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Employees State Insurance Corporation, Madras Vs. S.M. Sriramulu Naidu - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtChennai High Court
Decided On
Case NumberLetters Patent Appeal No. 128 of 1958
Judge
Reported inAIR1960Mad248; [1961(2)FLR150]; (1960)IILLJ699Mad; (1960)IILLJ699Mad
ActsEmployees' State Insurance Act, 1948 - Sections 2(12) and 77; Factories Act, 1937 - Sections 2 and 151(6)
AppellantEmployees State Insurance Corporation, Madras
RespondentS.M. Sriramulu Naidu
Cases ReferredMetro Motion v. F.F. Commissioner
Excerpt:
.....depend largely on the question whether those activities are carried on within the premises of the factory. the premises need not be a single building; a number of buildings within a single compound might constitute a factory.; the employees' state insurance act is the outcome of a policy to provide a remedy for the widespread evils arising from the consequences of national poverty. it is a piece of social security legislation conceived as a means of extinction of the evils of society, namely, want, disease, dirt, ignorance and indigence. the act was made a applicable in the first instance to factories as defined therein. understood in the light of its object, the act should be treated as intended to cover a wider class of employees than those contemplated by the factories act (lxiii of..........earners.(9) the factories act was intended to regulate the labour and working conditions of the factory employees as such. owing to the nature of the work in the factories, certain restrictions are placed in regard to the manner, and method and conduct of the work. the factories act, therefore, regulated the working conditions in the factories, having regard to the health and safety of the workers, by prescribing working hours for adults, prohibiting employment of children below a particular age, and giving advantages to workers by way of leave with wages and other benefits. in s. 2(m) of the factories act the term "factory" is defined thus:" 'factory' means any premises including the precincts thereof (i) whereon ten or more workers are working, or were working on any day of the.....
Judgment:
(1) This appeal raises a question as to the sustainability of a demand for contribution from an employer under the Employees' State Insurance Act (Act 34 of 1948), which, for the sake of brevity, will be referred to hereafter as the Act. The respondent was the proprietor of Pakshiraja Studios in Coimbatore. The Studio was engaged in the production of cinematograph films. A number of buildings constituted this "Studios," all of them being situate in the same compound. The work in the studio was done in the following departments: (1) Electrical, (2) Camera, (3) Sound, (4) Setting, (5) Moulding, (6) Carpentry, (7) Laboratory, (8) Editing, (9) Office and watch and ward, (10) Art and (11) Make up. Electric power was utilised in connection with some of these items of the work in the studio.

If all the departments were taken into account, the number of persons employed would admittedly exceed 20. But the same could not be said if each of the departments was taken by itself. The carpentry department, which employed more than ten but less than twenty persons, was notified as a factory under the Factories Act. As the other departments employed less than ten persons, none of them was brought within the purview of the Factories Act.

(2) The workers of the Studio were paid off on 28-9-1955 and the studio itself was closed on 25-9-1956. The Employees' State Insurance Act was extended to Coimbatore in the year 1953. The appellant, claiming that the Pakshiraja Studios was a factory within the meaning of the Act, called upon the respondent to pay the employers' contribution under S. 40 of the Act for the period from 23rd June 1955 to 22nd June 1956 and special contribution for four quarters, ending with 31st March 1956. The latter repudiated the claim.

Thereupon proceedings were initiated under S. 77 of the Act by the appellant in the Employees' Insurance Court, Coimbatore, for a declaration that the Pakshiraja Studios, Coimbatore, comprising the departments mentioned above, was a factory within the meaning of the Act, and that the respondent was liable to pay the employers' contribution and special contribution in respect of all the employees employed in the various departments, and for other reliefs. The respondent contested the claim, pleading that he was under no liability to contribute, as no one of the departments would come within the scope of the term "factory" under the Act.

The learned District Judge of Coimbatore, who presided over the Employees' State Insurance Court, held that the Pakshiraja Studios was a "factory" within the meaning of the Act, and that the respondent was liable to pay the contribution demanded. Aggrieved by that decision, the respondent filed an appeal to this Court, C. M. A. No. 269 of 1957. The appeal was disposed of by Basheer Ahmed Sayeed J. who held that a factory within the meaning of the Act should connote the same idea as that coming under the Factories Act. Relying on the principle of the decision in In re K. V. V. Sarma, ILR (1953) Mad 775: (1953 Mad 269), the learned Judge held that each of the various departments should be held to be distinct, and that, as in the present case the various departments located in different buildings, though within the same compound, they were capable of being treated as separate, and that, as in each department the employees numbered less than 20, not one of them could be held to be a factory within the meaning of the Act.

The basic for the learned Judge's opinion was that the word "factory" under the Act bore a definition substantially as the one under the Factories Act. In that view, the learned Judge set aside the order of the Employees' Insurance Court. In this appeal, which is filed against the judgment of the learned Judge, the principal question for determination is, whether Pakshiraja Studios would be a factory within the meaning of the term "factory", in the Employees' State Insurance Act.

(3) Section 2(12) of the Act defines:

"Factory means any premises, including the precincts thereof, whereon 20 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 under the aid of power, or is ordinarily so carried on." A factory thus is a physical area in any part of which a manufacturing process is carried on. Neither the term "premises" nor the term 'precincts' has been defined in the enactment. The meaning of the term "premises," as given in Shorter Oxford Dictionary, is "a house or building with its grounds or other appurtenances." In Stroud's Judicial Dictionary the term is interpreted as "some definite place within metes ad bounds, for example, land or land with buildings upon it." According to the Shorter Oxford Dictionary, the term "precincts" means "the space enclosed by the walls or other boundaries of a particular place or building or by an imaginary line drawn around." In Halsbury's Laws of England, 3rd Edn. Vol. 17, at page 15, an area of the factory is stated to be:

"A factory must occupy a fixed site but a place is not excluded from the definition of factory only by reason of the fact that is in the open air. Subject to the exceptions mentioned hereafter, the area of the factory is the whole space contained within its walls."

In Luttman v. Imperial Chemical Industries Ltd., (1955) 3 All ER ER 481, a question arose whether a canteen, which was intended to serve the person employed in the factory, stood within the factory, and would come within the definition of the term "factory" under the Factories Act, 1937 in England. Relying upon the definition of the term in S. 151(6) of the Act, it was held that the canteen was part of the factory, as it was used for feeding and entertaining people working in the factory, which was a purpose incidental to the process of manufacture carried on in the factory. The learned Government Pleader relied on the decision in Hoyle v. Oram, (1862) 142 ER 1090. In that case the appellant carried on the business of calico-printers at two places separated from each other seven miles. It was held that the same business was carried on in the two places. The case, however, turned upon the consideration of the question, whether both the premises were part of the single establishment. No question arose in the case whether the two places situate 7 miles apart would form part of the single factory.

(4) In Ramanatham v. King-Emperor, ILR 50 Mad 834: (AIR 1927 Mad 345) certain children were working in a drying yard, which was situated about five or six yards from the wall of a building in which a ground-nut decorticating machine was installed. Prosecution was launched against the owner of the factory for employing the children. A question arose whether the drying yard was included in the 'factory.' Jackson J. held that a factory, as defined by the Factories Act, would include everything, machine rooms, shed, godowns and yards, and that, if within these premises or precincts mechanical power was used in aid of any process for altering for transport or sale of any article, then those premises or precincts were a factory, and in that view, the drying factory yard, which was used for drying ground-nuts, would form part of the factory although there was no connection with the machinery or any work incidental to the manufacturing process.

In Ganpat Dattu v. Emperor, AIR 1930 Bom 162 there was a factory, manufacturing jaggery. There was an engine in a separate room and the crushing machines were outside that room. The shed, where the juice was stored in pans for boiling, was adjourning. All the buildings were in the same compound. More than 20 persons were employed in the shed, where the pans were, and the number working in the rooms were less. A question arose whether the entire building constituted a factory. That was answered in the affirmative. Thus neither under the terms of the definition under the Act nor under the principle of the cases stated above it is necessary that twenty or more should be employed in the manufacturing process itself. It is also not necessary that the entire premises should be occupied by the manufacturing process.

(5) The definition of the term, 'employee' in S. 2(9) supports this view. Section 2(9) says:

" '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; but does not include--

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

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

(6) Where, therefore, within the same premises or compound, a number of departments are situate and the departments are engaged in the work in connection with or incidental to the manufacturing process of the factory, they would prima facie all form part of the factory.

(7) In , a similar question arose under the Factories Act. The manager of the Gemini Studios, Madras, was prosecuted for an offence under S. 2 of the Factories Act. The Gemini Studios comprised several departments, all of them being situated in the same compound; it was conceded that three of the departments, carpentry, moulding and tinkering, would come within the Factories Act; but the dispute was raised with respect to the others. There was also a dispute whether the conversion of raw films into a finished cinematograph film could be said to be a manufacturing process. The learned Judges held on the latter question that the conversion of raw films into finished ones would amount to a manufacturing process.

But, on the former question, they held that the various departments of the studios should be held to be distinct ones, and that, unless each of them was taken to constitute by itself a factory the prosecution could not be sustained. Govinda Menon, J. (as he then was), delivering the judgment of the Bench, observed:

"The further question has to be considered whether if any one of these departments is a factory as being situated within the precincts of the Gemini Studios, then it is legally possible to separate those departments from the others which cannot be styled as factories. The building, where carpenters, molders and tinkers are carrying on their work, is admittedly a factory and the rules and regulations of the Factories Act apply to the departments. Evidence is lacking as to whether the other departments can be so separated. It is permissible to separate the carpentry, moulding and tinkering departments which are really unnecessary for the production of the films, from the others. There is no evidence to show that the other departments are so intertwined as to be composite one without being capable of being separated."

The observations cited above would show that the case was decided by reason of the absence of evidence in that case to show that the various departments were integrally connected with those in which the manufacturing process was done. The decision was rendered under the Factories Act; and it has to be considered whether it can be resorted to for guidance in interpreting the provisions of the Employees' State Insurance Act.

(8) The general rule is that in the matter of the interpretation, the meaning and scope of the words occurring in one statute or judicial decisions thereon, cannot be used for the interpretation of another statute enacted with a different object or for a different purpose. In Inland Revenue Commissioners v. Forest, (1890) 15 AC 334 at p. 353, Lord Macnaghten observed:

"The two Acts differ widely in their scope: and even when they happen to deal with the same subject the wording is not the same. It was argued indeed that the language was 'practically identical,' but that expression to my mind involves an admission that the language is different."

It is no doubt a recognised rule of interpretation, that where statutes are pari materia that is to say, are so far related as to form a system or code of legislation, the rule laid down in palmer's case would apply, that such Acts are to be taken together as forming one system and as interpreting and enforcing each other' (Craies on Statute Law, 5th Edn. page 125). It cannot, however, be said that the Factories Act and the Employees' State Insurance Act are, in pari materia, though they were enacted in the same year and both of them were intended to benefit the wage earners.

(9) The Factories Act was intended to regulate the labour and working conditions of the factory employees as such. Owing to the nature of the work in the factories, certain restrictions are placed in regard to the manner, and method and conduct of the work. The Factories Act, therefore, regulated the working conditions in the factories, having regard to the health and safety of the workers, by prescribing working hours for adults, prohibiting employment of children below a particular age, and giving advantages to workers by way of leave with wages and other benefits. In S. 2(m) of the Factories Act the term "factory" is defined thus:

" 'Factory' means any premises including the precincts thereof (i) whereon ten or more workers 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, or

(ii) whereon twenty or more workers 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 without the aid of power, or is ordinarily so carried on..................."

(10) The term 'worker' has been defined in S. 2(1):

"'Worker' means a person employed, directly or through any agency, whether for wages or not, in any manufacturing process, or in cleaning any part of the machinery or premises used for a manufacturing process, or in any other kind of work incidental to, or connected with the manufacturing process, or the subject of the manufacturing process."

(11) As the definition of the term 'worker' and the other provisions of the enactment would show the Factories Act was essentially concerned with the regulation of the factory in the interests and for the safety of the worker, a person employed in the manufacturing process or in any work incidental thereto. It stands to reason that distinct portions therefrom, e. g., a purely clerical establishment, cannot properly be within the purview of the legislation. Those persons would not be exposed to the dangers and risks to which a worker in the factory would be. In our opinion, the decision in only recognises this principle and excludes portions of the premises which, but for the accident of being situate in the same compound, could not be regarded s a factory. But that principle cannot be extended to the case of a factory, as defined under the Employees' State Insurance Act, whose object is more comprehensive, and whose scope designedly wider.

(12) The Employees' State Insurance Act is the outcome of a policy to provide a remedy for the widespread evils arising from the consequences of national poverty. It is a piece of social security legislation, conceived as a means of extinction of the evils of the society named by Lord Beveridge (in his report which inspired this type of legislation in all countries), namely, want, disease, dirt, ignorance and indigence. Having regard to the magnitude of the task, the Act was made in the first instance applicable to factories, as defined therein. It primarily provides benefits to the employees in such factories.

The Act envisages also the extension of benefits to other establishments industrial, commercial, agricultural or otherwise by a notification by the appropriate Government. It provides for benefits to the employees in the event of sickness, maternity, injuries in the course of employment and payments to dependents in certain cases. The monetary and other benefits granted under the Act to an insured employee or a factory are secured by system or compulsory insurance under which the employer, employees and the Government each contribute financially. This is unlike the previous legislation in respect of workers in factories. The Workmen's Compensation Act, the Factories Act and the Maternity Benefits Act are based on the liability of the employer.

The benefits conferred by the Employees' State Insurance Act cover a large area of employees than that the Factory Act and allied legislations intended. Under S. 46 of the Act, the insured persons, or, as the case may be, their dependents are entitled to its benefits. An insured person is an employee past or present in respect of whom contributions are or were payable under the Act. Contributions are made payable by and in respect of an employee. We have already referred to the definition in the Act of the term, "employee." That will include within its scope clerical and labour workers engaged or paid through contractors and also part-time workers and paid apprentices. That is in keeping with the objects of the Act, which was to relieve poverty, a feature not being confined only to the actual workers in a manufacturing plant.

(13) One of the most firmly established rules of construction of a statute is that laid down in Heydon's case, (1584) 3 Co Rep. 7a. The rule was stated thus:

"That for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive of enlarging of the common law), four things are to be discerned and considered. What was the common law before the making of the Act? What was the mischief and defect for which the common law did not provide? What remedy the Parliament hath resolved and appointed to cure the disease of the commonwealth? The true reason of the remedy. And then the office of all the Judges is always to make such construction as shall suppress the mischief and advance the remedy, and to suppress subtle inventions and evasions for the continuance of the mischief and pro privato commodo, and to add force and life to the cure and remedy according to the true intent of the makers of the Act pro bono publico."

(14) Understood in the light of its object, the Employees' State Insurance Act should be treated as intended to cover a wider class of employees than those contemplated by the Factories Act. The terms of the various definitions contained in the Act and the nature of the benefits secured to the insured employee thereunder also point to the fact that the term "factory" should have different and wider interpretation than that of the same word in the Factories Act, which, as we pointed out, was intended to safeguard against the risks attendant in a factory to workers connected at least in a way with the manufacturing process. The principle of the decision in which was concerned with the provisions of the

Factories Act, cannot, therefore, be extended to ascertain the extent of application of the Employees' State Insurance Act; to do so would be to restrict the scope of the Act which might lead to defeat its very objects.

(15) The learned Advocate for the respondent referred us to the decision reported in Metro Motion v. F.F. Commissioner, . In that case an employer had a shop where motor cars were sold; attached thereto was a service station where repairs and servicing were done to automobiles. Almost half a mile away from those premises there was a workshop owned by the employer, where bodies for trucks and buses were made. A question arose whether the premises would constitute a factory so as to make the employer liable under the Employees' Provident Funds Act. It was held that the main shop, in which motor cars were sold, was not part of the premises. The two premises in that case were, distinct, and there was no connection between the body-building undertaken in the workshop and the sale of the cars in the main shop. It was held that both together did not constitute a factory.

(16) In our opinion the scope of the statutory definition of the term 'factory' and the application of the Act cannot be decided on basis of what the employer, either for the sake of efficiency or convenience of management, does, e. g., by dividing the factory into various departments. The essential requisites of a factory under the Act are (1) a premises, a geographical area within a certain boundary (2) in a part of which at least manufacturing process should be carried on with the aid of power and (3) twenty or more persons should be working in the premises. It is not necessary that all the twenty persons should be working in the same section or department.

So long as the efforts of all the departments are co-ordinated to achieve the main object of the factory, that is, the manufacture, the decision whether a particular place is a factory or not would depend largely on the question, whether those activities are carried on within the premises of the factory. The premises need not be a single building; a number of buildings within a single compound might constitute a factory. In the present case all the buildings in which the various departments are housed lie within the same compound.

P.W. 1 stated "All the buildings comprising the studio comprising a composite whole, because they are all situated within one compound wall and, they are inter-connected." That he added "I am not able to say now which department building is inter-connected with which other department building" did not make the earlier statement any the less acceptable, especially when no real attempt was made to deny the truth of what P.W. 1 claimed when R. W. 1 (Rajagopalan) was examined on behalf of the respondent. It should thus be clear that it is only as a result of the coordinated efforts of all the departments that the raw films could be converted into finished cine films.

In such a case all the departments should be taken as a unit for the purpose of ascertaining whether the premises of the studios will be a factory under the Act. Judged by this test, the Pakshiraja Studios could be a factory, and the provisions of the Employees' State Insurance Act would apply to it and the respondent would be liable to pay the contribution and special contribution. We agree, therefore, with the view taken by the Employees' Insurance Court, and allow the appeal. There will be no order as to costs.

(17) Appeal allowed.


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