058, there were two writ petitions. In the first writ petition, the petitioners were the ministerial staff in the establishment of the A.P.S.R.T.C. In the second writ petition, the petitioners were workmen in the establishment of the A.P.S.R.T.C. The A.P.S.R.T. Corporation Board resolved to implement the E.S.I. Scheme to its employees and issued instructions for taking steps to implement the scheme and deduct the contribution of the employees from their wages. The petitioner filed writ petitions seeking the issue of a writ of mandamus to restrain the A.P.S.R.T.C. from implementing the insurance scheme in the establishment of A.P.S.R.T.C. The argument on behalf of the petitioners was that the proposed implementation of the E.S.I. Scheme indiscriminately makes the provisions of the E.S.I. Act applicable to alt the employees, ministerial as well as workmen working out of the premises of the factory or outside it or working even on the side of running the bus services in the State. This Court after considering Sections 1(4), 2(12) and 2(9) of the Act held that the A.P.S.R.T.C. was an establishment which is a factory. All the workers who are connected with the work of the factory, viz., the assemblage, body-building, repairs, etc., of the buses whether they work in the factory or elsewhere are employees within the meaning of Section 2(9)(i) of the Act. Some of the workers may be clerks or supervisors. But the nature of the work is such that it can be said that it is incidental or preliminary or connected with the work of the factory. So, even clerks or supervisors come within the definition of an 'employee'. It was emphasised that it is not material whether such persons work in the factory or elsewhere. It was, however, held that employees who are working on the side of plying the buses could not have the benefit of the E.S.I. Act.

40. Calcutta E.S. Corporation v. E.S.I. Corporation 1961-II L.L.J. 30 : A.I.R. 1961 Cal. 248, is a case where there were three power houses which were generating stations. The Electric Supply Corporation Ltd. is located in different parts of the city. They were held to be factories within the meaning of Section 2(12) of the E.S.I. Act and the employees therein were held to be employees within the meaning of Section 2(9). In order to arrive at that conclusion, the Court read Section 2(12) of the Act along with Section 2(k) of the Factories Act. This is of no help to us in the present controversy. This case is one before the amendment of Section 2(9) of the Act.

41. In B.C.S. & W. Mills v. E.S.I. Corporation A.I.R. 1970 Delhi 167 : (1970) L.I.C. 1108, a Division Bench of the Delhi High Court was concerned with the case of a factory engaged in the manufacture of cotton textiles. There was a compound wall surrounding the main factory building. Separate from the main factory building by open spaces or roads inside the compound are other buildings like godowns, offices, etc. It was contended by the company before the E.S.I. Court that those persons who were working in the godowns and offices though located within the same compound, were not working in the factory. Nor were they doing work connected with the work of the factory and that, therefore, they were not employees under the Act. The Court here had to consider the case having regard to the definition of an 'employee' under the Act before its amendment. On the first question considered by the Court, viz., whether any of the persons described in the attached statement before them are working in the factory, the Court did not express any final decision on the question because the learned Judges felt that they could decide the matter on the second aspect which they considered, viz., whether the concerned persons enumerated in the attached statement were employed for wages in connection with the work of the factory or any work incidental or preliminary or connected with the work of the factory. The question was, therefore, considered under Section 2(9)(i) of the Act. The Bench found that the employees listed in the statement before them were employees in different departments of the same company the object of which was to manufacture textiles. The manufacturing process could not be carried on without the help of the office workers. It was observed that it would be too artificial a view of the work in a factory to say that only the actual manufacturing staff should be regarded as doing the work of the factory. It was, therefore, held that the work done in the office of the factory must, therefore, be said to be connected with the work of the factory and, therefore, the office workers must also be said to be employees under the Act. In the above case, the offices were located in the same compound. In fact, Sri Srinivasamurthy conceded the fact that in case the sales offices such as the one located at Vijayawada happened to be located within the premises of the petitioner - factory at Sanatnagar, Hyderabad, they would be covered by the E.S.I. Act. In such a case, the learned Counsel submitted that it could be very well said either having regard to Section 2(9)(i) or by reason of the inclusive definition they are employees in a factory within the meaning of Section 38 of the Act which requires all employees in a factory to be insured.

42. Employees' S.I. Corporation v. Ganpathia 1961-I L.L.J. 593 : A.I.R. 1961 Mad. 176, is a case before the amendment of definition of Section 2(9) of the Act. Rajamannar, C.J. and Veeraswami, J., observed that persons employed in the Managing Agent's Office of a mill which is concerned purely with the administrative side of the mills and the sale of finished products are not in any way connected with the manufacturing process or with the work of factory and, therefore, were not employees within the meaning of Section 2(9)(i) of the Act. Their Lordships expressed the view that the work done by a person should be work incidental or preliminary to the work of the factory and as such the persons who were in some manner or other connected with the work in the factory, viz., manufacturing process alone, could be called employees within the meaning of the definition. This was a case before the amendment of Section 2(9) of the Act.

43. In another case before the amendment it was held by Maharajan, J., in a case reported in Mahalakshmi Oil Mills v. E.S.I. Corporation 1970-II L.L.J. 528 : (1971) L.I.C. 825 (Mad.), that where within the same compound fourteen persons were employed in a certain oil mill and six persons were employed in the office premises, it could not be held that it was a factory within the meaning of Section 2(12) of the Act. The learned Judge reading the definition of 'employee' in Section 2(9) of the Act with the definition of 'factory' in Section 2(12) of the Act in conjunction with the definition of 'manufacturing process' as contained in Section 2(k) of the Factories Act, held that only persons who are in some way or other connected with the work of the factory, viz., the manufacturing process could be said to be employees as defined in the Act Though twenty persons were employed in the same premises, it could not make all of them employees as defined in Section 2(9) of the Act and that it was impossible to accept that the work of selling products of the factory was connected with the work of the factory because such work was neither incidental nor preliminary to the work of the factory.

44. Another Madras case reported in E.S.I. Corporation v. Prabhulal Brothers 1973-1 L.L.J. 3047 : (1974) L.I.C. 701 (Mad.), was decided by a Division Bench. In this case, there was an umbrella factory. The question arose whether the sales clerks working in the factory were employees within the meaning of Section 2(9) of the Act before its amendment. The learned Judges, after considering the definition in Section 2(9) of the Act and the definition of a 'factory' expressed the opinion that the two definitions read together would cover the two sales clerks. They expressed the view that the work of the factory may comprise of activities wider than the manufacturing process. For this purpose reliance was placed upon the decision of the Supreme Court in N.E.L.P. Co. v. E.S.I. Corporation 1967-II L.L.J. 40 : A.I.R. 1967 S.C. 1364. The reason why the Bench thought that the sales clerks also were employees was that it was inconceivable that the work of the factory did not include sale of the umbrella. A factory is associated with a commercial activity and that activity will have as its ultimate aim the marketing of its products and the sales clerks would clearly fall within the definition of the term 'employee'

45. The case reported in Alavai Industries (P) Ltd. v. E.S.I. Corporation 1974-II L.L.J. 430 : (1975) L.I.C. 1227 (Mad.), Maharajan J., dealt with a case before the amendment of Section 2(9) of the Act. On the facts of the case, it was held, after considering the relevant definitions including Section 2(k) of the Factories Act which defined 'manufacturing process' that the appellant before the Court was factory within the meaning of the E.S.I. Act and, therefore, was liable to pay the employer's contribution.

46. In Chanan Singh & Sons v. Employees' S.I. Corporation A.I. R. 1963 Punj. 422, a Division Bench of the Punjab High Court had inter alia to consider whether a person working as an accountant is to be included among the twenty persons required to make any premises a factory for the purposes of the Act. It was observed that the two elements necessary in order to make a premises, a factory or that in part of the premises, manufacturing process must be carried on and there must be twenty persons working in the premises. Obviously is not required that all the persons working in the premises are required to be engaged in the manufacturing process. This is a case before the amendment of Section 2(9) of the Act. The Bench expressed disagreement with the decision in Employees' S.I. Corporation v. Ganpathia, (supra) where it was held that persons employed in the Managing Agents' Office of a mill which is concerned purely with the administrative side of the mills and the sale of finished products and who are not in any way connected with the manufacturing process or with the work of the factory were not employees within the meaning of Section 2(9)(i) of the Act. The Bench expressed the view that the work of accounting and the work connected with the sale and distribution of the products of the factory are matters incidental or preliminary to or connected with the work of the factory. For the reason given by us, this decision rendered before the amendment of Section 2(9) does not commend itself to us as laying down the correct position.

47. As a result of the foregoing discussion we are of opinion that the employees at the Zonal Sales Office at Vijayawada are employees covered by the Act only by reason of the inclusive part of the definition added to Section 2(9) of the Act by the Amending Act 44 of 1966. They are not employees within the meaning of Section 2(9)(i) of the Act as held by Venkatrama Sastry, J. in E.S.I. Corporation v. Sri Krishna Bottlers (P) Ltd. (supra). We agree with Kondaiah, J., that Section 2(9)(i) of the Act does not cover the case of the employees of Zonal Sales Office at Vijayawada. We agree with the learned Judges that the employees at the Zonal Sales Office at Vijayawada are covered by the inclusive definition added by the amendment of the Act by Act 44 of 1966.

48. An objection was raised on behalf of the respondent that the petitioner has sought a writ in the nature of a mandamus directing the 1st respondent to refer a question of law for the decision of the High Court under Section 81 of the E.S.I. Act. Section 81 of the Act reads thus:

An employees' Insurance Court may submit any question of law for the decision of the High Court and if it does so, shall decide the question pending before it in accordance with such decision.

The counsel contended that the word is ''may' in Section 81 of the Act and that it confers a discretion on the E.I. Court to submit or not to submit any question of law raised before it for the decision of the High Court. In the instant case the E.I. Court exercised its discretion not to refer the question of law to the High Court and, therefore, no writ can be issued. In M.P. No. 5 of 1974 in E.I. case No. 6 of 1970, which was an application filed by the petitioner for a reference under Section 81 of the Act it was urged before the E.I. Court that there was a conflict in the decisions rendered by this Court. A reference was made to the earlier judgment of the Division Bench in C.M.A. No. 187 of 1971 (Andh. Pra.) (unreported decision) which held that a notification under Section 1(5) of the E.S.I. Act was necessary to bring the employees of the zonal office within the purview of the Act. Later, the Bench decision rendered in C.M.A. No. 45 of 1973 dispensed with the requirement of such notification for covering the employees of the zonal offices or the sales offices situated at distant places and that the judgment of Venkatrama Sastry, J., is in conflict with the judgment of Kondaiah, J., in C.M.A. No. 45 of 1973, reported in E.S.I. Corporation v. Sri Krishna Bottlers (P) Ltd. (supra). We have already, in the earlier part of our judgment, referred to the conflicting views. That conflict is only in relation to the applicability of Section 2(9)(i) of the Act to employees in the sales offices or zonal offices situated elsewhere than in the premises of the factory. The E.I. Court, however, held that the different views taken by Venkatrama Sastry, J. and Kondaiah, J. with regard to Section 2(9)(i) had no material bearing and that the two divergent opinions would not warrant any reference to the High Court. We are not inclined to consider this objection as to maintainability.

49. It may be noticed that no objection was raised that a writ in the nature of mandamus could not be issued before the Bench which referred the case for a decision by the Full Bench. The Bench which referred the case to a Full Bench felt that there was conflict in the decisions not only of this Court, but also in other High Courts. We have dealt with the case accordingly.

50. The learned Counsel for the petitioner filed W.P.M.P. No 8765 of 1975 on the last day of the hearing of the writ petition, which is a petition under Order 6, Rule 17 read with Section 151, Civil P.C. to permit him to amend the prayer in the writ petition by adding a paragraph at the end of the prayer portion as follows:

Or in the alternative this Hon'ble Court may be pleased to issue a direction directing the respondent herein to forbear from enforcing the Memo A.P./lns/1/57-0097-48 dated 4-7-1970 issued by the 2nd respondent herein and restraining them from enforcing the provisions of the E.S.I. Act to the Establishments/Zonal Sales Offices of the petitioner.

Having regard to the opinion expressed by us, it is unnecessary for us to consider this petition on merits. The petition is dismissed. There will be no order as to costs.

51. A direction, therefore, will issue in the writ petition directing the 1st respondent, the E.I. Court, to dispose of the case, E.S.I. Case No. 6 of 1970, in accordance with law and in the light of judgment rendered now by us. The parties will bear their own costs in this writ petition.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //